When it comes to outsourcing, India continues to rule as the favourite global destination, even though factors like emergence of cheaper destinations, employee and salary crunch are adversely affecting the sector, a recent study shows.
India holds an edge as it commands global confidence to produce perfect Turn Around Time (TAT), a recent study by recruitment solutions provider Elixier Solutions shows.
TAT is the time needed for performing a task, especially receiving, completing, and returning an assignment.
"At present outsourcing business in India is increasing at a rate four times more than any other country and the county has the resource and margin to meet the competition," a partner in Elixier Solutions Vipul Prakash said.
According to the study, growing at a rate of 40 per cent annually, India is the lead player in this sector followed by China at the second spot with a growth rate of 25 per cent.
"Certain companies restrain from outsourcing their practices thinking it to be a luxury practice which only organisations having deep pockets can afford," Elixir Web Solutions Associate Partner Jacob Samuel said.
The overall outlook of this industry seems positive with experts predicting that the global market for shared services would grow to 1.43 trillion dollar by the end of 2009 from 1,000 billion dollar at present.
Although India and China are the market leaders in this sector, there are huge opportunities present in the market to give ample space to other countries like Philippines, Vietnam, Romania, Kenya, Sri Lanka and North America market to grow, the report said.
The study also said although it is unlikely that India would be able to retain its number one slot with China aggressively trying to outstrip it in the business, it would still be able to get a decent share of the pie.
Also, processes like human resource, insurance, life sciences, finance, legal services, technical support, risk management, supply chain and media would come up in a big way in terms of business and employment opportunities, the study added.
Wednesday, September 5, 2007
Sunday, August 26, 2007
India to top in venture capital investments: Study
The supremacy of western economies in the venture capital investment space is facing challenges from emerging economies with India expected to overtake global leader UK by 2009 if the current trend persists, a latest UBS-sponsored report said.
As per data analysed by the 'UBS UK Venture Backed Report - 2007' western leadership in innovation is being increasingly threatened by emerging economies like India and China.
According to the report, "India's VC market with a growth rate of approximately 90 per cent is likely to overtake the UK by 2009."
The Chinese VC market has already surpassed UK in terms of absolute size in 2006 and is growing at a much faster pace.
If the current growth rate persists, China's VC market would overtake the European market as a whole within two to three years. India would follow suit in the next four years, said the UBS sponsored report by Library House titled 'Funding Growth in a Changing World'.
The prime factor behind this stupendous growth by the emerging economies is that these countries have carved out a niche for themselves in the field of innovation as VC funds are utilised to support new ideas.
Venture capital forms a major component of a country's ability to innovate. The US is the acknowledged leader in technological innovation, while India and China pose an increasing challenge to the western economies.
India and China are at the cutting edge of innovation and strongly accelerating against the sluggish growth in Europe and the US, the report added.
The report says policy makers in the UK, Europe and the US must focus on how to maintain their lead in innovation amid the high competition. It cautioned that the rise of China and India should not be seen as a threat' to the West and vice-a-versa.
The reason being that for economic growth the utilisation of innovative products and services are perceived to be more important than their generation, analysts said.
"The consumption of innovation by an economy is just as important, as the generation of that innovation. UK companies need to become more willing to procure from innovative, but inexperienced, young companies," Professor of Business at Columbia University Amar Bhide said.
The global VC market has risen in recent years. Over 1.4 billion pounds of institutional capital was invested during 2006 through 556 deals in UK. The venture capital investments in 2006 shows a 27 per cent hike compared to 1.1 billion pound that was raised through 539 deals in 2005.
UK is the leader in Europe for VC but it still lags significantly behind the US in terms of absolute size.
As per data analysed by the 'UBS UK Venture Backed Report - 2007' western leadership in innovation is being increasingly threatened by emerging economies like India and China.
According to the report, "India's VC market with a growth rate of approximately 90 per cent is likely to overtake the UK by 2009."
The Chinese VC market has already surpassed UK in terms of absolute size in 2006 and is growing at a much faster pace.
If the current growth rate persists, China's VC market would overtake the European market as a whole within two to three years. India would follow suit in the next four years, said the UBS sponsored report by Library House titled 'Funding Growth in a Changing World'.
The prime factor behind this stupendous growth by the emerging economies is that these countries have carved out a niche for themselves in the field of innovation as VC funds are utilised to support new ideas.
Venture capital forms a major component of a country's ability to innovate. The US is the acknowledged leader in technological innovation, while India and China pose an increasing challenge to the western economies.
India and China are at the cutting edge of innovation and strongly accelerating against the sluggish growth in Europe and the US, the report added.
The report says policy makers in the UK, Europe and the US must focus on how to maintain their lead in innovation amid the high competition. It cautioned that the rise of China and India should not be seen as a threat' to the West and vice-a-versa.
The reason being that for economic growth the utilisation of innovative products and services are perceived to be more important than their generation, analysts said.
"The consumption of innovation by an economy is just as important, as the generation of that innovation. UK companies need to become more willing to procure from innovative, but inexperienced, young companies," Professor of Business at Columbia University Amar Bhide said.
The global VC market has risen in recent years. Over 1.4 billion pounds of institutional capital was invested during 2006 through 556 deals in UK. The venture capital investments in 2006 shows a 27 per cent hike compared to 1.1 billion pound that was raised through 539 deals in 2005.
UK is the leader in Europe for VC but it still lags significantly behind the US in terms of absolute size.
Sunday, August 19, 2007
Gujarat rules road to industrialisation: RBI
Gujarat has edged out Maharashtra to become India's top state in terms of investment commitments during 2006-07, cornering over 25 per cent of the total spending proposed by corporates across the country.
Gujarat received investment proposals to the tune of Rs 74,988 crore in 86 projects, while Andhra Pradesh was at a distant second with investment intentions worth Rs 25,173 crore, Maharashtra Rs 24,330 crore and Tamil Nadu Rs 24,229 crore, the Reserve Banks said in an analysis of 'Corporate Investment: Growth in 2006-07 and prospects for 2007-08.'
Gujarat, which is slated to go for elections some time in November, has displaced Maharashtra from the top slot attracting one-fourth of the total investment intentions in 1,054 projects aggregating Rs 2,83,440 crore.
Corporates invested Rs 1,31,299 crore in 812 crore during the previous year 2005-06.
