In India's Outsourcing Boom,GE Played a Starring Role

In India's Outsourcing Boom,GE Played a Starring Role

Early Investments Helped FuelTech and Service Sectors;A Cheap Source of Talent
Jack Welch Hears a Sales Pitch

By JAY SOLOMON in New Delhi and KATHRYN KRANHOLD in New York Staff Reporters of THE WALL STREET JOURNALMarch 23, 2005; Page A1

NEW DELHI -- In September 1989, Jack Welch, then General Electric Co.'s chairman, flew to India for a sales call. He hoped to sell products like airplane engines and plastics to the Indian government.

But during a breakfast meeting with top government advisers, it was Mr. Welch who got pitched. "We want to sell you software," Sam Pitroda, chief technology adviser to the late Indian Premier Rajiv Gandhi, told a surprised Mr. Welch. Mr. Pitroda explained that India needed business for its emerging high-tech sector. "If I kiss your cheek, what do I get in return?" the GE chairman replied, according to two men who were present. Fifteen years later, the answer is clear: the global outsourcing revolution.

India today earns more than $17 billion from corporations world-wide seeking low-cost overseas talent to do everything from write software to collect debts to design semiconductors. GE in large measure stoked the phenomenon, playing an unheralded role as the Johnny Appleseed of India Inc. and reaping billions in savings for itself along the way.

GE's technology partnership with India came amid the country's economic opening, which began in 1991 when New Delhi began systematically dismantling tariff and export controls. Indian executives say early investments by GE in India gave their technology and business service sectors crucial credibility and cash when other companies still viewed the country as a risky backwater. Moreover, exposure to Mr. Welch's culture of cost-cutting and efficiency taught them business skills they are now using to compete globally, often against U.S. firms.
"What we learned out of [the relationship with GE] is phenomenal," says S. Ramadorai, chief executive of India's largest software company, Tata Consultancy Services Ltd. Business from GE helped TCS boost its annual revenue to nearly $1.6 billion in the year ended March 2004 from just around $37 million in the early 1990s, says Mr. Ramadorai. Today, GE still accounts for 15% of TCS's overseas revenue and the Bombay company has used the GE relationship to spread into new markets such as China and Eastern Europe.

Publicly, GE has been reluctant to take credit for its singular role. Shipping white-collar jobs overseas has proved controversial in the U.S. Demoralized American workers have had to train their foreign replacements. During the 2004 presidential campaign, Democrats threatened to impose tax penalties on companies that move jobs overseas.

But the strategy has been pivotal for GE. In 2000, it inaugurated a Jack F. Welch Technology Centre in Bangalore that employs thousands of researchers working on everything from new refrigerators to jet engines. This year, the conglomerate plans to spend about $600 million on computer-software development from Indian companies, according to a recent company report. The company estimates that similar products would cost it as much as $1.2 billion in the U.S.
GE also recently unleashed a big new player in Indian outsourcing. In November, it sold a controlling interest in GE Capital International Services, or Gecis, a company with about 17,000 employees that GE started in 1997 to answer mail from its credit-card customers. With the $500 million sale of the Indian unit to private investors, it will start going after business from other corporations looking to save money.

Helped by the outsourcing boom, India's economy is on track to grow 7% for the fiscal year ending this month. Services now make up roughly half of India's total economic growth, and the revenues from India's technology sector are expected to exceed $28 billion during the current fiscal year, according to Nasscom, a trade organization representing India's high-tech sector.
Indian businessmen and politicians widely credit Mr. Welch and GE for seeding their country's economic boom. "The breakfast meeting was the turning point" for India's information-technology industry, says Jairam Ramesh, a senior economic adviser to India's ruling Congress party who was present at the 1989 meeting.

The first teams of GE executives Mr. Welch dispatched to India set foot in a country where cows meandered freely in the streets and temperatures often rose above 100 degrees Fahrenheit. "I was tasked to make sure nobody got sick," says Sunand Sharma, a former executive with GE's India operations who helped coordinate the conglomerate's initial software partnerships.
GE Medical System's former Asia chief, Chuck Pieper, was among the first to arrive in 1989, seeking an Indian partner to help develop a low-cost ultrasound machine. Because India was still a closed economy protected by steep tariffs and red tape, GE needed a domestic partner to sell its instruments there.

