People at Work & Play

As disposable income increases, so do desires. The well to do youth of India could leapfrog from the thrill of “my first motor-bike ” today to that of “my first car” tomorrow.

Tata Motors is working towards introducing a sedan car for Rs 100,000 or Rs.1 lakh ( as the figure is popularly called in India), the equivalent of $ 2500. The story of the potential market for such a car is described in Time by Simon Robinson.

If Tata were to lure away even 10% of the 6.5 million Indians who buy motorbikes every year, it will have expanded India’s car market by more than half. Competitors aren’t willing to cede that kind of market share without a fight. Carlos Ghosn, head of Renault-Nissan, recently announced that his company was looking at building a $3,000 car in India. Fiat, General Motors, Honda, Hyundai, Maruti (the Indian division of Japanese manufacturer Suzuki), Toyota and Volkswagen are all developing low-cost cars, though none of them have promised anything quite as cheap as $3,000.

Apart from the potentially huge market in India itself, Tata Motors plans to export its economical car to other countries in Southeast Asia and Africa. With its affordability being a key advantage, the Chairman of the Tata Group, Ratan Tata hopes to eventually sell as many as 1 million such cars worldwide each year. Countries like Brazil and Russia could also be possible markets. The project is expected to succeed because of the relatively low manufacturing costs in India- engineering costs alone being estimated to be  half that of Europe or the US.

On the flip side, there may be a high environmental price to pay as poor nations convert from two wheels to four. John Rogers, a consultant for the Asian Development Bank, estimates that the number of cars in India will increase from 6.2 million in 2005 to 41.6 million by 2025.

The new car will offer a viable option for many in India who currently manage- albeit with difficulty- to take their entire family out on their two wheelers!

A recent issue of Business Today tells us that Indians are the most upbeat about life in the Asia region. Research from AXA Asia Life shows that 82 % of the “mass affluent” ( the top 25-35 % of the population) in India have neither started planning for, nor taken care of  their retirement needs. AXA Asia is part of the giant AXA Group.

It appears that for Indians the first priority was career, followed by health, family and retirement in  that order.

As many as 85 % of Indians surveyed were satisfied with their lives - the highest for any country in the region. The Philippines was next with 72 % followed by Indonesia at 47 %.

Another insight was that although 76 % of Indians were concerned about the rising costs in childrens’ education only 1 % had invested in education plans.

However, the survey size was not very big. It covered 2400 people aged between 25 and 50 years in 8 markets in Asia.

Here’s some more good news for Indian economy watchers. We can take pride in the fact that India has been ranked No. 3 in the world as far as intangible assets are concerned. An article in the Economic Times says that India emerges head and shoulders above all developed countries and blocs, barring the US and Switzerland.

In today’s knowledge-driven global marketplace, intangible assets such as intellectual property, brand, customer relationship and talent hold much more value than tangible ‘visible’ assets such as capital, land, building, factories et al.

India is No.3 economy in the world with the highest intangible component as a percentage of the total enterprise value (TEV), value of disclosed and undisclosed tangible and intangible assets.

With an estimated intangible assets component of 74% (as proportion of TEV), India is just behind US (75%) and Switzerland (74%), according to Global Intangible Tracker 2007 (GIT), the most extensive global study ever on intangibles assets by the London-based Brand Finance Institute.

The GIT study assumes significance in the wake of changes in the accounting practices, which means that the valuation of intangible assets is now a boardroom issue and cannot be ignored.

With a large portion of our economy being primarily based on intellectual capabilities, the challenge for the future will be our ability to deliver top quality services and solutions across different points in the value chain.

Reuters has a blog post about recent cases of Indian entrepreneurs hitting it big through social networking sites such as DesiMartini and MingleBox .

Reliance Entertainment plans to invest US $100 million on its own social networking website BigAdda.com.

The blog post lists some facts why Indian Entrepreneurs and Venture Capitalists bet on social networking business models :

• 44% of the total number of Indians who logon to the internet use the social networking websites

• Out of that, Orkut which is owned by Google owns 64% of the social networking market share. It is estimated that Orkut has approximately 69 million users as per August 2007 estimates. Out of which, at least 16.9% Orkut users are from India.

• Nasscom in its 2007 report has estimated that the number of broadband subscribers, currently 1 Million, will hit 20 million users in the next 3 years and the number of internet users in India which is currently 40 million will rise to 100 million users by 2010

• According to our source, 54% of India’s population is under the age of 20 years which is nearly 540 Million people under 20 years of age

• India is known as the IT hub of the world

• India signs up more than 7 Million new telecom users each month. Indian telecom service providers such as Bharti, Vodafone, Essar, and Tata Teleservices are considering the proposition of adding social networking services to their user base

• According to a Telecom Regulatory Authority of India (TRAI) Report, the number of Indians using their mobiles to login to the internet has almost doubled last year from 16 million to 38 million just last year

• With a population of more than a billion people, India has become the golden pot for investors worldwide.

These are impressive numbers indeed and speak volumes of the potential business opportunities ahead for entrepreneurs in this space.