Total investments during 2007-08, after taking into account the capital expenditure, ECBs etc, are likely to aggregate to Rs 2,06,460 crore, RBI said, adding the turnaround in corporate investment, which began in 2002-03 and peaked in 2004-05, is expected to be sustained in 2007-08.
During 2006-07, Maharashtra, in terms of investments, was relegated to the third place after Andhra Pradesh which attracted 8.9 per cent (Rs 25,173 crore) of the total corporate investments.
Maharashtra shared the third slot with Tamil Nadu attracting 8.6 per cent of total investments.
Gujarat received investment proposals to the tune of Rs 74,988 crore in 86 projects, while Andhra Pradesh was at a distant second with investment intentions worth Rs 25,173 crore, Maharashtra Rs 24,330 crore and Tamil Nadu Rs 24,229 crore, the Reserve Banks said in an analysis of 'Corporate Investment: Growth in 2006-07 and prospects for 2007-08.'
Gujarat, which is slated to go for elections some time in November, has displaced Maharashtra from the top slot attracting one-fourth of the total investment intentions in 1,054 projects aggregating Rs 2,83,440 crore.
Corporates invested Rs 1,31,299 crore in 812 crore during the previous year 2005-06.
Total investments during 2007-08, after taking into account the capital expenditure, ECBs etc, are likely to aggregate to Rs 2,06,460 crore, RBI said, adding the turnaround in corporate investment, which began in 2002-03 and peaked in 2004-05, is expected to be sustained in 2007-08.
During 2006-07, Maharashtra, in terms of investments, was relegated to the third place after Andhra Pradesh which attracted 8.9 per cent (Rs 25,173 crore) of the total corporate investments.
Maharashtra shared the third slot with Tamil Nadu attracting 8.6 per cent of total investments.
Saturday, August 18, 2007
China set to replace US as world's No 2 exporter
China is all set to overtake the United States as the world's second-largest exporter this year, and may well top Germany as the world's leading exporter next year, Xinhua news agency quoted vice minister of commerce Yu Guangzhou as saying.
China currently ranks third in export volume after Germany and the United States.
Beijing could overtake the US by the year-end if current trade trends continue, Guangzhou told the China Economic Development Forum.
Last year, China's export volume trailed US exports by less than $70 billion, while the pace of export growth was 7 percentage points faster than that of the US. If that growth continues, China's exports could exceed US exports by $50 billion this year, Yu said.
Chinese customs statistics show that the country's foreign trade volume reached $980.9 billion in January-June, up 23.3 per cent from the same period a year ago. Of this, exports grew 27.6 per cent to $546.7 billion, and imports grew 18.2 per cent to $434.2 billion.
Meanwhile, China's quality watchdog has warned that the country's failure to improve the quality of some of its exported goods was undermining its trade strength.
"We may have entered the ranks of the big traders, but we're still far, far from being a strong trade power, and the fundamental reason is that our product quality competitiveness is not strong," the People's Daily quoted Li Changjiang, head of the General Administration for Quality Supervision and Quarantine, as saying.
Concern over potentially tainted products made in China has resulted in recalls or bans on such goods - from Chinese toothpaste to toys and pet food. (See: Recall of Chinese toys has lead to factory closures: China Toy Association)
His comments were reported a day after China said it would send officials to the United States this month and next to cool worries stemming from a series of scandals over tainted exports, from toothpaste to pet food and toys containing lead paint.
"Quality is a symbol of national strength," Li said. He also called for tougher regulation of manufacturers and exporters.
China currently ranks third in export volume after Germany and the United States.
Beijing could overtake the US by the year-end if current trade trends continue, Guangzhou told the China Economic Development Forum.
Last year, China's export volume trailed US exports by less than $70 billion, while the pace of export growth was 7 percentage points faster than that of the US. If that growth continues, China's exports could exceed US exports by $50 billion this year, Yu said.
Chinese customs statistics show that the country's foreign trade volume reached $980.9 billion in January-June, up 23.3 per cent from the same period a year ago. Of this, exports grew 27.6 per cent to $546.7 billion, and imports grew 18.2 per cent to $434.2 billion.
Meanwhile, China's quality watchdog has warned that the country's failure to improve the quality of some of its exported goods was undermining its trade strength.
"We may have entered the ranks of the big traders, but we're still far, far from being a strong trade power, and the fundamental reason is that our product quality competitiveness is not strong," the People's Daily quoted Li Changjiang, head of the General Administration for Quality Supervision and Quarantine, as saying.
Concern over potentially tainted products made in China has resulted in recalls or bans on such goods - from Chinese toothpaste to toys and pet food. (See: Recall of Chinese toys has lead to factory closures: China Toy Association)
His comments were reported a day after China said it would send officials to the United States this month and next to cool worries stemming from a series of scandals over tainted exports, from toothpaste to pet food and toys containing lead paint.
"Quality is a symbol of national strength," Li said. He also called for tougher regulation of manufacturers and exporters.
Sunday, August 5, 2007
India to beat US, Japan by ’50
Another Study Ranks Bric Nations As Top I-Destinations
Emerging economies, including India, will overtake the developed countries in economic growth by 2050, with the popularity of India and China as investment destinations is rising while the attractiveness Europe and North America is slipping, says a study.
“The seven new global powers by 2050 will comprise the so-called Bric economies (Brazil, Russia, India and China) together with Indonesia, Mexico and Turkey,’’ says the Ernst and Young European Attractiveness Survey 2007.
These seven emerging countries would overtake the economies of the G7 countries—Britain, Canada, France, Germany, Italy, Japan, United States—in terms of GDP but whether India can develop its infrastructure at pace with that of global investment remains to be seen, the survey added.
Earlier in January, a Goldman Sachs report had put India second to China and ahead of the US in its ranking for the top economy in 2050.
The developing economies will outdo the G7 if they manage to mend the loopholes regarding transparency, fairness and infrastructure development. India’s popularity is rising as 26% respondents said the country is among their top three preferences in 2007 whereas the figure was just 11% in 2004.
The survey highlights that with intensifying competitive cost pressure, companies across the world would resort to offshore services and manufacturing to lower cost and higher growth economies such as China and India. One company in five intends to relocate all or part of its European activities outside the region and for this they look forward to the Asian countries.
