Globalisation’s offspring

Posted on April 5, 2007 by indra

‘The Economist’, April 7, 2007 has these insertions in an article captioned as above. http://www.economist.com/opinion/displayStory.cfm?Story_ID=8960441

A pack of fast-moving, sharp-toothed new multinationals is emerging from the poor world.

So far this year, Indian firms, led by Hindalco and Tata Steel, have bought some 34 foreign companies for a combined $10.7 billion. Indian IT-services companies such as Infosys, Tata Consultancy Services and Wipro are putting the fear of God into the old guard, including Accenture and even mighty IBM.

These are very early days, of course. India’s Ranbaxy is still minute compared with a branded-drugs maker like Pfizer

Infosys rightly sees itself as more agile than IBM, because when it makes a decision it does not have to weigh the opinions of thousands of highly paid careerists in Armonk, New York. That, in turn, can make a difference in the scramble for talent. Western multinationals often find that the best local people leave for a local rival as soon as they have been trained, because the prospects of rising to the top can seem better at the local firm.

A firm like Tata Steel, from low-cost India, would never have bought expensive, Anglo-Dutch Corus were it not for its expertise in making fancy steel.

IBM now has over 50,000 employees in India and ambitious plans for further expansion there. Even as India has become the company’s second-biggest operation outside America, it has moved the head of procurement from New York to Shenzen in China.


It has a special report too ‘Hungry tiger, dancing elephant’. http://www.economist.com/business/displaystory.cfm?story_id=8956676

The annual investors’ day (of IBM) is usually held in New York, though it once took place in faraway Boston. By going to Bangalore, the technology giant was sending a strong message. With 53,000 employees, India is now at the core of IBM’s strategy. With other big developing countries, including China, Brazil and Russia, it is fast becoming the firm’s centre of gravity.

Mr Palmisano announced that IBM would invest a further $6 billion in India over the coming three years, up from $2 billion in the previous three. That sum does not include any acquisitions of Indian companies. (It has already struck some big deals, notably buying Daksh, an Indian outsourcing company, in 2004.) Some locals wondered how IBM would manage to spend all that money. But booming demand is pulling wages higher in India and costly training is now needed to lure workers being courted by other companies.

IBM’s Indian adventure highlights three overlapping themes. Emerging economies increasingly count as a threat to established global firms, as well as an opportunity. Indian services firms such as Infosys and Wipro are starting to give IBM-and its old rivals, Accenture, EDS and Hewlett-Packard-a run for their money. As globalisation accelerates, this is forging a new vision of what it is to be a successful multinational company.

And the issue also have an article on the Chinese exertise on piracy: The sincerest form of flattery http://www.economist.com/business/displaystory.cfm?story_id=8961838

COPYING in China goes far beyond fake DVDs, watches and handbags. “We can copy everything except your mother,” goes a saying in Shanghai. Soy sauce with fizzy water passed off as Pepsi, fake Cisco network routers (known as “Chisco’s”) and mobile phones that look like the latest offerings from Nokia can all be easily found. So, too, can fake blood plasma.

And now comes cars of all brands..

What was once a trickle has since become a stream. Toyota’s badge, Honda’s name (which became “Hongda” for motorcycles) and Nissan’s bumpers have all been the subject of legal wrangles. Shuanghuan Automobile got into trouble for copying Audi’s famous four-ring logo a few years ago. It then copied the design of Honda’s CR-V, called it the SR-V and appears to have won the subsequent legal tussle. Last month the firm won an export licence, and it plans to start shipping another model, the CEO (pictured)-a sport-utility vehicle with a striking resemblance to the BMW X5-to Romania and Italy.

Perhaps this is the strength of China.
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The story of India Inc’s deal mania

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Feel good? April fool!

Posted on April 4, 2007 by indra

Are we heading for some worse news than India and Pakistan getting out of World Cup after a defeat from Bangladesh and Ireland respectively?

Here comes the other devastating news of crash in sensex. Nearly 617 points were lost in the haemorrhage, rivaled only by the 826-point crash on May 18 last year on the first business day of the new financial year. The selling wave wiped out Rs 1,44,000 crore of shareholder wealth, engulfing all sectors of industry. Banking, information technology, real estate and automobile stocks were the worst hit. And many, who master in finding some reason for the mishap or massacre, blame it to the RBI’s surprise inflation-busting measure.

I wonder if it reflects the performance of the companies and the dividend that they will announce for the year. Will the growth slump or the supply get dried? But perhaps, as usual some Rungta, Jhunjhunwala, Kejriwal will go for suicide as I saw one in good old days of HM. An honest cashier got allured by the dream future through share market took away company’s money and invested in hope to return it safe in locker back in time before the people know it. It didn’t happen because of a similar crash and he crushed himself under the local train.