Among Mr. Pieper's first contacts were with Wipro Ltd., a Bangalore software-services company which until the late 1970s largely profited from selling vegetable oil. He says he quickly became enthralled with Wipro's chief executive, Azim Premji -- today India's richest man -- who picked him up at the Bangalore airport in a hulking Ambassador sedan, a 1950s design famed for its rugged endurance but lack of air conditioning or power steering. Mr. Pieper felt confident that he could get a "good night's sleep" with Mr. Premji as GE's partner. Within a year, the two companies had formed a joint venture to manufacture and distribute an ultrasound machine.
GE's industrial-equipment sales into India didn't take off as anticipated. But executives realized they'd found a cheap source of talented programmers and engineers. GE's Mr. Pieper quickly set aside $5 million annually to hire Wipro to write more software code for GE ultrasound machines and computer tomography, or CT, scanners.

GE's taste for cost-cutting came as a shock to Wipro executives such as 48-year-old Ramesh Emani, who helped manage the software partnership. He says GE soon began playing one Indian software firm against another to drive down costs, demanding constant productivity gains. "GE was very brutal," says Mr. Emani, who now heads a Wipro unit developing software for automobiles and cellphones.

By the mid-1990s, top GE managers began encouraging other units to follow the medical division's lead in India. In some cases, Mr. Welch gave the order directly, says Mr. Pieper, now vice chairman of Credit Suisse First Boston's alternative capital division in New York. "For the same amount of engineering dollars, we were getting 50% more people thinking about stuff world-wide," he says.

A software programmer in India with two to four years' experience makes about $10,000 a year, compared with $62,000 in the U.S., according to Hewitt Associates LLC, a Lincolnshire, Ill., consulting firm.

GE contracts helped underwrite the growth of India's technology sector, Indian executives say. At one point during the 1990s, Wipro's software unit, Wipro Systems Ltd., received 50% of its revenue from GE. At TCS and another leading technology company, Infosys Technologies Ltd., the figures were between 20% and 30%, the companies say. Combined these three firms now account for a third of India's total software exports.

For the fiscal year ended March 31, 2004, Wipro's information-technology businesses generated more than $1 billion in revenue, up from just $15 million in 1989. Its headquarters in Bangalore is an oasis of blue fountains and manicured lawns amidst dirt roads and parched fields. In a December interview there, Wipro's chief executive, Mr. Premji, said GE "helped us understand global companies."

By the late 1990s, GE began turning its attention from simply buying software from India to using the country as a base for data entry, processing credit-card applications and other clerical tasks.

Other companies such as American Express Co. and British Airways PLC had already moved some back-office operations to India. But with Mr. Welch's enthusiastic support, GE eventually went much further, shifting thousands of jobs and untold dollars in operational expenses to India. Savings on backroom operations alone amount to about $300 million a year.
Nigel Andrews, a former top GE Capital executive who oversaw India, says the "light went on" for GE in 1997 as the financial unit was about to create an Indian office to process credit applications for a credit-card joint venture with a local bank. Mr. Andrews says he realized that India's 100 million English speakers offered an almost limitless pool of inexpensive, educated labor for such tasks. "We started to think, we can do this for the rest of the world," says Pramod Bhasin, 53, a former GE Capital executive who helped create Gecis and serves as its chief executive.

Their first move was to hire away the Indian executive then managing American Express's Indian outsourcing unit, Raman Roy. The new Gecis operation quickly took on a number of assignments for GE's U.S. businesses, such as pulling together mortgage applications. By late 1998, Mr. Roy began patching together a prototype for the company's first international call center in New Delhi. That effort met with skepticism from U.S. executives, who thought India's telephone and electricity infrastructure was too unreliable. Mr. Roy's team worked with Indian regulators to install reliable phone lines and bought generators to guard against frequent power cuts. They strung bed sheets between cubicles to meet U.S. requirements for privacy of financial data.