“China attracts the interest of 50% of respondents currently undergoing a relocation search, while India is considered by 30% of voters,’’ the survey said. Europe’s attractiveness for foreign investors declined significantly in 2007, though it has managed to maintain its lead as the most attractive global investment region, the survey says.
However, the survey cautions that the mature economic markets in Europe are losing their hold on investors as the emerging economies of Asia gain further momentum. This change in foreign investor interest towards Asian countries is because of high skilled labour power, cost effectiveness and good ground for research and development (R&D) activities.
Asia has shown a significant gain and narrowed the gap with Europe and in the list of preferred regions China has moved up to the second position this year, while India has attained fifth position in the league.
Western Europe tops the chart with 55% respondents naming it as one of their most preferred business locations followed by China which received the vote of 48% respondents, while India managed to hold on to the fifth position with 26% decision makers voting in its favour, the survey said. Central and eastern Europe grabbed the third position (39% vote) while the United States and Canada shared the fourth slot with 38% respondents voting in their favour for the preferred location for investments.
The global business world has become increasingly multipolar, the survey said adding that “the attractiveness of the traditional top ranked regions of Europe and North America is giving way to a rise in popularity of India and China’’.
Emerging economies, including India, will overtake the developed countries in economic growth by 2050, with the popularity of India and China as investment destinations is rising while the attractiveness Europe and North America is slipping, says a study.
“The seven new global powers by 2050 will comprise the so-called Bric economies (Brazil, Russia, India and China) together with Indonesia, Mexico and Turkey,’’ says the Ernst and Young European Attractiveness Survey 2007.
These seven emerging countries would overtake the economies of the G7 countries—Britain, Canada, France, Germany, Italy, Japan, United States—in terms of GDP but whether India can develop its infrastructure at pace with that of global investment remains to be seen, the survey added.
Earlier in January, a Goldman Sachs report had put India second to China and ahead of the US in its ranking for the top economy in 2050.
The developing economies will outdo the G7 if they manage to mend the loopholes regarding transparency, fairness and infrastructure development. India’s popularity is rising as 26% respondents said the country is among their top three preferences in 2007 whereas the figure was just 11% in 2004.
The survey highlights that with intensifying competitive cost pressure, companies across the world would resort to offshore services and manufacturing to lower cost and higher growth economies such as China and India. One company in five intends to relocate all or part of its European activities outside the region and for this they look forward to the Asian countries.
“China attracts the interest of 50% of respondents currently undergoing a relocation search, while India is considered by 30% of voters,’’ the survey said. Europe’s attractiveness for foreign investors declined significantly in 2007, though it has managed to maintain its lead as the most attractive global investment region, the survey says.
However, the survey cautions that the mature economic markets in Europe are losing their hold on investors as the emerging economies of Asia gain further momentum. This change in foreign investor interest towards Asian countries is because of high skilled labour power, cost effectiveness and good ground for research and development (R&D) activities.
Asia has shown a significant gain and narrowed the gap with Europe and in the list of preferred regions China has moved up to the second position this year, while India has attained fifth position in the league.
Western Europe tops the chart with 55% respondents naming it as one of their most preferred business locations followed by China which received the vote of 48% respondents, while India managed to hold on to the fifth position with 26% decision makers voting in its favour, the survey said. Central and eastern Europe grabbed the third position (39% vote) while the United States and Canada shared the fourth slot with 38% respondents voting in their favour for the preferred location for investments.
The global business world has become increasingly multipolar, the survey said adding that “the attractiveness of the traditional top ranked regions of Europe and North America is giving way to a rise in popularity of India and China’’.
Sunday, July 22, 2007
India: Spending on Infrastructure to benefit rural India
Finance minister Palaniyappan Chidambaram's latest speech may have skirted the infrastructure sector in the announcement of big-bang budget proposals. But infrastructure players may not have much to complain.
The allocation for the development of national highways as well as rural roads has been increased, two ultra-mega power projects have been announced and asset management companies (AMCs) will now be able to dabble in infrastructure funds.
In another important development, there has been a whopping 31.5 per cent increase in the allocation (over the earlier Rs18,696 crore) towards the Bharat Nirman programme. A project of the department of drinking water supply under the ministry of rural development, this programme aims at strengthening infrastructure in six areas, — housing, roads, electrification, communication (telephone), drinking water and irrigation. All this in the four years from 2005-06 to 2008-09.
Roads
The provision for the National Highway Development Programme (NHDP) has been increased to Rs.10,667 crore from the existing Rs.9,945 crore. Of this, Rs.405 crore will be mopped up by the North-Eastern region of the country for which another road-cum-rail project has also been announced over the Brahmaputra river in Bogibil, Assam. Work on the Golden Quadrilateral road project - which dominated discussions during the last two annual Budget presentations - is on in full swing. According to the finance minister, the project will be completed by 2009.
Cement
The Budget has been a mixed bag for cement producers. The focus on the NHDP will benefit cement companies. But a differential excise for cement manufacturers will leave some of them sulking. The excise duty on cement has been reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag or less in the retail market. But those sold above this price will attract an excise duty of Rs.600 per tonne.
Power
Two more ultra-mega power projects (UMPPs) will be approved by July 2007. Each of the coal-based project will have a capacity of 4,000 MW or above. The recently-released Economic Survey 2007-08 had reported that the CEA (Central Electricity Authority) has identified nine sites in nine states for the UMPPs. These include four pithead sites and five coastal sites.
Irrigation
An additional 24 lakh hectares of irrigated area are proposed to be created by the end of financial year 2007-08, including nine lakh hectares under the Accelerated Irrigation Benefit Programme. During this period, the target for farm credit has been hiked from Rs175,000 crore to Rs225,000 crore. An outlay for irrigation has also been announced at Rs11,000 crore.
The duty on lift irrigation, agricultural sprinklers and food processing equipment reduced from 7.5 per cent to five per cent. The finance minister has also announced a one hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging schemes.
Tourism infrastructure
The allocation towards tourism infrastructure has been hiked from Rs.423 crore to Rs.520 crore.
The allocation for the development of national highways as well as rural roads has been increased, two ultra-mega power projects have been announced and asset management companies (AMCs) will now be able to dabble in infrastructure funds.