But today, the investments in shares are more popular. Many have placed their life time earning with some portfolio managers. What happens if the crash hits them on the wrong side? Let me tell you that they are master risk takers. They will bear it.

But the special issue of ‘Outlook‘ on the ‘state of the nation’ offered by my friend, Shri YK Singh furthered my miseries. Articles after articles, it has painted the grim picture from ‘the other India’ (as it called it), as it silently suffers. And it also claims,’ This is the “nearly-forgotten” India of the poor and downtrodden people numbering 250-300 million or perhaps the double of that with an earning average of Rs 500 per month or less. And this happens even after spending of around Rs 40,000 crore in the Ninth Plan (1997-2002) meaning around Rs 8,000 per month per poor.

Will there be worse news affecting the nation as such in days or months to come? The answer may be in affirmative with elections in UP soon.

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Can Communists Run The Country?

Posted on April 4, 2007 by indra

With my experience of working in the largest industrial unit of its time in West Bengal since 1961, and a longer association because of my education in Presidency College and IIT, Kharagpur, I feel pained with both the political and economic conditions of the state. Nandigram episode was almost the climax of the system. I was very happy when during my February 2006 stay in Bidhannagar, I heard communists addressing the issue of acquisitions of agriculture land for industries at various rallies and public meetings to create an acceptable atmosphere through education of the need of the industrial development. It was the right step for implementation. But perhaps, it was not sufficient a preparation or not carried out with the people concerned. I was amazed, when I heard about the protest by the farmers, and the field-labourers against the acquisition of land for the Tata Motors Singur. I got shocked the way police and cadre of CPM attacked Nandigram. That could never be a solution. Many and me too will go by his honest attempts to pull up West Bengal with fast track industrial development, but the means adopted were wrong and unjustified. The CM lost his face. “What happened in Nandigram was unfortunate. We apologise for the incident.”

It is interesting to hear the CM and the minister of industry saying boldly, “Rapid industrialisation was the only option left for the all-round development of the state and tackle the rising problem of unemployment. Agriculture is not a “viable option for growth any more.”

Both the hawks as well as doves in the party at the recent Delhi meet have endorsed the decision. CPI(M) state secretary Biman Bose has announced: “The state government would not succumb to any pressure or any misinformation campaign. At least Rs 20,000 crore industrial projects are in pipeline at this juncture.”

All news pertaining to West Bengal in the business newspapers are positive with increasingly high confidence. But my question is related to the outcome of 30 years and more of the rule in West Bengal by CPM led- United Front. Perhaps no other state of the country, not even Kearat (that is the point of difference) is lucky enough to have so long of political stability (rule of a single party and one chief minister). Why couldn’t it produce the expected results both on human development index and social equity?

Education for which West Bengal was almost at the top in India seems to be miserably neglected by the government. According too a former vice-chancellor, Calcutta University, “Most school teachers belong to the CPI(M)-affiliated unions and don’t feel the need to deliver. Teachers are highly paid and highly pampered. Thus, absenteeism is rife and when teachers take classes, they don’t teach properly.” A 2002 survey by the state government itself found that most of the primary and upper primary schools lacked infrastructure and they faced consistently low teacher attendance. What can be the government’s answer for this?

The Pratichi Trust, founded by Amartya Sen, carried out a survey in Purulia, Birbhum and West Midnapore districts in 2001 and reported: “We realised that 30 per cent of the students didn’t attend classes. Only 7 per cent of those who didn’t take private tuitions (since they couldn’t afford to) could write their names. So, the poor continued to be excluded from education.”

It is surprising that even after this long a period of Marxists rule in West Bengal, some other economic indicators are equally poor for the state. The percentage difference of per capita income in rural and urban West Bengal is almost the highest at 171.75%, and only 28.53% pf households have been provided with electricity connections (NCAER data)

According to the latest report of National Sample Survey Organisation (NSSO), West Bengal tops the hunger list of India, with at least 71.6 lakh suffering from food shortage and over 8.8 lakh of these not getting two square meals a day, all through the year. At least 10.6% of the rural population and 0.7% of the urban population in West Bengal do not get adequate food in some months of the year.

While we all agree that industrialization is the only way, can someone from CPM such as very vocal and media savvy SitaramYachuri and Karats explain why did it take 30 years and more to realize that? Are they not misleading the simple countrymen, the ‘aam aadmi’ about the advantages of the communist’ model of governance?
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Kolkata has more jobs than Delhi, Chennai

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Kothapally and Raj Samadhiyala

Posted on April 3, 2007 by indra

To come out of the mental agony created after reading the lead article-‘The elephant must remember’ of the Outlook’s special edition on the ‘state of the nation’ about ‘the other India’, I tried to dig deep and found some stories that helped me recover.

The people of two villages got luckily empowered and participated to change their destiny.

