Tapai Memorial Lectue 2011

28th T. A. Pai Memorial Lecture India's Decade of Destination T. A. PAI MANAGEMENT INSTITUTE Post Bag No. 9, Manipal - 576 104, Karnataka, India E-mail: [email protected] Delivered by Web: www.tapmi.edu.in Dr. Jagdish N. Sheth Professor of Marketing, Goizueta Business School, Emory University January 2011 Organised by T. A. PAI MANAGEMENT INSTITUTE Manipal - 576 104, Karnataka, India India's Decade of Destination Dr. Jagdish N. Sheth Emory University Introduction including Tata and Birla and many public sector units (PSU) including Coal India, While India's political freedom is more than Maruti, SBI and LIC. The combined market 60 years old, its economic freedom is only caps of these enterprises since 1991 is 20 years old. In 1991, the government nothing short of spectacular. Finally, India's abandoned the planned social economy economy has been increasingly and model manifested in what was labeled as steadily getting globally integrated both the “license Raj” in favor of capitalist economically and politically. market economy. What has been achieved in such a short Impact of Economic Reforms span of 20 years is impressive. First, it has So what has been the impact of this become one of the fastest growing transformation of India's economy? First economies in the world (8-9% annually and foremost, it has created a new Image with moderate inflation) compared to the of India: India's image worldwide has Hindu rate of growth (2% or less) prior to dramatically changed from a country of its second independence. Second, it has roaming cows and snake charmers to one accumulated more than 500 billion dollars of an emerging superpower with talented in reserves both through export growth people in all walks of life from especially in services sectors such as IT and contemporary literature and art, to science ITES as well as by attracting all types of and engineering, to business and finance. investment (stock market, private equity Second, it has also generated new self and foreign direct investment) in India. confidence and “can do” attitude among This is destined to cross a trillion dollars its educated class as well as illiterate within this decade. masses. In fact, nothing seems to be Third, India's stock market has performed impossible if you are an Indian or in India. extremely well creating significant wealth Third, it has produced altogether new large for all types of investors which include global enterprises such as Mittal, DLF, main street investors through mutual Reliance, Bharti, Dr. Reddy's, Ranbaxy, funds, foreign institutional investors (FII) Infosys and many more. and especially for entrepreneurs and Finally, it has also created a new middle promoters. Fourth, it has also produced class; I call it the call center couple: both several large new enterprises such as husband and wife are college educated, Reliance, Infosys and Bharati as well as re- both have to work, and neither wants their energized traditional business groups parents to live with them because they like 1 and enjoy their privacy and freedom. The appliances, garments, motorcycles, India's Resource Advantage where they have settled. Many are second call center couple does not want to shop scooters, beverages, prepared foods, and or third generation but still identify with The key reason why this possibility will from the traditional merchant or the agriculture products such as fruits, their original roots in India. Finally, and become a reality is India's resource neighborhood provision store owner who vegetables and grains as well as dairy most importantly, Indian Diaspora has advantage. India has six key comparative home delivers daily groceries and toiletries products including milk, cheese and butter. accumulated enormous wealth through resource advantages. First and foremost is with a monthly account settlement. As the second largest market in the world, hard work, savings and entrepreneurship its demographics. India's population will Instead, the call center couple wants to it will attract global enterprises from in all types of industries including cut have the largest pool of young educated shop at a modern organized retailer such around the world to make and market diamonds, gas stations, hospitality (hotels workforce in the world by 2025. In as Big Bazaar and Metro, which offer locally. This will also be true of global IT and motels), and of course, the Silicon contrast, it is expected that China's branded, quality products (both domestic industry including IBM, Accenture, Valley. This Indian Diaspora is increasingly historical one child policy over two and imported) with fixed prices and Microsoft, Google, Cisco Systems and becoming interested and committed to generations as well as its rapid affluence checkout counters that accept credit cards Intel. India for at least two reasons: India offers will make it the largest aging nation much as payment. as good and often better career and sooner than expected. In other words, by Third, India will partner with strange bed business opportunities; and