I attended a briefing organised by the London School of Economics (LSE) with Dr Rajendra Pachauri, Chairman of the Interngovernmental Panel on Climate Change and Director General of TERI that was hosted by Lord Stern, who authored the Stern Review for the British Government.

What I found quite refreshing was the admission by Pachauri about India’s failure to communicate what it’s doing viz climate change & global warming. As a comms professional who’s actually seen some of the great work being done all over India, I can’t comprehend why the Indian Government don’t invest more in projecting what the world needs to know about India.

As an example, he showed a video clip for a civil society campaign that his institute have spearheaded called ‘light a billion lives’ that seeks to promote the use of solar lamps as a means of bringing light into 400million Indian homes. I was astounded to learn that 1.6bn people live in darkness, of which approx 25% live in India.

Dr Pachauri didn’t strike me as someone who sucks up to Indian politico’s but I was astounded to hear from him about how Rajiv Gandhi was one of the first political leaders to understand the challenge caused by global warming and his subsequent desire to establish a ‘planet protection fund’, which each country would channel 0.1% of its GDP into to tackle climate change. He went as far as  suggesting that had Rajiv Gandhi not be assasinated, then perhaps India would be leading the international debate.

Moving on to what India is doing, here are some examples:

1. As a country with finite resources, and a large underclass – India recycles like no other country. You need to visit India to understand the manner in which discarded items that one refers to as waste, provides a livelihood for others. You can truly see innovation at the grass-roots.
2. On forests, it seems that India’s been cutting down it’s forests, but in actuality, several Indian states have increased forest cover. Public vigilence has also increased and you can often find groups demonstrating against any evil designs by multinationals or such organisations in rural locations.
3. Gujarat & Rajasthan are leading the way in harnessing private sector participation in creating wind farms, solar parks etc.

From a macro-policy perspective, the following was offered by Dr Pachauri as examples of what the Indian Government needs to do:

• Improve public transportation infrastructure. (I’m not sure as to what Dr P would make of Ratan Tata’s dream of increasing car usage by selling his micro car – the Nano).
• Like the UK, perhaps introduce ONE department that oversees all aspects of climate change policy. At present, policy areas are fragmented as several government departments coordinate policies specificaly for their particular interest.
• Encourage private sector involvement that would result in commerical sense being injected into discussions, the aim being that some of these ideas become commercially viable – and therefore ripe for investment.

The other speakers at the briefing were: Ms. Minouche Shafik, Permanent Secretary (Private Sector & Infrastructure) at the World Bank; Urjit Patel, President of Business Development at Reliance Industries; Naina Lal Kidwai, Head of India for HSBC.

In his conclusion, Pachauri emphasised “the need to end confrontation between developed and developing nations; and called for a need for more partnerships and further innovation to meet the challenge of providing sustainable livelihoods” – no wonder he won a Nobel!.

With people like Tulsi Tanti and Baba Kalyani who’re running large businesses promoting wind and solar energy, I’m surprised that this debate hasn’t really sparked a discussion with India’s CEOs in the same way as their English counterparts have been engaged in. It’s one of the areas I cover in my forthcoming book on Indian entrepreneurs going global.

I’ve got a small dilemma that I need your help in resolving. You may be aware that for the last two years or so, I’ve been writing a book on the emergence of Indian companies in international markets, and have profiled ten Indian CEOs / entrepreneurs / promoters such as Narayana Murthy, Baba Kalyani, Subhash Chandra, Malvinder Singh, Kishore Lulla etc. who have lead the charge to globalise their firms.

Well, I’ve now finished writing the book and can now focus on the presentational aspects of the project, of which, the most important being (at least for today) the title of the book. My original choice was: ‘India Inc: How India’s Top Ten Business Leaders are Winning Globally’. However, as a result of the economic downturn, is this title appropriate, given that the world has been turned on it’s head as a result of the banking crisis and subsequent global recession?

It would seem a little to extravagant to use the original title in the environment we’re currently in.

For this reason, I’m searching for something appropriate as a subtitle to ‘India Inc: xyz…’. Or is ‘India Inc.’ substantial enough?

Your ideas are welcome.

Another quick, but important post! Princess Sheela’s Maharaja Uncle has been nominated for the CNN-IBN Indian of the Year Award. Please go vote for him! His name is Baba Kalyani and he is in the Business category. Go vote! The sooner he wins, the sooner he will invite me to his palace!  Once you put in your information, it will take you through the poll for Politics and Sports first (I don’t care who you vote for in these categories >:]), and then Business.  You will need to complete the poll by voting for the categories after the Business category (I do not care who you vote for here either>:]).  Please go through all of them to ensure that your vote will actually be counted.  So go vote NOW!! HERE!! Thank You!!  Why are you still here?!  Go vote!  Voting ends at midnight on January 22nd, so hurry up! :p  Merci.

It will never be as famous as the Model “T” Ford, nor the Volkswagen Beetle, but the little Maruti Suzuki 8OOcc car that was first sold 25 years ago today is the most significant vehicle ever produced in India.