Madhavi Tata has come out with the story of Kothapally.

In 1998, Kothapally, the village in Andhra Pradesh Rangareddy district of Andhra Pradesh faced a severe water shortage. Kothapally had no tanks, its wells ran dry, crop yield plunged and villagers came to accept abject poverty as their lot.

A year later, the International Crops Research Institute for Semi-Arid Tropics (ICRISAT) chose Kothapally for an experiment in a community watershed scheme. The villagers were initially wary as they thought tanks would lead to flooding. So, the institute built an earthen check dam on common land at a cost of Rs 35,000. The benefits started accruing in the first season itself. A group of six farmers could realize the potential and decided to try icrisat’s advice. In six months, “the wells were gushing with water and our yields were much higher”. Others were willing to give water conservation and soil management a shot. Within years, groundwater level rose 27 per cent, yields went up, farmers could grow post-rabi and post-kharif crops like vegetables and flowers, and earnings quadrupled. The villagers now own 40 autos, six tractors and five lorries to transport their produce. And Bijili Laxmi, a marigold farmer from this village has a drastic change in her daily routine. ‘From getting up at 5 am daily and trekking 6 km to fetch water, she now just has to turn the tap.’

Lola Nayar has another story in her article that is all about the sorry state of affairs of ‘the other India’ but for this story of the combined attempts of NGO and the people that are making a change in the rural hinterland-albeit very slowly:

Almost on the opposite side on the India’s map is Raj Samadhiyala, a village 20 km from Rajkot in the drought-prone Saurashtra region of Gujarat. From being a poverty-stricken hamlet, its 2,000-odd dwellers today harvest three crops, including 20 varieties of vegetables. The personal annual incomes range between Rs 50,000 and Rs 12 lakh. The primary healthcare centre works to full attendance, each house has a toilet, water connection and drainage system, there’s full enrolment in the local primary school, and the village is safe and secure with no reported thefts.

The credit goes to Hardevsinh, a post-graduate who chose to stay back to change the village. He says, “I bridged the gap between the panchayat and the people by setting up village community leaders. These leaders were accountable for results from their respective communities.” The village was able to introduce water harvesting, build 45 checkdams, create a network of farm ponds and percolation tanks that raised the water table over the years

Further down, Ashish Kothari, a member of environmental action group Kalpavriksh, his article, has also some good news from another village in Maharashtra.

Hiware Bazaar, near Ahmednagar in Maharashtra, started harvesting rainwater and re-vegetating the hills around it in the 1980s. Prior to this, it had to beg authorities to send water tankers in summer. Today, it provides clean drinking water to all its residents, and irrigates much of its agricultural land. All village children now attend school and health facilities have improved considerably.

Several hundred villages in the Alwar district of Rajasthan have achieved water self-sufficiency and increasing agricultural stability through water harvesting structures promoted by the Tarun Bharat Sangh.

Marginal farmers (many of them Dalit women) in seventy-five villages in Zaheerabad area of Andhra Pradesh’s Medak district had to migrate elsewhere for work. But now, after over 15 years of sustained efforts by villagers aided by the NGO Deccan Development Society, there is self-sufficiency in food production, which has generated several thousand human-days of work. Remarkably, this has been done by reviving traditional seed diversity, linking up the production of traditional cereals to the public distribution system, and promoting organic farming.

In Orissa, researchers looking at satellite images of forest cover have noticed a marked improvement in some parts of the state. This is due to the untiring efforts of villagers to reclaim greenery. They have also initiated 10,000 forest protection committees with little or no outside help. Their motivation? Improved availability of fuel and fodder, revitalisation of water sources and greater control over their immediate lives.

Other such initiatives have sprung up across many states: protection of sea turtle nesting sites in Orissa and Kerala, people’s sanctuaries in Rajasthan and Nagaland, conservation of black buck, cranes, or waterbirds by communities in Andhra Pradesh, Punjab, Rajasthan, Orissa, Bihar and elsewhere.

While many of the above examples are initiated by villagers themselves, there are also many that have been catalysed by government officials or NGOs.

It excites me and makes me hopeful. I wish some thing could happen faster covering the whole of rural and urban poor. The question before the people who are in leadership and also those who matter in keeping them in those roles is a simple one.

Will such models be replicated in lakhs of other villages that need it badly? Can the energy of all those NGOs, corporate houses, and institutions be synergised to speed up the process?

Posted in economy, rural india | Leave a comment

Management Matters

Posted on April 2, 2007 by indra

Be it a public or private enterprises, management is key. And many times it requires only some commonsense. One needn’t have an IIM, or Stanford/ Harvard background. Let us look at two stories- one from the pubic sector and the other from the private.

