Obama’s Indian Odyssey

‘Should the West be scared?’

This question was posed on a BBC panel discussion earlier this week, in the light of President Obama’s recently concluded visit to India and Prime Minister Cameron’s trip to China. While this particular discussion was limited, it has been interesting to observe the somewhat dismissive coverage in the British media about the visit. Interesting, given the takeaways from the Cameron visit to India in July this year (see earlier blog).

Having personally been involved with a number of head of state visits to India over the last two decades, including President Clinton’s visit to India in March 2000, here is my take on the messages for business – both overt and covert – from President Obama’s game-changing and mesmerising visit to India.

1. Recognition of a new world order. During his trip, President Obama has peppered each of his speeches with unequivocal assertion to the fact that relationships have changed and that ‘we need to change with them’. His comment that the US-India partnership will be the ‘defining partnership of the 21st century’, his description of India as ‘indispensable’ and a ‘cornerstone’ of US policy in Asia and his wish to see India take up a permanent seat on the UN Security Council, speak volumes of the paradigm shift that has taken place in the mindset of the world’s largest economy. To quote President Obama, 'India isn't emerging, it has emerged'.
2. It’s (also) the economy, stupid. A country’s chief executive is responsible not only for a country’s physical security but also its economic security. A point that President Obama has not been allowed to forget for a single day since he embarked on his journey to 1600 Pennsylvania Avenue. The result – consciously choosing to kick off his historic visit with India’s commercial capital – Mumbai – announcing business deals worth US$15 billion, supporting 70,000 jobs in the United States, by the close of the three days of his visit.
3. Knowledge is the new global currency, technology the game-changer, people the glue, youth the catalyst.
4. Protectionism doesn’t pay. Growth will come through trade with Asia. It is inevitable and not a zero-sum game. Global economic integration has promise and potential. We need to negotiate this changing relationship.

Or, as President Obama’s icon, Mahatma Gandhi, succinctly observed, ‘be the change you want to see in the world’.

Seven trends defining India’s growth story

In the last one week, I’ve come across some very interesting research – some slightly dated, the majority quite recent.  Yet, each of these individual threads, coincidentally, supports the other.  What does the emerging tapestry reveal?

1. The undisputable re-emergence of Asia, specifically China and India (see Angus Maddison, Hans Rosling, McKinsey, International Monetary Fund).  China’s recent eclipsing of Japan to gain recognition as the world’s second largest economy is par for the course as is increased intra-regional trade.

2. Increasing domestic prosperity 

• For the first time ever, the number of high-income households in India has exceeded the number of low-income ones (reference NCAER);
• Sales of trucks and buses — an indicator of economic activity — rose 37 per cent to 51,481 units in July 2010;
• Overall automobile sales grew at 31.50 per cent to 1,237,461 units in July 2010; and
• Mobile penetration is projected to reach 55.9 percent in 2010, increasing to 72.5 percent in 2012. 

3.  India’s growing engagement with the world

• Expanding share of world trade - 2.8% in 2009 compared to 0.6% in 1998
• Foreign direct investment (FDI) flows increasing steadily

4.  Heightened business focus; less emotional baggage

• India Inc's merger and acquisitions have touched nearly US$ 50 billion level over January-July 2010, over three times the total in 2009. 
• Strategic rationale driving corporate expansion (Fortis, Piramal Healthcare)
• Robust succession planning process (Tata Sons, Larsen and Toubro, Infosys)

5.  An aspirational, entrepreneurial, young talent pool

• 72 % of India's population is below the age of 40, 47% of Indians are under the age of 20 and 10% of the world population is an Indian under 25
• According to Goldman Sachs, India will add 110 mn people to global workforce by 2020.
• The Indian Government plans to increase the gross enrolment ratio from the current 12.4% to 30% by 2020 and further up to 40% by 2025. 

6.  Increasingly pervasive influence of technology and media

• Reverse / low-cost innovation – Tata, GE, Nokia leading the way
• The media and entertainment sector is estimated to be growing at a compounded annual growth rate of 13 per cent over the next few years; rollout of 3G by the private sector over the next few months is expected to be a game-changer for business and society.

7.  Growing economic maturity and self-confidence

• India has become the fifth country to have a unique symbol (`) for its currency
• Foreign exchange reserves total US$ 284 billion
• Is forging its own set of strategic partnerships – USA, Singapore, Myanmar, Africa, Afghanistan - to name a few.

In sum, the tapestry presents much potential.  Yet, as anyone remotely familiar with India knows, it is far from being an easy market to do business with.  Any truthful case study of an international company doing business with India is peppered with anecdotes about how they have had to revise their India strategy.  Poor governance and infrastructure remain areas of concern.  

But then again, if India were an economist’s ‘perfect’ market, it wouldn’t be witnessing the extraordinary growth rates it has.