In another important development, there has been a whopping 31.5 per cent increase in the allocation (over the earlier Rs18,696 crore) towards the Bharat Nirman programme. A project of the department of drinking water supply under the ministry of rural development, this programme aims at strengthening infrastructure in six areas, — housing, roads, electrification, communication (telephone), drinking water and irrigation. All this in the four years from 2005-06 to 2008-09.
Roads
The provision for the National Highway Development Programme (NHDP) has been increased to Rs.10,667 crore from the existing Rs.9,945 crore. Of this, Rs.405 crore will be mopped up by the North-Eastern region of the country for which another road-cum-rail project has also been announced over the Brahmaputra river in Bogibil, Assam. Work on the Golden Quadrilateral road project - which dominated discussions during the last two annual Budget presentations - is on in full swing. According to the finance minister, the project will be completed by 2009.
Cement
The Budget has been a mixed bag for cement producers. The focus on the NHDP will benefit cement companies. But a differential excise for cement manufacturers will leave some of them sulking. The excise duty on cement has been reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag or less in the retail market. But those sold above this price will attract an excise duty of Rs.600 per tonne.
Power
Two more ultra-mega power projects (UMPPs) will be approved by July 2007. Each of the coal-based project will have a capacity of 4,000 MW or above. The recently-released Economic Survey 2007-08 had reported that the CEA (Central Electricity Authority) has identified nine sites in nine states for the UMPPs. These include four pithead sites and five coastal sites.
Irrigation
An additional 24 lakh hectares of irrigated area are proposed to be created by the end of financial year 2007-08, including nine lakh hectares under the Accelerated Irrigation Benefit Programme. During this period, the target for farm credit has been hiked from Rs175,000 crore to Rs225,000 crore. An outlay for irrigation has also been announced at Rs11,000 crore.
The duty on lift irrigation, agricultural sprinklers and food processing equipment reduced from 7.5 per cent to five per cent. The finance minister has also announced a one hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging schemes.
Tourism infrastructure
The allocation towards tourism infrastructure has been hiked from Rs.423 crore to Rs.520 crore.
Tuesday, July 17, 2007
OECD predicts steady growth for BRICs
According to a new study by Organisation of Economic Cooperation and Development (OECD), economic growth in the emerging BRIC economies (Brazil, Russia, India and China) will continue on a steady path even as the developed nations will see a slower progress.
The OECD study said, "The latest composite leading indicators (CLIs) suggest that moderate economic expansion will continue in the developed countries and Brazil, Russia, China, and India will continue with their steady expansion."
The OECD has compiled composite leading indicators (CLIs), which summarise information contained in a number of key short-term indicators linked to GDP for its member-countries since the 1980s.
It was designed to provide early signals of turning points (peaks and troughs) between expansions and slow-downs. The CLI for the OECD area, which covers 29 developed countries of Europe, America and Asia Pacific, rose 0.5 point in May to 110.1 from a revised 109.6 in April.
For China, the CLI rose 3.3 points in May whereas CLI for India increased 1.6 points in April as data for May was not available in the the report. India's CLI rose to 154.8 points in April from 153.2 points in February this year.
The CLI for Russia rose by 1.4 points and for Brazil it increased by 2.4 points.
Meanwhile, for the United States CLI increased by 0.5 point in May and in the euro areas CLI increased by 0.1 point in May and in the UK the index went up by just 0.5 point in the month.
OECD's CLI index is a tool to provide qualitative information on short term economic send this article to a friend movements rather than quantitative measures emphasising on movements over time in up or down directions rather than levels.
The OECD study said, "The latest composite leading indicators (CLIs) suggest that moderate economic expansion will continue in the developed countries and Brazil, Russia, China, and India will continue with their steady expansion."
The OECD has compiled composite leading indicators (CLIs), which summarise information contained in a number of key short-term indicators linked to GDP for its member-countries since the 1980s.
It was designed to provide early signals of turning points (peaks and troughs) between expansions and slow-downs. The CLI for the OECD area, which covers 29 developed countries of Europe, America and Asia Pacific, rose 0.5 point in May to 110.1 from a revised 109.6 in April.
For China, the CLI rose 3.3 points in May whereas CLI for India increased 1.6 points in April as data for May was not available in the the report. India's CLI rose to 154.8 points in April from 153.2 points in February this year.
The CLI for Russia rose by 1.4 points and for Brazil it increased by 2.4 points.
Meanwhile, for the United States CLI increased by 0.5 point in May and in the euro areas CLI increased by 0.1 point in May and in the UK the index went up by just 0.5 point in the month.
OECD's CLI index is a tool to provide qualitative information on short term economic send this article to a friend movements rather than quantitative measures emphasising on movements over time in up or down directions rather than levels.
Wednesday, June 27, 2007
Bric(Brazil, Russia, India, China) overtakes US in energy: Goldman Sachs
United Nations: The main challengers to US economic power—Brazil, Russia, India and China—have overtaken US in dominating the global energy industry, according to a study by Goldman Sachs.
The rising power of the four countries—the new economic tigers nicknamed the Brics’—is already evident in the metals and mining sector and is starting to be felt in insurance and consumer-related industries, said Anthony Ling, a managing director at the investment bank.
“For any company operating on a global scale, world is changing rapidly, more challenging than ever before, truly globalising,” he said, and one of the significant changes is “rise of Bric economies.”
At the end of the first Gulf War in 1991, 55% of the 20 largest companies in the energy industry by market capitalisation were American, and 45% were European, according to Goldman Sachs study. But in 2007, 35% of the 20 largest energy companies are from Bric countries, about 35% are European, and about 30% are American, the study said.
“The US is now lagging with the smallest percentage number of energy companies worldwide,” Ling said. “If you think about the global resource industry typically being a leader in terms of global trends, we’re starting to see this replicated in the mining industry, where 20% of the top 20 companies are now from Bric countries,” he said. “We believe this sort of pattern will be repeated industry by industry.”
It is already evident in the insurance business, where Brics account for about 10% of the top 20 companies, and in the global beverage industry, where the new economic powers are just starting to show with about 5%. Ling predicted the Brics would soon be moving into the food and pharmaceutical sectors.
If investors and corporations don’t take the growing power of the Brics in the global economy into account, he warned, they will lose out on investment growth and competitive advantage for their companies.
Ling, who has been involved in analysing the energy industry for 20 years, said he did not believe anyone polled after the first Gulf War “would come remotely close” to predicting the market capitalisation of the energy industry today. “I think there’s a number of factors, which I think is a very good case study for just how rapidly changing the competitive environment for most industries are,” he said.