Lalu Prasad Yadav, Union Railways Minister in India Today’s Special Conclave Issue April 9. 2007 with the theme- ‘CHALLENGES FOR THE BRAVE NEW WORLD’ had this story of his approach that brought the turnaround.

As you all know, the railways is a big network with approximately 14 lakh workers. It runs 1,100 trains every day and carries more than 1.5 crore passengers. Till yesterday, the Railways was in a very bad shape, not even in a position to pay dividend. It was completely bankrupt. The Rakesh Mohan Committee had come up with various suggestions: dissolve the Railway Board and create a regulatory commission; decrease the staff strength; increase the railway budget every year, increase passenger and freight fares every year; privatise services.
When the UPA came to power in 2004, I wanted to become the home minister but they made me the railway minister and I said okay. I started looking into its functioning and found that accidents were a common feature in the Railways and I used to think, what if these keep happening and I had to face Parliament every day. If accidents happen every day, the MPs will keep asking for my resignation every day and one day I might have to resign too.
I got down to the job earnestly and one of the first things I told the Railway Board was that they must have honesty, commitment and vision. We felt if we increased the fare it would affect the masses. Instead, we reduced the fares. Every day, approximately, 60-70 lakh people travel in Mumbai suburban railway where the passenger fare is already low, but still we reduced the fare by a rupee. We also reduced the fare of the goods train.
I assured all 16 lakh gang men, signalmen and others that they will not be retrenched. The turnaround in the Railways is not one man’s effort, I have merely directed it. I just said we will not let anybody steal. We have to stop it. I have personally checked goods trains, weighed the goods on the weighing machine and found huge disparities in load booked and the actual load carried. Several officers have been punished. Earlier the loading and unloading used to take seven days, now it has been reduced to five days. By taking these few small steps only, we were able to save about Rs 10,000 crore. Not just that, we have reduced the expenditure and last year we had a surplus of Rs 13,000 crore and we have paid dividends. This year again we had a surplus of Rs 20,000 crore. We have money now. We are going to get new coaches designed for every class.

Lalu delegated, demanded, and perhaps facilitated too. And he got the results. I wish he would have used a similar approach in running of Bihar also. And perhaps Prime Minister should shift Lalu to power ministry where he can repeat the same performance. Sushil Shinde with a background of police department could have taken some lessons from Lalauji and brought a similar efficiency in power sector by taking ruthless steps to cut down the 30-40% losses because of theft.

And then we can go to ‘The incredible story of Tata Motors and the Rs 1-lakh car’ as told by Robyn Meredith, Forbes.

After the economy slumped in the late 1990s–just when expenses for developing the passenger car hit home–Tata truck and bus sales plunged by 40%, and Tata Motors lost $110 million in fiscal 2000. It was the first red ink seen since 1945. Executives were stunned. “It was corporate India’s biggest loss,” says Ravi Kant, managing director of Tata Motors. “The crisis changed us.”
But Tata Motors, part of India’s largest conglomerate, first had to reset its ways. Change started with a spring 2000 meeting at the Lakehouse, a bungalow across the street from the company’s main factory in Pune. Kant, then in charge of the commercial vehicle division, needed fresh ideas instead of rigid resistance, so in an experiment, he called a meeting of 20 of his most promising young managers–all under 35 years old.
“I have a problem,” he said in his matter-of-fact tone. “The company is bleeding.” He asked for ideas on how to stop the gush of red ink. Okay, they told him, trim costs.
Girish Wagh was there, just 29 then. He remembers the shock of what came next. “Ravi Kant said that 1% in cost cuts would be a rounding error. He asked for 10%!” says Wagh. “Never had we thought of such a target.”
Every single year until then costs had gone up, not down. Kant told them to present a basic plan that very afternoon, in front of him and–alarmingly–all their bosses.
They worked frantically. By the 3 p.m. meeting, their wildest ideas were on the table. Taken together, they added up to 6.5%. “A breakthrough!” Kant remembers thinking. But that’s not what he said. “Please go back and think again,” he told them. He needed 10%, not 6.5%. “You’ve got three weeks.”
The young team took some measures even as it scrounged for more. In came benchmarking, purchasing from Internet auctions, outsourcing parts to more efficient suppliers and boosting revenue by selling Tata-made dies to other companies.

The transformation of Tata Motors had begun with the searing loss in 2000, but it continued with a return to profit in the fiscal year ending March 2003. By then it was producing two car models and selling a bit abroad. Today, after buying or partnering, the company has vehicle projects around the globe and exports 11% of output, mostly to South Africa.
Efficiency is way up: It now takes between 12 and 15 minutes to change a die on the passenger car assembly line, down from two hours in 2000. The company’s break-even point for capacity utilization is one of the best in the industry worldwide.
Between 2000 and 2006 nearly 6,000 workers left the company with early-retirement deals. Meanwhile, the once radical e-sourcing idea has become routine for Tata, which ran 750 reverse auctions on Ariba in the past year to bring down purchasing prices by an average of 7% for everything from ball bearings to the milk served in the company cafeteria.