"The phone company initially told me there wouldn't be outages for much longer than six minutes," Mr. Roy says. "I told them I couldn't survive an outage of even six seconds."
The venture offered clear economic advantages. An Indian call-center worker earns around $3,000 annually, compared with more than $27,000 in U.S., according to Hewitt, which says its comparison is based on secondary sources. Mr. Bhasin says 8,500 people responded to a newspaper ad for the first 20 positions. After the call center's first trial in early 1999, GE allocated more than $10 million to expand the operation, as well as other processes. Mr. Roy says former GE Capital Chief Gary Wendt told him: "You don't know the revolution you just created." Mr. Wendt didn't return phone calls seeking comment.

n the U.S., GE's outsourcing push continued to meet resistance. Executives worried about replacing American workers with overseas labor. Mr. Andrews says that managers at GE Capital's credit-card operations feared U.S. clients might take offense at being called by foreigners.

As the cost savings, efficiencies and quality became apparent, GE increasingly came to view outsourcing as a weapon to drive its profits. Mr. Welch challenged his top managers to meet with Indian staff. At GE's annual gathering of top management in Boca Raton, Fla., he gave the stage to Messrs. Andrews and Bhasin, who pitched their operation. "You weren't a fully fledged player if you weren't doing something in India," says Mr. Andrews, who today serves on several corporate boards and as a governor of the London Business School.

GE's Gecis unit eventually employed 12,000 people at two expansive office buildings outside Delhi and a glittering new tower in Bangalore, and several thousand more in other countries. It also started proving more sophisticated services like accounting and analyzing new markets for GE businesses. In 2004, Gecis estimates, it did about $400 million of work, mostly for its parent company.

In November, GE sold 60% of Gecis to U.S.-based investment firms General Atlantic Partners LLC and Oak Hill Capital Partners LLC. The sale has allowed Gecis to begin working for companies other than GE, including Japan's Nissan Motor Co., which recently signed on as a customer.

GE leaders have discovered limits to overseas operations. India's nuclear standoff with neighboring Pakistan in 2002 caused executives to worry the company had become too "concentrated" in the subcontinent and led to a pause in investment, says Scott Bayman, head of GE's India subsidiaries.

Some other GE units have also withdrawn business from India. Last year, GE's health-care business stopped using India to handle customer-service calls, after a GE health-care survey showed that hospitals and physicians "prefer to work with local, U.S.-based customer services." The calls are now being routed to call centers in Wisconsin and Florida. GE's health-care unit still does some work with Gecis.

Alumni of GE's India operations say they aren't worried about a backlash against outsourcing. Indian entrepreneurs are churning out dozens of new technology and outsourcing companies, many based on business models learned from the American conglomerate.

Mr. Roy, the former Gecis executive, founded Spectramind which was acquired by Wipro. Now with 15,000 workers under him at Wipro, Mr. Roy says he's looking forward to competing with his former employers. "Technology companies and outsourcing firms in India need to recognize that if it wasn't for GE, they wouldn't be here today," he says.

Write to Jay Solomon at jay.solomon@wsj.com3 and Kathryn Kranhold at kathryn.kranhold@wsj.com4

The right passage to India - Mckinsey article

The right passage to India
Companies attracted to the country’s potential must do more than merely transplant products and systems that have succeeded elsewhere.

Kuldeep P. Jain, Nigel A. S. Manson, and Shirish Sankhe

The McKinsey Quarterly, Web exclusive, February 2005

India, for some time now the focal point of the global trend toward strategic offshoring, has simultaneously become appealing as a market in its own right. With GDP growth more than double that of the United States and the United Kingdom during the past decade, and with forecast continued real annual growth of almost 7 percent,1 India is one of the world's most promising and fastest-growing economies, and multinational companies are eagerly investing there.

Yet the performance of the multinationals that have tried to exploit this opportunity has been decidedly mixed. Many of those notable for their strong performance elsewhere have yet to achieve significant market positions (or even average industry profitability) in India, despite a significant investment of time and capital in its industries.2 Why? Perhaps because the market entry strategies that have worked so well for these companies elsewhere—bringing in tried and tested products and business models from other countries, leveraging capabilities and skills from core markets, and forming joint ventures to tap into local expertise and share start-up costs—are less successful in India. Our research3 suggests that the most successful multinationals in India have been those that did not merely tailor their existing strategy to an intriguing local market but instead cut a strategy from whole cloth. In short, they have resisted the instinct to transplant to India the best of what they do elsewhere, even going so far as to treat the country as a bottom-up development opportunity.