Exxon Mobil is still the No. 1 energy company by market capitalisation today, as it was in 1991, Ling said. But he said it is now followed by the likes of PetroChina Co, a unit of state-owned China National Petroleum; Gazprom, the Russian gas monopoly; Petrobras, Brazil’s government-run oil company; China’s Sinopec; Russi’s Rosneft and Lukoil; China National Offshore Oil Corp; and India’s ONGC.
“So you have major state energy companies that have entered the market capitalisation ranks,” he said. “I think it’s a combination of the US energy industry falling dramatically behind the rest of the world for a number of reasons.” First, Ling said, energy production has changed. Goldman Sachs analysed about 170 new projects around the world, each in excess of 500 million barrels, “the socalled legacy assets that will drive production in the future,” he said.
Ling said 70% of that new production is coming from outside the Organisation for Economic Cooperation and Development, which includes the world’s richest nations including the US, Japan, South Korea, Canada, and major European nations.
The rising power of the four countries—the new economic tigers nicknamed the Brics’—is already evident in the metals and mining sector and is starting to be felt in insurance and consumer-related industries, said Anthony Ling, a managing director at the investment bank.
“For any company operating on a global scale, world is changing rapidly, more challenging than ever before, truly globalising,” he said, and one of the significant changes is “rise of Bric economies.”
At the end of the first Gulf War in 1991, 55% of the 20 largest companies in the energy industry by market capitalisation were American, and 45% were European, according to Goldman Sachs study. But in 2007, 35% of the 20 largest energy companies are from Bric countries, about 35% are European, and about 30% are American, the study said.
“The US is now lagging with the smallest percentage number of energy companies worldwide,” Ling said. “If you think about the global resource industry typically being a leader in terms of global trends, we’re starting to see this replicated in the mining industry, where 20% of the top 20 companies are now from Bric countries,” he said. “We believe this sort of pattern will be repeated industry by industry.”
It is already evident in the insurance business, where Brics account for about 10% of the top 20 companies, and in the global beverage industry, where the new economic powers are just starting to show with about 5%. Ling predicted the Brics would soon be moving into the food and pharmaceutical sectors.
If investors and corporations don’t take the growing power of the Brics in the global economy into account, he warned, they will lose out on investment growth and competitive advantage for their companies.
Ling, who has been involved in analysing the energy industry for 20 years, said he did not believe anyone polled after the first Gulf War “would come remotely close” to predicting the market capitalisation of the energy industry today. “I think there’s a number of factors, which I think is a very good case study for just how rapidly changing the competitive environment for most industries are,” he said.
Exxon Mobil is still the No. 1 energy company by market capitalisation today, as it was in 1991, Ling said. But he said it is now followed by the likes of PetroChina Co, a unit of state-owned China National Petroleum; Gazprom, the Russian gas monopoly; Petrobras, Brazil’s government-run oil company; China’s Sinopec; Russi’s Rosneft and Lukoil; China National Offshore Oil Corp; and India’s ONGC.
“So you have major state energy companies that have entered the market capitalisation ranks,” he said. “I think it’s a combination of the US energy industry falling dramatically behind the rest of the world for a number of reasons.” First, Ling said, energy production has changed. Goldman Sachs analysed about 170 new projects around the world, each in excess of 500 million barrels, “the socalled legacy assets that will drive production in the future,” he said.
Ling said 70% of that new production is coming from outside the Organisation for Economic Cooperation and Development, which includes the world’s richest nations including the US, Japan, South Korea, Canada, and major European nations.
Tuesday, June 26, 2007
Fun Business: India and China are driving growth in global media and entertainment
Entertainment could be the best business proposition going. According to a PricewaterhouseCoopers (PwC) report, India and China are set to drive expansion of the global entertainment and media (E&M) industry to $2 trillion by 2011. BRIC countries will be responsible for 24 per cent of this growth, with India and China as the principal contributors.
India’s E&M market is experiencing a tearaway 18.5 per cent annual growth, the highest in the world among major markets. The country is clearly in the throes of a consumer boom. With rising disposable incomes, people have more to spend on leisure and entertainment. An increase in advertising spend, which stands at a mere 0.34 per cent of GDP in 2006, could boost the ongoing expansion of India’s E&M industry, which encompasses newspapers, magazines, TV content, TV distribution, radio, broadband Internet, films, video games, amusement parks and more. Given that India has the potential to become a big E&M player — as it is in IT today — concentrated efforts must be made to make this sector of the economy internationally competitive.
E&M is being transformed by the advent of digital technologies and the PwC report says that half the expected industry growth will be generated through online and wireless technologies. Regulation of broadcasting, cable and Internet distribution networks must take account of technological convergence, thanks to which phone, TV and broadband Internet services can soon be provided together in one gadget. The policy framework must not be biased against any particular media format, and there should be a level playing field between public and private sector players. Piracy also needs to be addressed, for which legislation needs to be beefed up and enough empowered officers deployed in the field to check piracy.
Bollywood will find Hollywood taking the battle to its home markets by dubbing its products in Hindi or other regional languages. Indian movie-makers will have to respond by making films that are internationally acceptable beyond the Indian diaspora markets. Bollywood doesn’t yet have its equivalent of Crouching Tiger, Hidden Dragon, a film made with an international cast of ethnic Chinese actors that grossed $130 million in the US market. When that happens Indian soft power will be a force to reckon with in the world.
India’s E&M market is experiencing a tearaway 18.5 per cent annual growth, the highest in the world among major markets. The country is clearly in the throes of a consumer boom. With rising disposable incomes, people have more to spend on leisure and entertainment. An increase in advertising spend, which stands at a mere 0.34 per cent of GDP in 2006, could boost the ongoing expansion of India’s E&M industry, which encompasses newspapers, magazines, TV content, TV distribution, radio, broadband Internet, films, video games, amusement parks and more. Given that India has the potential to become a big E&M player — as it is in IT today — concentrated efforts must be made to make this sector of the economy internationally competitive.
E&M is being transformed by the advent of digital technologies and the PwC report says that half the expected industry growth will be generated through online and wireless technologies. Regulation of broadcasting, cable and Internet distribution networks must take account of technological convergence, thanks to which phone, TV and broadband Internet services can soon be provided together in one gadget. The policy framework must not be biased against any particular media format, and there should be a level playing field between public and private sector players. Piracy also needs to be addressed, for which legislation needs to be beefed up and enough empowered officers deployed in the field to check piracy.