Except for a right leadership that showed determination to be globally competitive, nothing had changed at Tata Motors. Tata Motors is the only Indian company in the passenger car sector.

And that difference made Tata Motors what it is today, when the other two (HM and Premier) because of the lack of the steely management will to survive and grow got vanished from the passenger car manufacture.

Posted in education, governance, management | Leave a comment

MD- Tata Motors! Why is this Bigheadedness?

Posted on April 1, 2007 by indra

I had just finished going through an incredible story of Tata Motors in Forbes. No one can question the creditable and successful entry of TELCO, now known as Tata Motors, in passenger car manufacture. The two old monopolistic Indian passenger car manufacturers couldn’t survive the onslaught of competition when the Indian economy opened after post liberalization of 1991. One died, the other is gasping.

However, I was amazed and shocked to read a report that appeared almost in all newspapers. Why should Tata Motors managing director Ravi Kant be so adamant and blunt in asserting the right regarding setting up of its Rs 1 lakh car plant at Singur that has created so much of controversy? He can certainly defend the company’s selection of Singur as the site for its proposed small-car plant. But he can’t say what he has been attributed to have said. Ravi Kant said, “We choose where we want to set up the plant and nobody has the right to speak about the location. It is entirely our choice.” The statement smells arrogance. Tata Motors and its MD owe to the people of the country a technical explanation behind selecting Singur over the other locations suggested by the government. It is important as many including myself suggested that Tata Motors would have selected the other location rather Singur- the highly fertile 1000 acres of cultivation land. MD would have presented a matrix showing the ranking of the different locations on various parameters desired for a right plant location.

How illogical and authoritarian it looks when Ravi Kant asserts, “I personally visited twice all the six sites shown by the Bengal government. I was part of the decision-making process in which Singur emerged as the clear choice based on sound business sense.”

As I was told by one of my friends, Ravi Kant is an alumnus of my own IIT, Kharagpur. As a senior, I expected he would have given an engineer and manager-like an answer rather than replying like an autocrat dictator.

Many who don’t like the decision of Singur are the well wishers of Tata Motors and feel proud about its performance over the years. The whole of India is looking forward for a great technical breakthrough of the company with this unique product of Rs 1 lakh car and wish a grand success of the venture. But Ravi would have been humbler in his statement.
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Trinamool warns Tata Motors of ‘serious consequences’
P.S. Here is how the selection of location is explained by a global corporation:

Mr Paul Otellini, Intel’s president and chief executive officer has been cited in a March 26-dated story on http://news.xinhuanet.com thus: that Intel chose Dalian (a port city in northeast China’s Liaoning Province) over a dozen other sites, including cities in Israel and India, because China is Intel’s fastest growing market and the cost of production is lower; and that infrastructure, education, adequate power, water and logistics in Dalian were all factors in securing the deal.

And some good news from Singur– Singur locals look at alternative means of employment

Posted in industry, manufacturing | Leave a comment

Supreme Court Stay on 27% Reservation for OBC- Some Questions

Posted on March 31, 2007 by indra

The media is agog with this unexpected Supreme Court’s stay on the implementation of the government’s decision to reserve 27% seats for Other Backward Classes, more popularly called OBCs in central educational institutions, including top schools like IITs, IIMs, and AIIMS since it came yesterday sometime.

I have expressed many a times that any identification and differentiation of the people on the basis of castes must end, if India wishes to be a modern great global economy, and that it must wish above everything.

I was very happy with the report of an initiative of Shri Shri Ravi Shankar, founder of the Art of Living Foundation. About 5,000 people, including several Dalit and Hindu leaders, pledged to work against untouchability and discrimination through a seven-point action plan at the first truth & reconciliation conference held in New Delhi.

Sri Sri Ravi Shankar, founder of the Art of Living Foundation, addressing the conference, had said, “Discrimination is not sanctioned by religion. Every Hindu should be educated about the fact that many sacred texts were written by Dalits maharashis in Hindu literature. Notable examples are the two great epics, Ramayana and Mahabharata written by Dalit Maharishis Ved Vyas and Valmiki. Fear and communication gap between communities is keeping us apart. We must reconcile differences.” The seven-point action plan focused on ensuring temple entry for Dalits, collective celebrations of festivals including community feasts, abolishing the practice of separate utensils for Dalits, empowerment of women from economically weaker sections of society, providing educational facilities to weaker sections, spiritual and religious education to Dalit children and equality and justice for all. As a symbolic implementation of the plan, leaders partook in a community feast. Dalit leader and president of the Indian Justice Party, Udit Raj welcomed the initiatives and advocated that the posts of the head of maths be filled by priests from every caste on a rotation basis.