Reading today’s ” Times of India “underscores for me the paradox that is India. An item says that an apartment in Mumbai’s posh Nariman Point area was sold for Rs. 34 crore. The rate per square foot - an astonishing Rs. 97, 842 ! Just above, is another item which says that in 2005, the last year for which complete figures are available, there were as many as 312 suicides per day, one-third of them by women.

Robert Vadra is not subject to security frisking at India’s civil airports but the Chiefs of the defence services, the Army, the Navy and the Air Force are!! Robert Vadra is not the Supreme Chief of the Armed Forces. He happens to be the son-in-law of Congress Chief, Sonia Gandhi.

We have some the brightest people as well as some of the most primitive social systems. We enjoy the benefits of democracy with some of the worst violations taking place under the guise of democratic norms. In some aspects we are more Leftist than Communist China. We are proud of our past and yet do not learn lessons from it.

This is the paradox that it India. As many would say in India ” We are like that only”!

Expect a gain of Re. 1 per year against the $ said K V Kamath, Chief Executive Officer and Managing Director, ICICI Bank.

He said the Indian currency would continue to appreciate further in future. “If I were in company management, I would allow at least Rs 2 per year or Re 1 a year strengthening,” he told corporates and industry representatives, implying that companies should be prepared for a Re 1 rise in the Indian unit against the dollar per year. The rupee has risen 13.7 per cent over a year.

Speaking at a manufacturing summit organised by the Confederation of Indian Industry, Kamath said the manufacturing sector, which clocked a growth rate of 12.5 per cent in 2006-07, is a star.

“Financial capital in not a challenge anymore as our markets are strong. What we are facing is the severe dearth of talented human capital and hence we need to enter into tie-ups with universities and customise programmes to suit the industry’s requirements.”said Mr. Kamath.

“Moving up in Mumbai” is a well written article by Eric Bellman in the Wall Street Journal. Speaking of three young men in Mumbai and their aspirations to get ahead in new opportunities created by a growing economy, the article captures insight into their lives and thoughts.

Writes Bellman “Until recently, much of the new wealth in India went to college-educated computer programmers, consultants and call-center workers. While they have made the country’s technology industry a new pillar of global commerce, the total number employed by the software industry is still only about two million — less than 0.2% of India’s 1.1 billion population. At the other end of the spectrum, India still has more than 200 million people who live below the poverty line, mostly farmers.

Between the two are tens of millions of Indians, mostly city dwellers in their 20s and 30s, who are taking their first steps into the salaried class by selling goods and services to the increasingly free-spending upper crust. They represent a kind of swing vote in how far India can spread the fruits of its rapid expansion. Annual economic growth has averaged more than 8.5% for the past four years, but much of the benefits have accrued to the old industrial families and the tech-savvy few.”

Over the next 3 years, the booming retail sector is expected to create 2.5 million new jobs in India.

“People are not despondent anymore,” says N.S. Sastry, former director of the National Sample Survey Organization, the government office that tracks employment trends. “They see better employment opportunities, better earning capacities and opportunities to improve their skills.”

Another thumbs up for the Indian economy comes from the latest launch from Hyundai. The Korean giant, which was the 6th largest car maker in the world in 2006, launched a car for the world market for the first time from India.

Hyundai had sales of over $ 29 billion in 2006. The Hyundai Motor India Ltd recently introduced its new compact car, ‘i10′ priced between Rs 3.39 lakh and Rs 3.98 lakh. ( 1 lakh=100000).

“The i10 will be manufactured only in our Indian plant and exported to over 70 countries,” said Hyundai Motor Company President Jae Kook Choi in New Delhi.

“Hyundai Motor India is poised to play a very important role not only in India but also in HMC´s global plans with HMI becomes Hyundai´s global hub for small car manufacturing,” said Choi Jae-Kook. “We are very proud of the i10 as it brings the best of Hyundai´s design and technology and I am confident that it will be a very big success around the world,” he added

The FORTUNE Global Forum site has a great section called “Conversations With Indian Business Leaders”.

See an interesting conversation with Jagdish Khattar, Managing Director of Maruti, the organisation that produces more than half the cars on Indian roads. Maruti Suzuki India Limited registered Total Income of Rs. 47,358 million (Net of Excise) during the second quarter (Q2) of the fiscal (July-September 2007), a growth of 33.7 percent over the same period last year.
Profit Before Tax went up to Rs. 6,841 million during Q2 of 2007-08, a growth of 28 percent over same period last year. Net Profit stood at Rs. 4,665 million, up 27 percent over July-September 2006.

Speaking about poverty in India, Mr. Khattar said “Reforms in agriculture, growth in manufacturing, government investment in roads and physical infrastructure and focus on the social sector will together enable us to raise levels of living in rural areas while absorbing more people in urban centers.If we are unable to do that, then it could seriously hamper India’s role as an emerging market leader. People are bound to reject the economic model. In a democracy, they will make sure their rejection is noted and acted upon. “

Asked to pick 5 words to describe India, Mr. Khattar said “Beneath the chaos, lurks opportunity”.

We admire Maruti for the way it has transformed manufacturing in India and has led a new movement of consumerism in the automobile sector