Bollywood will find Hollywood taking the battle to its home markets by dubbing its products in Hindi or other regional languages. Indian movie-makers will have to respond by making films that are internationally acceptable beyond the Indian diaspora markets. Bollywood doesn’t yet have its equivalent of Crouching Tiger, Hidden Dragon, a film made with an international cast of ethnic Chinese actors that grossed $130 million in the US market. When that happens Indian soft power will be a force to reckon with in the world.
Friday, June 8, 2007
Indians head home in 'brain gain'
For much of the last century India suffered a "brain drain". Generations of Indians set off in search of a better life in other countries. Today, an estimated 25 million people of Indian origin live overseas. But could the tide be turning?
"My dad was against me moving back to India," Manish Amin tells me in his new flat in Delhi where he lives with his wife and two sons.
Three decades ago Manish's parents moved from India to the UK. He has just moved back.
"My dad's idea was that everyone wants to get away from India", Manish says. "But now he's seen the big high rise flats, the big shopping malls, even he's amazed. You get Marks and Spencer, Debenhams, everything's here now."
Manish has set up his own online travel company. He's already taking 200 bookings a day.
India's breakneck economic growth seems to be enticing the country's diaspora back to the motherland.
In Bangalore, one of India's booming high-tech centres, an estimated 35,000 overseas Indians have set up home.In the last few years people born overseas who are able to prove their Indian descent have been able to apply for a special immigration status.
The Overseas Citizenship Certificate provides many of the benefits of full citizenship without the need to give up a foreign passport.
Mr Gurucharan, Joint Secretary in the Ministry of Overseas Indian Affairs, says they are proving popular.
"In the last six months or so we've issued over 40,000 Overseas Citizenship Certificates, and I believe that this trend will grow," he says.
"In the 1960s when people left India the buzz word was 'brain-drain'. We see it now as 'brain-gain'."
Career prospects
India's healthcare system is benefiting. Doctors who have trained in overseas health services are finding faster career advancement.
Dr Shabnam Singh recruits doctors for a private hospital.
"The Indian private sector facilities are at a par, and dare I say it, in some cases better than what is available in the West," she says.
"In the last six years I would say that from a trickle at first there is now a constant flow of people wanting to relocate back home."
The Indian government does not have the detailed figures to prove whether "reverse migration" is increasing at a significant rate.Many of those applying for the Overseas Citizenship status may simply want the convenience of visa-free travel, without intending to relocate to India.
But there can be no doubt that many young people of Indian origin no longer see the best opportunities as being in the West.
Lifestyle choice
Ferena Scott was born and raised in Glasgow. She now has a successful career as an actress in Bollywood.
"There's something for everyone here," she says.
"And because you have a luxurious lifestyle you can enjoy yourself more."
It is an attraction some find hard to resist. The yawning gap between the new rich and the old poor means the wealthy in India have a very high standard of living.
There is also the emotional bond. Scott says that despite being born in the UK she has always felt a strong tie to India."As a young kid in Britain people would look at me and ask me where I was from. I'd say, 'Scotland', and they'd say, 'yes, but where are you really from?'
"Somewhere at the back of your mind you're wondering about this country that your parents came from and wondering if maybe you belong there."
Despite its so-called "economic miracle", India still has shocking levels of poverty, a burdensome bureaucracy and crumbling infrastructure. But many overseas Indians feel the country's time has come.
"When I was young, growing up in the UK, we used to play football in the streets," says Manish Amin.
"Kids can't do that there now. Here though, there's open ground, the kids can play by themselves. I think the main thing for us was just to have that comfortable life here."
India's rise as a manufacturing giant
India Inc is on a roll after a series of recent global mega-mergers and hostile takeovers in the recent past.
Earlier this week, KM Birla's Hindalco acquired the world's largest producer of rolled aluminium products, Novelis, for $6bn.
Before that, LN Mittal - who is based in London but holds an Indian passport - took over the world's largest steel-maker, Arcelor, and Ratan Tata gobbled up another steel manufacturer, Corus, to become the fifth largest producer.
The deals herald the emergence on the world stage of global Indian entrepreneurs in manufacturing, and indicate that India is becoming an international hub for metals, petro-products and auto components.
Global leaders
The rise of the manufacturing giants follows that of services firms, like TCS, Wipro and Infosys, who have all left their mark globally.
Now ambitious Indian conglomerates are thinking of either crashing into the Fortune 500 list, or vastly improving their existing position.
The country's second largest private firm, the Mukesh Ambani-owned Reliance Industries, aims to be among the top 10 in the list.
With Novelis in the bag, Kumar Birla's Hindalco Industries is sure to enter the list, three years ahead of its target year.
Others like Videocon, Moser Baer and Bharat Forge have emerged as global leaders in their respective sectors.
A Boston Consulting Group (BCG) report last May argued that "a revolution in global business is under way", and the axis of corporate power was shifting towards the BRIC (Brazil, Russia, India and China) countries.
It identified 100 new global challengers from these nations, which included 21 Indian firms, including Bharat Forge, Hindalco, Videocon and Tata Steel.
Last year, a McKinsey study found the dynamics in emerging markets like India "actually provide an invaluable springboard" for their companies to go global.
A 2006 study by Mape, an investment bank, concluded "the Indian Multinational Company (MNC) has finally come of age" and "Indian buyers have become a force to reckon with in many industries such as pharma, auto components and oil and gas".
Factors such as liberal policies, access to cash, and the rise of entrepreneurial ambitions are responsible for the emergence of global Indian groups.
At a public meeting a few weeks ago, India's Finance Minister, P Chidambaram, commented that Tata Steel's multi-billion dollar interest in Corus reflected the rising aggression among Indian promoters.
Ratan Tata, who was present, countered that this would not have been possible five years ago because of restrictive policies.
Even as Indians shop abroad, foreigners are eyeing investment potential in India.
Operational incentives
But unlike the 1990s, when global MNCs wished to tap only the burgeoning base of Indian middle-class consumers, they are now planning to take advantage of low costs and widely available natural resources to make India their exports hub.