Why should any honest Indian or, if I say so, Hindu disagree with any of the seven points? I don’t think there is any rationality in perpetuating the caste system that is the unnecessary and damaging burden from the history. Let the country men including the Hindus agree to dismantle it, if not with one stroke, over a timeframe. Caste based society kept India slaves for centuries and certainly none would like to get that exploited again and again by the vested interests to keep us at the bottom of the pyramid.

Some pertinent questions need answers.

Should the caste system with its damaging historical past be the main identifying factor of the society? Do and will the people of India and particularly the next generations like to perpetuate their identification by their castes?

Why was the census based on the caste dropped after 1931? Even if it was by a default, it must be considered as a wonderful decision to integrate the society.
Should the Indian constitution be amended to provide for a single-issue headcounts or referendum?

Does the unanimous backing of the parliament members for reservation, or for that matter on any issue of shellfish interest of the members such as office of profits bill mean the wills of the people of India?

However, I wonder why could those opposing quotas for OBCs not find even a single MP to support their cause and oppose the bill that is getting so much of indirect moral support from judiciary.

Is the judiciary doing what is just technically correct and judicially prudent or is it the ego war between the judiciary and the legislature to prove its supremacy?

The court might have certain justification for stay such as lack of authentic data on the size of OBC population, extent of backwardness, as well as the centre’s adamant refusal to exclude the creamy layer from quotas. However, the decision would have come much earlier to avoid the anxiety among those OBC students who are standing a chance to get admitted in absence of the stay.
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‘Don’t Divide The Country’
An inconvenient truth
A Blow To Affirmative Action In India

Posted in economy, social issues | Leave a comment

Other Sectors Must Emulate IT Sector

Posted on March 29, 2007 by indra

A new report by CLSA entitled Chain Reaction by Bhavtosh Vajpayee and Anshu Govil has appeared.

The report tries to put in figure the implications of strong IT sector growth across the economy. Some of its data are fascinating and other sectors such as textiles, pharma, or auto components and leather must emulate it for creating an all-out growth, employment and alleviation of poverty.

Export: IT/BPO exports have reached about $30 billion in the financial year 2006-07. Over the next three years the industry will double ($60 billion export target in 2010). Its incremental impact over the coming three years will be similar to what it has achieved over the last 20 years. (Interestingly, President Kalam wishes the figure to be $100 billion by 2010. And one can imagine the implications with that.)

Job creation: The industry is expected to create over 1.7 million new jobs directly and using a conservative multiplier of 1.4 (every IT job is expected to create 1.4 new jobs in other sectors), about 2.3 million indirect jobs over 3-4 years. Thus the IT industry will absorb 80-85 per cent of all the employable engineers and about 60 per cent of all quality graduates.

From about 4 million people entering the job market in urban India every year, the IT industry (both directly and indirectly) will absorb nearly 35 per cent over the coming 3-4 years. About 13-14 million people enter the working age population annually taking both urban and rural India together. And the IT industry has the potential to employ 10 per cent of these people.

Real estate: Based on a Cushman & Wakefield projection of 850 million square feet of residential demand till 2010, 70-75 per cent of this incremental residential demand will cater only to the IT sector (for both rental-cum- owned housing).

Commercial space: The demand projection is for 155 million square feet of commercial space in India till 2010. The IT sector alone will account for about 65 per cent of this, even after assuming that the sector builds about 50 per cent of its own space and leases only 50 per cent.

Middle Class Creation: Between 2002 and 2010, India will add 4.4 million households to the upper middle class, of which about 20 per cent will be accounted for by IT. Between 2002 and 2010, the report points out 21 million households will be lifted out of the category earning less than Rs 100,000 per year, and the IT industry through indirect job creation will account for at least 20 per cent of this uplift.

Tax collection: Over the next 3-4 years, 13-14 per cent of all income tax collections will come from IT employees. 20-25 per cent of India’s nominal GDP expansion over the next three years will come from the direct and indirect impact of the IT sector.

A recent analysis by the Asian Development Bank, based on the numbers in the latest National Sample Survey Organisation report on employment creations during 1999-200 and 2004 proves the point.

“Those who have studied till middle school seem to be the biggest gainers from the growth in employment, cornering nearly 42% of the 70 million jobs that came up between 1999-2000 and 2004. It means over 29 million new jobs during the five-year period have gone to those who have studied till middle school.

Next in line are those who have completed primary school, bagging over a quarter or 18 million new jobs that were up for grabs. While their educational qualifications would have made them eligible only for blue-collar jobs in factories, these two segments also fared well in the services sector.”