With less of a focus on the initial entry and with a longer-term view of what a thriving Indian business would look like, the more successful companies have invested time and resources to understand local consumers and business conditions: tailoring product offers to the entire market, from the high-end to the middle and lower-end segments; reengineering supply chains; and even skipping the joint-venture route. The reward for this effort? Of the 50-plus multinational companies with a significant presence in India, the 9 market leaders, including British American Tobacco (BAT), Hyundai Motor, Suzuki Motor, and Unilever, have an average return on capital employed of around 48 percent. Even the next 26 have an average ROCE of 36 percent (exhibit).

Getting local in India
India's per capita income is half of China's and one-fourth of Brazil's, and as much as 80 percent of Indian demand for any industry's products will be in the middle or lower segments. As a result, multinationals must resist the temptation merely to replicate their global product offerings; the products and price points that are competitive in India are often considerably different from those that work well in other countries. In particular, in India companies must reach into the middle and lower-end segments or they may end up as niche high-end players, with insignificant revenues and profits.

Multinationals that understand the Indian consumer's expectations and price sensitivities can tap into what is often a large and promising market, but they shouldn't assume that the lowest price tag will always lead it. Indian consumers, even in the lower-end segments, will pay a premium if the value of superior features and quality is seen to far outweigh their cost. LG Electronics, for example, reengineered its TV product specifications in order to develop three offerings specifically for India, including a no-frills one to expand the market at the low end and a premium 21-inch flat TV for the middle segment. By keeping the price of the latter offering to within 10 percent of the price of TVs with conventional screens, LGE persuaded many consumers to buy it. These innovations have led the company to a top-three position in the country's consumer durable-goods and electronics market in a little over three years, with revenues of nearly a billion dollars in India. And Toyota Motor captured nearly a third of the multi-utility-vehicle (MUV) market by offering a significantly superior product at a limited price premium.

Very often, however, companies need to develop completely new products to compete at target price points set by local competitors, as Hindustan Lever Limited (HLL), a part of the multinational Unilever, did with its low-priced detergent brand, Wheel. Responding to local competition, HLL lowered the active detergent content of its existing product, decreased the oil-to-water ratio, and then launched the new detergent at a 30 percent discount to the price points of the company's more traditional detergents. Today, Wheel accounts for 45 percent of HLL's detergent business in India and for 8 percent of total HLL sales.

In other cases, companies must significantly localize their product offerings to meet Indian consumer preferences. Hyundai, for example, spent several months customizing its small-car offering, Santro. Because Indian consumers attach significant importance to lifetime ownership costs, Hyundai reduced the engine output of the Santro to keep its fuel efficiency high, priced its spare parts reasonably, and made more than a dozen changes to the product specifications to suit Indian market conditions. In contrast, other global automakers entered the market with vehicles that had low gas mileage and high repair rates and after-sales service costs.

Companies can bolster their profitability by reengineering their supply chains. Hyundai, for instance—in contrast to other global auto manufacturers in India, which source only about 60 to 70 percent4 of their components locally—buys 90 percent of its components from cheaper Indian suppliers rather than importing more expensive parts from its usual suppliers elsewhere. Multinational pharmaceutical companies outsource a large share of their production to third-party manufacturers within India—an uncommon practice for major pharma companies elsewhere in the world. And both Hyundai and LGE have built global-scale manufacturing facilities to capture economies, making India a global manufacturing hub that can serve other markets as the local market develops.

Using extensive third-party distribution also helps. In India, organized retail distribution systems reach less than 2 percent of the market, so there is considerable pressure to find innovative ways of reaching retail consumers. This third-party distribution system is crucial to capturing demand created by the superior price-to-value offerings available in smaller cities and rural areas, which make up a large share of the Indian market. In fact, successful multinationals—such as Castrol (acquired by BP in 2000), LG Electronics, and Unilever—have built deep third-party distribution networks that serve second-tier cities and villages. Here again, a local strategy is crucial. One multinational company, for instance, used to own its entire worldwide distribution infrastructure, including warehouses and trucks. Applying that business system in India, where large companies face high labor and overhead costs, made it impossible to attain nationwide reach. Moving to a third-party distribution system employing a network of dealers and agents proved very successful.