In steel, Arcelor-Mittal and South Korea's Posco wish to set up a plant producing 10 million tonnes of steel every year in the east of India - for both domestic sales and exports.
A similar trend can be witnessed in other sectors like auto components.
As India plans to build dozens of special economic zones, with a slew of financial and operational incentives, it will attract more foreign investors.
A recent DSP Merrill Lynch study pointed out that Foreign Direct Investment (FDI) inflows to India this fiscal year (2006-07) are likely to overtake Foreign Institutional Investors' investments (FII) on Indian bourses.
Between April and November 2006, India's FDI inflows stood at $7.3bn, a 117% rise over the same period in the previous year.
With foreign money pouring in, Indian firms have no option but to become bigger, better and bolder.
Buy the world
They have to go global and capture new geographical markets.
If the proposed Mittal or Posco plant had come up in India prior to the Tata-Corus deal, Tata Steel would have become a puny player even in the domestic market.
Now, with an additional annual production capacity of 19 million tonnes, Tata Steel can effectively compete with either of them, both globally and domestically.
Other Indian groups like Birla and Dhoot (of Videocon) have realised they have to initiate similar acquisition moves in a bid to survive - and thrive.
Grant Thornton has estimated that while Indian outbound deals, or global mergers and acquisitions, were valued at $4.3bn in 2005, they crossed the $15bn mark in 2006.
In the first month of this year, the two combined deals (Tata-Corus and Birla-Novelis) have been valued at over $18bn.
Indians, it seems, are taking over - or buying out - the world.
Monday, March 19, 2007
Middle class in India has arrived
The middle class in India has the sense that it is coming into its own; that it has acquired the numerical strength (300 million and more, if you use a fairly loose definition) to make the Indian market matter even in a global context; and to demand that their issues be addressed when elections come round.
The cacophony on television, the visible shift in focus of the general newspapers (out with coverage of city slums, in with coverage of shopping malls), the rush to start new airlines and the obvious international interest in India, all say the same thing: the middle class in India has arrived.
Didn't Indian airline companies account for close to half of all the new Airbuses ordered at the Paris air show? QED.
Is it that open and shut, or is there room for doubt? Looking at how the political system does not respond to the need for basics (like clean water and reliable power) would straightaway belie the claim that the middle class has political clout, but what of the other posers?
As always, the NCAER (or National Council of Applied Economic Research) survey of households gives us interesting answers to these vital questions.
It is a shock to discover, for instance, that despite the evident emergence of a strong middle class, barely 10 per cent of all households have life insurance cover--traditionally the first form of savings for anyone with a reliable income flow and with dependants.
And medical insurance is available for barely 1 per cent of all households!
There is worse to come. Only 2 per cent of households have credit cards (so much, then, for the vaunted advent of plastic money). Even that basic item in a middle-class household, the refrigerator, exists in only a sixth of all households in the country (probably because only a third of rural households have a domestic electric connection!).
It might be as much of a surprise to know that half of all the TV sets sold in the country are either black and white, or small (i.e. 14-inch) colour sets.
The only items of truly mass consumption remain daily consumables like cooking oil and washing and toilet soaps (which should really be classified as necessities, not options), followed some way behind by shampoos.
Among consumer durables, the ones used most often are not the stuff of contemporary middle class legend, and are either table/ceiling fans or bicycles. The first category sells about 37 million each year, the second about 25 million.
In other words, what appears a normal lifestyle to the average city youngster working in an office is completely abnormal for the majority, in both towns and cities (just as it is completely abnormal to speak and write in English -- only about 6 per cent do that).
From this, it is a short leap to yielding to the obvious appeal of CK Prahalad's thesis, that your "fortune lies at the bottom of the pyramid"; in other words, if you want to make big bucks in the Indian market, you had better serve customers with really low-cost goods and services.
Certainly, the evidence of the mobile phone industry and of cable TV bears this out; both expect their customers to pay no more than a few hundred rupees every month, for a fairy nominal cost, and they add enormously to the quality of life and to productivity.
The NCAER projections till the end of the decade do show, however, that for almost any category of product the market will double in terms of annual sales.
Some will do even better, while others will grow slowly. So most businesses can be said to have a good future if they can find their customers. That means more airports, more flights, many more cars. . . the full works.
That's because the size of the middle class itself will grow sharply in the coming years. But while there will be plenty of reason to celebrate the Indian party, the NCAER projections show that even in 2009-10 the middle class will be an island in a larger ocean of non-consuming classes.
Time we got a little impatient with the pace of change and economic reform?
The cacophony on television, the visible shift in focus of the general newspapers (out with coverage of city slums, in with coverage of shopping malls), the rush to start new airlines and the obvious international interest in India, all say the same thing: the middle class in India has arrived.
Didn't Indian airline companies account for close to half of all the new Airbuses ordered at the Paris air show? QED.
Is it that open and shut, or is there room for doubt? Looking at how the political system does not respond to the need for basics (like clean water and reliable power) would straightaway belie the claim that the middle class has political clout, but what of the other posers?
As always, the NCAER (or National Council of Applied Economic Research) survey of households gives us interesting answers to these vital questions.
It is a shock to discover, for instance, that despite the evident emergence of a strong middle class, barely 10 per cent of all households have life insurance cover--traditionally the first form of savings for anyone with a reliable income flow and with dependants.
And medical insurance is available for barely 1 per cent of all households!
There is worse to come. Only 2 per cent of households have credit cards (so much, then, for the vaunted advent of plastic money). Even that basic item in a middle-class household, the refrigerator, exists in only a sixth of all households in the country (probably because only a third of rural households have a domestic electric connection!).
It might be as much of a surprise to know that half of all the TV sets sold in the country are either black and white, or small (i.e. 14-inch) colour sets.
The only items of truly mass consumption remain daily consumables like cooking oil and washing and toilet soaps (which should really be classified as necessities, not options), followed some way behind by shampoos.
Among consumer durables, the ones used most often are not the stuff of contemporary middle class legend, and are either table/ceiling fans or bicycles. The first category sells about 37 million each year, the second about 25 million.
In other words, what appears a normal lifestyle to the average city youngster working in an office is completely abnormal for the majority, in both towns and cities (just as it is completely abnormal to speak and write in English -- only about 6 per cent do that).
From this, it is a short leap to yielding to the obvious appeal of CK Prahalad's thesis, that your "fortune lies at the bottom of the pyramid"; in other words, if you want to make big bucks in the Indian market, you had better serve customers with really low-cost goods and services.