contributing India in 2025 2025, China will look like Japan, South fellows in search of industrial, agricultural, back to motherland is made easier by Korea, Singapore and other advanced Where will India be in 2025? Here are some energy and talent resources around the changes in government attitude and economies of the world as its population predictions based on accelerated world. Think of its investment and business behavior toward its NRIs. More and more, ages and ages rapidly. China's growth is projections of past impressive record. First, partnering with Bolivia, Peru, Venezuela, they are recognized as a great asset for the likely to slow down to less than five percent some of the largest global enterprises will Iran, Malaysia, Kazakhstan, Myanmar, ascendancy of India as a globally beyond 2025 while growth of Indian be of Indian origin especially in basic Egypt and several resource rich African integrated economic superpower. industries such as copper, steel, aluminum countries. In other words, India's global economy will continue at a higher rate. A fourth key resource advantage is its and cement. India Inc. will transform into alignment will be less on ideology (non- Second, India is also blessed with natural diversity. It is more diverse than the truly global enterprises not through alignment movement) and more on resources. It has a large fertile land European Union. However, unlike the exports but through large global markets and resources including human capable of crops (cotton, wheat, rice), European Union, it has achieved a national acquisitions of world class companies with resources. fruits and vegetables suitable for different identity above and beyond its subcultures. strong technical, manufacturing or climates. It has a vast coastal area of It is hard to imagine in the foreseeable branding assets. Recent acquisitions by Finally, India will gain significant marine life. It is blessed with industrial raw future that a German, French and Italian Arcelor Mittal, Hindalco, Tata (across many geopolitical clout by 2025. It is already a materials including coal and iron ore. And will think of themselves as Europeans first of its companies), Wipro, Marico, member of G20 nations along with China; finally, it is the home of largest livestock. It and Germans, French or Italian second. Crompton & Greaves, Essar and Avantha it will be given a permanent seat at the UN produces and consumes more milk than And this is a functioning diversity across Group will be replicated by Reliance Security Council, and will be asked to any other nation, for example. languages, cultures, geography and to a Industries, ONGC, and SBI. provide leadership talent to world bodies large extent, across religions. This is such as the ILO, WHO, World Bank and IMF. A third major resource advantage is its Second, India will become the second (and Diaspora of more than twenty million Non complimented by a functioning in some instances the first), largest Indeed, some economic experts and Resident Indians (NRI). It is not only the size democracy. It has demonstrated over sixty consumer market in many products and advisors believe that by 2025 India will of the Indian Diaspora but it is also spread years that changes in political leadership services surpassing the United States, catch up with China and will start to across the globe. Indian Diaspora is highly take place peacefully and smoothly. This Japan and Germany. This will include outdistance both the US and China like a educated and increasingly in the functioning democracy and rule of law mobile phones, consumer electronics, good marathon runner. leadership role in the respective countries makes India even more attractive to the 2 3 rest of the world. It is not just the cell phone operators, too many cement consolidation and by reforming the and especially the United States. This is language advantage. Its legal, accounting producers and so on. Industry becomes unorganized sector into organized modern already happening in textiles, for example. and financial systems are comparable to efficient through shakeouts and mergers SMEs. It will also happen in automotive other commonwealth nations and are and ultimately results in three large scale components and pharmaceuticals. In my A second major obstacle to the rise of India getting organized to be compatible with suppliers. The only place in India one sees estimation, investment in modern is, of course, lack of modern infrastructure European and American systems. scale advantage is in the public sector infrastructure will generate additional throughout the value chain from industries. 1.5% GDP growth without inflation. A f i f t h r e s o u r c e a d v a n t a g e i s production to consumption. This includes entrepreneurship and innovation. The third obstacle is lack of enforcement. This fragmentation is compounded by two modern seaports, cargo airports, logistics Entrepreneurship is universal and Despite all of the faults of communism, it additional factors.

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