WorldCity Business Magazine

Indian momentum

by Mary Dempsey

The timing is right for South Florida to think about India, experts say.

Indy Datta of Wireless Logix Group says India’s private sector thrives thanks to its technology solutions.

The economic success of India has much to do with a convergence of disconnected factors. After years of political tangling with the United States, India now has a pro- American, pro-business government run by people with private-sector experience. The legal system has eased rules on foreign investment at the same time it has strengthened copyright and patent protections.

Mergers and acquisitions have become easier to execute. And the government is sinking money into education.

Three Indian business executives told a DHL Connections audience that the intersection of these factors and others has made the populous country a more appealing place for multinational businesses, including those in South Florida.

“It’s been a confluence of things, political and economic. The GDP has grown for the last few years. Economic vitality in India is strong,” said Indy Datta, executive vice president of strategic marketing and business development for Wireless Logix Group. The Fort Lauderdale-based wireless technology company is so keen on the Indian economy that it has expanded into the Southeast Asian nation itself.

Even though Wireless Logix was started by an Indian family, it is a U.S. based operation and had no presence in India until recently. “In October 2005, we had no office in India. By December, we had threeemployees there,” Datta explained.

Although India is not a wealthy country, it is so populous 1.1 billion people live there that it has a purchasing power equivalent to that of the richer United States, which has just more than a quarter of India’s population.

Even beyond sheer numbers, economic growth has also brought greater wealth to India’s middle class, creating markets for even more products. The CEO of Daimler Chrysler India said in mid-April that the company had sold a record number of Mercedes-Benz cars in India in 2005 and he expected the demand for luxury cars to grow even more this year. BMW has set up a car plant in the country, and Audi reportedly wants to open dealerships in India.

Much is said of India’s proliferation of engineers and tech specialists, but that focus on science education and information technology is also part of the country’s allure. Indian univerities and colleges graduate 400,000 engineering and science students each year.

“In Indian society, people want to be engineers, doctors scientists. People are highly trained. We have five business schools in the country and all of them have been modeled on the top business schools in the United States,” said Syed Naveed, the vice president of familyowned ShAPE Inc. in Bangalore. “Even poor people can now afford to send their kids to some private schools.”

Naveed said ShAPE started as a high-tech automotive component manufacturer. It has evolved into a precision machine engineering firm and has targeted Miami “as its entry market” for the United States, Naveed added.

“We now have 25 million highly educated English-speaking people and that development is relevant to the knowledge economy,” he told the audience at the late March seminar titled “India: The Next Frontier.”

Naveed joined Datta and lawyer Mateen Husami, senior international counsel for Abbott Laboratories in Chicago, in discussing India’s attraction for foreign companies.

Mateen noted that legal reform has played an important role in boosting India’s appeal for foreign companies and investors. There are no restrictions now on foreign investment and money can enter and leave the country freely.

Mateen added, “although it has some way to go to get to the U.S. level,” there have been recent changes that strengthened both copyright and patent laws.

Despite the panelists’ optimism, India still has much it must work on if it is to compete with powerhouse China. As Datta noted: “India is not the land-of-everything-is-smooth.’ You have to have nerves of steel and patience to deal with the bureaucracy.” By way of example, he cited a study that showed it took 21 days to launch a business in South Korea, 40 days in China and 80 days in India.

While the DHL panelists pointed out that India is pouring money into infrastructure upgrades, the level of investment still falls short of what is needed. A recent study by the Tata consortium, one of India’s biggest and most powerful business groups, found that the country needs billions of dollars in short-term infrastructure investment to continue development.

The study concluded that $550 billion would be needed over the next five years, with at least $140 billion going into power generation, $30 billion into roads and $22 billion into telecommunications.

In fact, members of the DHL breakfast conference audience pointed out that one reason that India has done so well in the telecom sector may be because it does not have a strong infrastructure to develop other industries. And Naveed acknowledged that bureaucracy, an ineffective court system and other delays have kept India from growing at an even faster rate.

“My hometown is Bangalore. For five years, they’ve been shelving plans for an international airport. During this same time, I think China has been building nine airports,” he said. “India is behind China on infrastructure.”

Others at the gathering spoke of corruption at all levels of government. Abbott’s Husami said strict U.S. regulations barring bribery mean that there is not a level playing field.

“We found that Germany companies or Japanese companies or Swiss companies that didn’t have those kinds of shackles would go out and bribe people up and down,” he said. “That makes it hard for U.S. companies to compete.”

While U.S. companies look to India as a location to outsource certain service jobs, from call center operations to even the writing of documents interpreting U.S. court rulings or the drafting of architectural drawings, the wage advantage that India once held is being whittled away.

“There’s a 15 percent increase in average salaries every year for the last three years. And yes, you’ll pay $145,000 for a person with a degree in information technology,” Husami said. “Salaries are coming up to par.”

But Naveed interjected: “You’ll pay for high-tech grads, yes. But if you go one run lower, to the machinists, the production workers, the wages are highly competitive. For jobs that pay 80 cents an hour in China, you’ll pay $1 in Indian, $2.50 in Mexico and $20 in the United States,” he said.

Further, he added, as long as the United States continues to restrict visas, even for would-be immigrant workers with highly technical skills, U.S. companies will have no choice except to look outside the country for labor since U.S. schools are not turning out enough tech-focused grads each year to meet demand.