Finally, in contrast to companies that rotate expatriate managers in and out of the country every two or three years—often a recipe for failure—most successful multinationals, such as Citibank, GlaxoSmithKline, and Unilever, have an Indian CEO in their local operations. Given the need to tailor products, supply chains, and distribution systems to local markets, local managers tend to be more effective. If the CEO is an expatriate, combining longer postings with a strong local second in command, as in the case of the South Korean giant Hyundai, seems to be crucial to success. In addition, multinationals such as Castrol have benefited from strong local boards to counsel, challenge, and help local operations.

Skipping the joint venture
Multinationals entering new markets have traditionally struck up joint ventures with local partners for a variety of reasons, including their ability to influence public policy, to bring into the venture existing products as well as marketing and sales capabilities, and to comply with regulatory requirements when foreign participation was restricted to less than 50 percent of a business.

While joint ventures are still crucial to gaining access to privileged assets in some industries—metals and mining, for example, and oil and gas—our research shows that, where possible, multinationals are better off going it alone. Of the 25 major joint ventures established from 1993 to 2003, only 3 survive. Most foundered because the local partner couldn't invest enough resources to enlarge the business as quickly as the multinational had hoped. As a result, most of the multinationals that initially entered the market through joint ventures have exited them and pursued independent operations. Multinationals, such as Hyundai and LGE, that have achieved real success in India have bypassed joint ventures entirely, and newcomers are increasingly entering the market on their own. Even when a joint venture is unavoidable, successful multinationals ensure from the outset that they retain management control and have a clear path to eventual full ownership.

Participating in the regulatory process
Multinationals in deregulating industries often need to be flexible and patient during the natural process of regulatory evolution. Regulations governing the mobile-telephony sector, for example, have been amended several times since 1994 as it has grown; it had two licensed operators per region back then and now has as many as six. Although most multinationals left the sector when the regulations governing it changed, Hutchison Whampoa continued to invest in India. Ten years later, Hutchison Essar is one of the top three telcos in the country (as reckoned by market share), and interviews with industry experts suggest that the company enjoys strong profitability.5

If regulations are a crucial factor for an industry, the CEO needs to spend a lot of time managing them. The most successful multinationals haven't relied on third-party legislation managers or joint-venture partners to address regulatory issues; instead they have invested much time and energy to identify and understand the key policy makers, to formulate robust positions for investment, and even to suggest regulatory changes. In addition, these companies have garnered support from constituencies such as state governments, which compete for investments, and industry associations that lobby for similar regulatory changes.

Clearly, any entry into a new market requires a certain degree of tailoring to its specific needs and conditions. But for some companies, the entry into India has forced a fundamental rethinking of product offers, cost structures, distribution systems, and management teams. Companies that successfully tap into the promising Indian market often ignore conventional wisdom, including the need for joint ventures.

About the Authors
Kuldeep Jain is a consultant and Shirish Sankhe is a partner in McKinsey's Mumbai office, and Nigel Manson is an associate principal in the London office.

This article was first published in the Winter 2005 issue of McKinsey on Finance.

Notes
1The Economist Intelligence Unit forecasts 6.9 percent real GDP growth from 2003 to 2008.

2Based on McKinsey analysis of the Centre for Monitoring Indian Economy's Prowess financial database for average industry profitability. The database, built on CMIE's understanding of disclosures in India on around 8,000 companies, is highly normalized.

3We reviewed the performance in India of more than 100 multinationals, conducting detailed case studies of 15 that have had varying degrees of success and interviewing 30 experts, company managers, analysts, and current or retired CEOs of leading multinationals.

4The Automotive Components Manufacturers Association (ACMA) of India.

5Since it is unlisted, actual numbers aren't available.

India is taking the education of its next generation much more seriously than the U.S.

Science and Engineering Need to Be Cool Again
India is taking the education of its next generation much more seriously than the U.S.