Certainly, the evidence of the mobile phone industry and of cable TV bears this out; both expect their customers to pay no more than a few hundred rupees every month, for a fairy nominal cost, and they add enormously to the quality of life and to productivity.
The NCAER projections till the end of the decade do show, however, that for almost any category of product the market will double in terms of annual sales.
Some will do even better, while others will grow slowly. So most businesses can be said to have a good future if they can find their customers. That means more airports, more flights, many more cars. . . the full works.
That's because the size of the middle class itself will grow sharply in the coming years. But while there will be plenty of reason to celebrate the Indian party, the NCAER projections show that even in 2009-10 the middle class will be an island in a larger ocean of non-consuming classes.
Time we got a little impatient with the pace of change and economic reform?
Sunday, March 18, 2007
BRIC may yield ground to CHIME
After having lavished attention on the BRIC (Goldman Sach's acronym for the emerging markets of Brazil, Russia, India, China) markets, global investors are now looking at a new alphabetical grouping, CHIME, symbolising China, India and Middle East.
Analysts believe that this geographical grouping — China and India's high growth and the fund flush Gulf region — holds the promise of tremendous growth in the years ahead.
According to a report in the Asian Venture Capital Journal, "The Middle East and Asia corridor is slowly becoming real and important. As Asia has become a lot more attractive today than the Western countries and the Gulf is an emerging market with a lot of liquidity."
Compared to the high-growth BRIC emerging markets, CHIME is developing as a far more geographically continuous and economically consistent proposition, the report noted.
This reverses the previously held view that the Mid East region continues to look for investment avenues outside.
Investors from the prosperous and high growth six-member Gulf Cooperation Council, or GCC, (comprising the UAE, Saudi Arabia, Kuwait, Oman, Qatar and Bahrain) have a different outlook and priorities to Western funds looking to diversify away from their own slow-growth economies.
The abundant liquidity of the GCC group means that investors may be more ready to explore new options and take risks and hence there could be an increasing look towards the east.
Analysts believe that this geographical grouping — China and India's high growth and the fund flush Gulf region — holds the promise of tremendous growth in the years ahead.
According to a report in the Asian Venture Capital Journal, "The Middle East and Asia corridor is slowly becoming real and important. As Asia has become a lot more attractive today than the Western countries and the Gulf is an emerging market with a lot of liquidity."
Compared to the high-growth BRIC emerging markets, CHIME is developing as a far more geographically continuous and economically consistent proposition, the report noted.
This reverses the previously held view that the Mid East region continues to look for investment avenues outside.
Investors from the prosperous and high growth six-member Gulf Cooperation Council, or GCC, (comprising the UAE, Saudi Arabia, Kuwait, Oman, Qatar and Bahrain) have a different outlook and priorities to Western funds looking to diversify away from their own slow-growth economies.
The abundant liquidity of the GCC group means that investors may be more ready to explore new options and take risks and hence there could be an increasing look towards the east.
Another good year for urban India; what about rural Bharat?
If national security measures can get nearly Rs100,000 crore, surely we can afford to invest at least as much in securing our 'food security', argues Arun Firodia, chairman, Kinetic Group.
The current financial year has been a great one. GDP has grown by 9.2 per cent, government revenues are buoyant, and exports are up. Full credit should be given to the finance minister for the excellent economic management of the country. He seems to have decided not to touch the 'winning formula' and continued with his existing policies, more or less.It was expected that finance minister would chart out a revolutionary new path and transform the rural economy into a powerhouse of future economic growth. While there are many good schemes already operating in this sector, they have not succeeded in reaching the intended beneficiary stakeholders, because of a lack of sound implementation.
Unless delivery mechanism improves, these schemes would remain a drain on the exchequer.
Also the financial outlay on rural sector should have been at least Rs100,000 crore since the rural sector accounts for nearly 20 per cent of India's economy. But important areas like crop insurance will get only Rs100 crore and the National Rainfed Area Authority would get another measly Rs100 crore.
If national security measures can get nearly Rs100,000 crore surely we can afford to invest at least as much in securing our 'food security'. Instead of spending Rs43,000 crore to buyout the Reserve Bank of India's stake holding in the State Bank of India. The government could well have channeled this amount in creating asset like small irrigation, roads, cold storage, etc, in rural areas.Infrastructure sector of power, ports, roads, etc, cry out for immediate attention. But 80 per cent of this Budget will be spent on revenue expenditure with, a comparatively insufficient amount being allocated left for infrastructure creation.
There are some welcome incremental steps in the area of job creation, food processing, bio-energy, R&D, etc. It is also good to know that there will be further fiscal consolidation in the current year.
Urban India can look forward to another good year. But what about rural Bharat?
The current financial year has been a great one. GDP has grown by 9.2 per cent, government revenues are buoyant, and exports are up. Full credit should be given to the finance minister for the excellent economic management of the country. He seems to have decided not to touch the 'winning formula' and continued with his existing policies, more or less.It was expected that finance minister would chart out a revolutionary new path and transform the rural economy into a powerhouse of future economic growth. While there are many good schemes already operating in this sector, they have not succeeded in reaching the intended beneficiary stakeholders, because of a lack of sound implementation.
Unless delivery mechanism improves, these schemes would remain a drain on the exchequer.
Also the financial outlay on rural sector should have been at least Rs100,000 crore since the rural sector accounts for nearly 20 per cent of India's economy. But important areas like crop insurance will get only Rs100 crore and the National Rainfed Area Authority would get another measly Rs100 crore.
If national security measures can get nearly Rs100,000 crore surely we can afford to invest at least as much in securing our 'food security'. Instead of spending Rs43,000 crore to buyout the Reserve Bank of India's stake holding in the State Bank of India. The government could well have channeled this amount in creating asset like small irrigation, roads, cold storage, etc, in rural areas.Infrastructure sector of power, ports, roads, etc, cry out for immediate attention. But 80 per cent of this Budget will be spent on revenue expenditure with, a comparatively insufficient amount being allocated left for infrastructure creation.
There are some welcome incremental steps in the area of job creation, food processing, bio-energy, R&D, etc. It is also good to know that there will be further fiscal consolidation in the current year.
Urban India can look forward to another good year. But what about rural Bharat?
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