However, IT sector is playing a role model for companies as well as individuals. IT sector proved beyond doubt that even technocrats and not only those born with silver or gold spoon in their mouth can be entrepreneur and rich. It also created larger number of millionaires among its employees by sharing the wealth so that they can help it grow wealthier. The sector also gave a new meaning to investing public and changed the goalpost of investor expectations. It brought a new standard for the quality of life both at home and at workplace. And wherever IT clusters grew, the overall standard of that city got transformed, be it Bangalore, Hyderabad, Pune, Noida, Gurgaon, or Sector 5 of Salt Lake City in Kolkata.

While IT industry has shown how one can deliver despite all the infrastructural and procedural bottlenecks and why the corporate India must stop hiding behind those excuses. It demonstrated that if freed of governmental interference and outdated legislation, Indian companies can be world-class.

This is where India’s globally recognized superiority in IT and ITeS sector provides a better value for the country and its people at large than what the manufacturing sector has brought to China, as both in the entry salary as well as the annual increments, IT sector is better off.

The generic pharma, auto components and auto manufacturing, and the leather, textiles and apparel industry all have similar potentials to create employment and prosperity for the youth joining workforce. Just take one example from the trends in auto sector. The penetration of midsize cars is gradually increasing, and it means the need of more and more drivers in Indian scenario. (“The increased affluence leads to a greater propensity to employ drivers.” According to projections of JD Power.) Against the estimated 238,000 units of mid-size cars sold in 2006, the number is likely to grow to 555,000 by 2012. And the small cars would grow from 778,000 in 2006 to 10,50,000 by 2012. All that means huge employment of all skill categories.

Retail and financial services are the two new sectors, which have the potential to employ at least 5 million in 5-7 years and really broad base growth across regions and skill sets.

However, It only confirms India must grow at higher rate without getting complacent about it.

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India, China, or Vietnam

Posted on March 28, 2007 by indra

According to a revised estimate announced by commerce and industry minister, Kamalnath, one of the most visible ministers of UPA government, the fiscal year will be the best with FDI (Foreign Direct Investment) touching a figure of $15 billion, nearly the double of $7.72 billion of the last year. The achievement is creditable, as India could manage only $38.90 billion between 1991and march 2006. But even with $15 billion FDI, India’s share is less than one-fourth of what China ($63Billion) attracted in 2006. But all this is happening because of only one reason; India is the second largest market after China. Thee government has not done any thing significant to attract more and a respectable figure in comparison with China.

Michael Dell, the founder chairman of world’s second largest PC maker Dell Inc. was recently in India. It is interesting to appreciate what he said. ” Dell’s 86 suppliers are planning to invest $19 billion in next two years, but not a single dollar is coming to India. Reason is the high tariff structure. One of the suppliers is investing $5 billion, but it has chosen Vietnam over India to invest. Dell sources around $19 billion worth of components from China and Taiwan but nothing from India. India levies 20-25% tariff on PC production visa-a-vis many other countries with very low or nil tax rates. Of a $500 PC, the duty element in India is around $100. However, because of the sheer size of the Indian market Dell is putting up an assembly plant in Sriperumbudur SEZ near Chennai at an investment of $ 30 million to manufacture 400,000 units annually.

Why can’t the government decide the priority high tech sector where it intends to have FDI inflows? Why can’t it be reducing the tariff in line with even a poorer country such as Vietnam? Why should it go on collecting these high taxes and doling out in so-called programmers for social equity once they know through different studies of the experts that it hardly reach the beneficiaries and gets diverted to the relatives and known of the politicians, bureaucrats, and only those who manage the vote banks or accounts in Swiss banks? Why should it go on talking of globalisation, if it can’t master the rules and tricks of competition?

The second story is of South Korean steel giant Posco that signed the MOU in June 2005 for setting up a 12-million ton steel plant in Orissa at an investment of Rs 52,000 crore. Even after almost two years, the issues related to the land and mining lease are not cleared. When the media reported Posco’s intention to shift the project to Vietnam, both the Orissa and central government has woken up to the realities. The Orissa government today said it would within the next 3 months, remove all hurdles to South Korean steel giant Posco. Even PM is making promises to resolve disputes over land acquisition that threaten to delay projects including steel ventures by Arcelor Mittal and South Korea’s Posco. And what is the guarantee that it would happen, when, as reported, the villagers opposed to the Posco steel project had formed “self-sacrifice squads” to protect their lands from being acquired?

Is the government doing sufficient selling of the necessity and advantages of these development projects among the people of the region? And can the so-called activists such as Medha Patkar and her peers present an alternative plans for the growth of the regions and the country? Why can’t they be given a district’s administration and all resources to prove their models of inclusive growth? Why can’t the government go for a countrywide debate on the issues of acquisitions and making the bills on SEZs and acquisition robust enough to be vulnerable to get exploited by the business tycoons?