FORTUNEWednesday, March 2, 2005 By David Kirkpatrick

After my trip to India last month, which I wrote about in my last column, “India's Virtual Ties with the U.S.”, my worldview has been changing. Now more than ever, I'm aware of how quickly the divide between the developed countries and developing ones is closing. Seeing what’s happening in India helps make it clear that the U.S. can no longer count on remaining the world's technological leader. To stay competitive with India—and other emerging economies—it must do more to train young Americans in the sciences and technology. My thoughts were reinforced at an awards luncheon that I attended on Monday for the Committee to Encourage Corporate Philanthropy, a forum of CEOs that addresses how businesses and philanthropies can work better together. (I was a juror.)
What got my attention at the awards ceremony was how often the urgency of America’s education crisis emerged as a theme. In his remarks, Jeff Immelt, CEO of General Electric (which shared the big-company award with Novartis), explicitly drew the link that prompts this column. “In India and China,” he said, “30% of the students get science and engineering degrees. In the U.S., it’s 4%.” Immelt described some of GE’s efforts to help high-school students better understand the sciences and to prepare them for college. Of course, it’s in GE’s interest for students to study engineering and science, but it was apparent from Immelt’s comments that his concerns go beyond his company's needs. He fears that the U.S. will lose its competitive advantage if we don’t get more kids interested in these subjects. He’s not alone.
Earlier, I had chatted over lunch with Henry Schacht, former CEO of Lucent and Cummins Engine. I told him about my trip to India and recounted a few of the points I made in last week’s column—how so many of India's youth are amazingly energetic, eager to work, and well-trained. Schacht, who has been going to India since the 1950s, is also deeply impressed with the country’s progress. And like Immelt, he sees a big contrast between the attitudes and trends here toward the hard sciences vs. those in India. The U.S., Schacht worries, is not creating enough trained scientists and other experts at a time when the sciences are leading the global economy. He told me the U.S. needs to embark on a major nationwide campaign to remake our entire educational system—from elementary school through college.
The CECP also gave an award Monday for the philanthropy that does the best job working with business to achieve the group’s goals. The winner was Jumpstart—a wonderful nonprofit that helps low-income U.S. preschool children develop the skills they’ll need to succeed in school. It was nominated twice—by Pearson PLC and by Starbucks, two of its corporate partners. Jumpstart trains college students to mentor kids. Jumpstart CEO Rob Waldron told the audience how a typical poor child in Manhattan’s Lower East Side, for instance, gets read to for as little as 25 hours prior to entering kindergarten, while in an affluent neighborhood like the Upper East Side, the figure is closer to 1,700 hours. Low-income children on average have one-quarter the vocabulary of their middle-income peers by age five.
Waldron criticized what he called the “near-feudal” education system in the U.S. He clearly worries that these kids will be woefully unprepared for life as adults in a world increasingly dependent on technology.
It amazes me that with such wide recognition that the country is facing an education crisis, we don't seem to be able to get major traction to repair it. What ever happened to George W. Bush’s promise that he would be the “education president”? No Child Left Behind may have its virtues (and also its problems), but it certainly doesn’t seem sufficient. We need massive infusions of funds and creativity, and we also need a consistent message from the White House on down that this is a national crisis that must be addressed soon.
In India, it is every parent’s dream that his child become either an engineer or a doctor. In the U.S., engineering is considered uncool. A friend recently told me about a conversation in which a parent was almost apologetic that her son was studying chemical engineering.
We need to talk bluntly about how our country’s powerful competitive position in the world—the source of all the wealth that has so distinguished us from everyone else for the last 50 years—is not something we can take for granted. In fact, it is probably in jeopardy, as citizens in other nations— India, China, and elsewhere—show a more tenacious work ethic and a greater willingness to tackle tough subjects like engineering. We better get cracking, because it is becoming increasingly clear that countries whose citizens have science and engineering knowledge are the ones that will triumph in the future.

Questions? Comments? E-mail them to me at dkirkpatrick@fortunemail.com

India's Virtual Ties with the U.S - Fortune article

India's Virtual Ties with the U.S.The Internet is connecting the two countries in ways not conceivable a few years ago.
FORTUNEWednesday, February 23, 2005 By David Kirkpatrick

Before a recent nine-day trip to India, I purchased two Apple iSight video cameras—one for my wife and daughter in New York and one for me to take on my travels. What an amazing innovation! They attach to our Mac computers, and using Apple’s iChat software the three of us could share an Internet call. Not only was it free (once I got Internet access), but it also gave us a video connection. I was able to hold the camera out the window and give my family live views of the Bangalore skyline. Sometimes we just left the connection on, so I could hear our dogs barking at home, as I lounged around my hotel room 8,300 miles away.
We were sharing a sort of virtual presence using the Internet. That is a nice metaphor for the relationship between the U.S. and India. The two countries are increasingly experiencing the consequences of full-time mutual virtual presence, thanks to the Internet. For U.S. companies, this has created the opportunity to have work performed remotely in that country. And for India, it has opened a wide window to the world, especially the U.S. Meeting young Indians who talked about their credit cards and computer foul-ups gave me some insight into how their society is changing in ways inconceivable even a few years ago. Like my family and me, the two countries are now essentially coexisting in an electronic world.
In the cities I visited—Mumbai (formerly Bombay), Chennai (formerly Madras), and Bangalore—the presence and influence of the U.S. felt surprisingly strong. American brands were pervasive, indicating that India’s growing success will have lots of benefits for our country as well. Dell PCs seemed to be in almost every office. I was driven around mostly in Fords. And Citibank ATMs were almost as ubiquitous as in New York.
And while India's grinding poverty was evident everywhere, so was an amazing and familiar work ethic. An impressive willingness to work hard is one of the main things that distinguished Americans in the last century, it seems to me. Now we’re realizing that in parts of the developing world, especially India, workers have a comparable willingness to strive to get ahead. In Mumbai, the energy of the people on the street reminded me of Manhattan. Messengers hustled around, commuters crowded into trains, and construction workers were building new structures all over the city. The urge of Indians to better their condition, both individually and collectively, was palpable.
One major negative for the Indian economy was its decaying and insufficient infrastructure. When you arrive at the Mumbai International Airport, you’d think it was 1963. Most roads are rutted and, even in cities, often partially unpaved. The government, so far, has not gotten serious about this problem. It’s easy to imagine that India’s momentum may be slowed by this weakness. But right after thinking such thoughts, I would walk into an office filled with fresh-faced young people and be so struck by their energy and enthusiasm that I had to believe the infrastructure problems could somehow be overcome. The will to succeed there is strong.
Despite all the energy, the signature impression I had on arriving in India is the amazing juxtaposition of awful poverty with awesome wealth. I stayed in the Grand Hyatt Mumbai, one of the most luxurious and well-designed modern hotels I’ve ever seen. (It opened last April.) But out my window I could see the ubiquitous shacks that seem to line every road in Mumbai. The nearby Intercontinental Hotel actually has shacks right in front of its driveway.
Yet for wealthy travelers, everything that India offers seems accessible. I knew prices were low in India by U.S. standards, but it was amazing to see just how low they were. Not only does a nice suit in a department store go for $130, but a terrific meal in a good restaurant is $10. Even a globally standard product like a Coldplay CD costs only about $8 in the best record store in Bangalore. People from abroad are starting to travel to high-quality Indian hospitals for complex medical procedures like joint surgery, because the prices are so much lower than in the U.S. and Europe. Prices will very gradually rise as do incomes, but this place will remain very inexpensive relative to prices in developed countries for a very long time.
My gut feeling is that the Indian and American economies are going to become ever more intertwined, and that is probably a good thing. For instance, I found India so enthralling that I could imagine living there someday. Of course, it helps that one vestige of the British colonial system is that most everyone in the country's commercial world speaks English. That makes it easier for a guy like me to get around in India than in places like China or Mexico, to mention two of my other favorite developing countries.
It’s possible to live an extremely comfortable life in India on relatively little money. Someone in India living on $12,000 a year can have a cook, a driver, a housekeeper, and the benefit of all those low prices. I could imagine retiring here. It’s a comforting thought, at least, when I’m worrying about whether I’ve saved enough for retirement.
When I mentioned this to my wife, she protested that India was too far away from our families and friends. But her comment brings me back to the Apple iSight cameras. The free video connection made it possible for me to feel closer to my family halfway around the globe. If our telecommunications tools evolve as much in the next 10 years as they have in the last, we may be able to experience a virtual presence that really is convincing—in 3D, for example. It’s possible in the future we may really diminish the isolation of distance. That could make living in a place like India a lot easier for an American.
As the Internet continues to knit the entire world closer together, especially India and the U.S., we could be headed toward an entirely new kind of transnational lifestyle.
Questions? Comments? E-mail them to me at dkirkpatrick@fortunemail.com