How can any foreign investor get attracted to India with this sort of trouble in starting a business, as with each passing day the project cost increases that is critical to any Greenfield project? If the country aims to attract FDIs comparable to China, it will have to make all the necessary changes in its working culture. There is no shortcut to grow with all sorts of inefficiency in the systems and every imaginable types of indiscipline in the people of the country brought in through the shrewd politicians and their so-called leaders in the name of democracy and human rights.

All foreign investors may talk nice about India in public but when it comes to investment, the SWOT study of the country where they intend to invest must satisfy them fully for its long-term commercial viability providing sufficient returns. And that is the reason that Intel decided to build its $2.5 billion first Asian chip manufacturing plant in the northeastern city of Dalian in China, reflecting China’s growing importance as a market for high-tech goods. The great economist Prime Minister and his able lieutenants know why Intel couldn’t be attracted to India that fails to come out with a competitive policy for chip manufacturing sector as a strategy for the nation that wishes to be a superpower in IT sector. Many a times, a question crops up. Are they really serious enough?
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Machining Industry Can Lead Indian Manufacturing Sector

Posted on March 28, 2007 by indra

Dr. B N Mondal, Head, Centre for Advanced Materials Processing, Central Mechanical Engineering Research Institute & Secretary, Investment Casting Society, India had invited me to attend the ‘National Workshop regarding super hard material and its cutting (machining) application’ at CMERI, Durgapur during 29-30 the March, 2007. As I am not keeping very good health these days, I found traveling to Durgapur a little trivial. But I couldn’t resist the temptation to write a brief update on machining industry in India, as I foresee. I did send this to Dr. Mandal, whom I knew from his IIT’s days. Rakesh, my eldest son was at that time in IIT, Kharagpur. Here is the writeup that I could do.

Machining Industry Can Lead Indian Manufacturing Sector

Machining has been an important manufacturing process for ages for engineering industry. A large number of parts going in the final assemblies of the products, be it aeroplanes or automobiles require machining operations to finish them within critical tolerances for optimum functioning over the life cycles.

Over the years, there have been sea changes in all areas of the machining, be its the machine tools, the cutting tools, fixturing, or other accessories such as cooling agents. But some changes are almost universal in all these. Flexibility, reconfigurability, modularity, ease and error free automatic operations, and serviceability have been the main goals.

CNC Machining centers and turning centers have replaced different machine tools for varying machining operations, such as drilling, reaming, boring, and even turning, grinding and even broaching. Even a complicated component such as cylinder blocks of an automobile engine or a sophisticated huge sheet metal stamping die tools can almost be totally machined in a single setup today on one machine.

Cutting tool materials today can machine harden above 60Rc pieces and that too without any cooling agent that used to cause a lot of nuisance on the shop floor. In next step, perhaps the cutting tools will be smart enough to automatically switch over the cutting parameters depending on the real machining characteristics of the material being machined.

Workholding fixtures are smarter to control precisely the grip force required for the cutting parameters without deforming the features as it comes out of the machine tools after the finishing operations.

But the most important input has come from the Internet compatible controls that has made troubleshooting and maintenance manageable even for sophisticated items by removing the need of the expert to be physically present to assist on the machine tools.

Some of new trends that has helped the machining to be more productive are the near net shape basic forming processes for precision casting and forging that have eliminated the need of three step machining to one. Simultaneously, in some sector such as aeroplane industry, the components are getting bulk machined from almost raw billets integrating number of components in one thus eliminating assembling operation and tolerance stack up. The advent of high speed machining and hard machining has also facilitated the production engineers to eliminate number of machining steps.

Surprisingly, no innovation has come in basic machine tool design to replace the machining/turning centers that once was predicted.

For India, it is necessary that it becomes a manufacturing nation so that huge employment gets created to exploit its demographical advantages to the best. Machining industry can be one area that can serve the purpose. Some may say that it is capital intensive, but with machining center when one machine can be used to finish many components totally, it can be commercially viable business.

I am pained that India even today does not facilities good enough to manufacture all the die tools of the automotive industry, and the OEM manufacturers both domestic and global with presence in India are dependent to get it from other cheaper countries such as Japan, Taiwan, South Korea, or perhaps from China and Thailand. One can appreciate the need by looking at the number of die tools involved in creating a new model of car and its cost. Will the OEMs keep on importing them with frequent changes of models that will be expected from the Indian automotive enthusiasts and consumers?

My other agony relates to the machine tools industry. Unfortunately, with all opportunity not a single machine tools company could grow to a global scale though all the necessary skill and talent with demand too was there. Naturally, an ambience is to be created by the government agencies such as National Manufacturing Competitiveness Council (NMCC) so that more and more of the graduate engineers start thinking of becoming entrepreneurs in manufacturing sector. CMERI can also be a motivating force.

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