The Ambassador is of course India’s most iconic saloon, but it is a symbol of the manufacturing industry’s failings, whereas the Maruti has been the catalyst for India’s modern and internationally competitive auto industry.

Today is the 25th anniversary of Indira Gandhi, then the prime minister, releasing the first ten 8OOcc cars to their customers at Maruti-Suzuki’s Gurgaon factory on the outskirts of Delhi in 1983 – where she was shown (below) the factory plan by V. Krishnamurthy, the company chairman. 

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I was there, as The Financial Times’ new south Asia correspondent, and the next day reported Osamu Suzuki, chairman of the Japanese company, saying: “It is difficult to have a good operation in India”. He added that it would be achieved “providing the Indians do not expect to make too many of their components too quickly”.

Demonstrating the new start that Maruti marked, the imported management style decreed “the recruitment of shop floor workers with an average age of 20 who have never worked anywhere before, wear grey overalls, do physical exercises every morning and prompt time-keeping”.

It’s obviously worked because a total of 2.7m of the 800’s have been produced and it is still being sold – for Rs215,000 ($4,500), having been launched in 1983 for Rs52,500 ( then about $5,000).

I remember people in Delhi wondering how they would fit a driver into such a small car along with their families (they did!), and complaining about how it nipped in and out of  the traffic around stodgier vehicles (similar to earlier complaints in Britain about the iconic Austin-Morris Mini)

the Maruti 800

“The 800 made India a country that is now on wheels”, R.C.Bhargava, who was managing director years in the 1980s and 1990s and is now the chairman, told me today.

Originally an  Indian government-Suzuki 50-50 joint venture, the company is now Suzuki controlled and is producing 750,000 cars of all shapes and sizes. It is the clear market leader with a 40% market share.

Bhargava worked on the launch with Krishnamurthy, the founder-chairman who had been a top bureaucrat and now, in his 80s, heads the government’s National Manufacturing Competitiveness Council.

Krishnamurthy was told by Indira Gandhi to revive the bankrupt Maruti car venture that had been started by her late son Sanjay Gandhi, and produce a “people’s car”.

She didn’t get what she wanted because the 800 became a car for  the middle classes and  was followed by larger models. But she did get a hugely successful joint venture with Suzuki which began to unlock India’s hidden manufacturing strengths that had been bottled up by post-independence economic policies.

O.Suzuki’s remark about not making many components quickly in India stemmed from the fact that there were virtually no component suppliers that could begin to make acceptable parts. There were also no concepts of quality or production control. Maruti changed all that, sparking a revolution that is now spreading across India’s manufacturing industry, which is why today’s anniversary is so important.

“Maruti brought to India the concepts of tight cost control and process engineering,” Gautam Thapar, chairman of Avantha (BILT, Crompton Greaves etc), told me for a Fortune magazine article two years ago.  “It brought the first wave of modern component technology with the concept of Indian entrepreneurs and Japanese companies together supplying Maruti as an anchor client”.

Baba Kalyani, chairman of Bharat Forge, the world’s second-largest forging company,  agreed: “It brought in a completely new breed of component manufacturing with modern products and processes. A new culture started”.

Not only were there no adequate component suppliers in 1983, but there was no concept of partnerships between a manufacturer and its suppliers. “A supplier was treated almost like a servant,” said Bhargava

Maruti changed that with a supplier development program, taking 25% equity stakes in some companies from Japan and elsewhere. Clusters developed in three locations, one of them around Maruti’s factory in Gurgaon on the outskirts of Delhi. Workers and suppliers were sent to Japan to learn management and production techniques and this interchange continues today – Maruti design engineers worked in Japan on the Swift that was launched in 2005.

Maruti has never had the recognition it deserves as the catalyst for India’s modern motor industry, nor for its wider impact on manufacturing. Krishnamurthy and his team created something of far more lasting importance than other more famous names – you see the result on Indian roads every day.

Source: Forbes.com

There’s a new business opportunity opening up in India that could become as big and popular for investors as telecoms and retailing.  It is education, which is one of the biggest blockages to India’s growth and development because standards are currently so bad.

Even poor families spend 20% of disposable income on private schools and universities, rather than expose their children to 950,000 mostly ill-equipped and under-staffed government schools. Independent surveys have suggested that absenteeism by teachers (yes, teachers!) averages 25%, rising to more than 40% in the poorest and least regulated states. Absenteeism by children is also high – 20% among those aged between 15 and 16.

The availability of secondary education is vastly below demand, and many graduates are ill-equipped for employment. Only 7% of young adults between the ages of 18 and 24 go to universities compared with 16% in China and far more in the United States and Europe. Many that do go emerge ill-equipped for employment. NASSCOM, India’s software trade organization, said in 2006 that only 25% of graduate engineers and 10-15% of ordinary graduates applying for IT jobs were employable, echoing statistics in a 2005 McKinsey report. Kiran Karnik, who was then NASSCOM’s president, primarily blamed obsolete curricula and equipment

Although there are a few signs that school attendance is improving, this dismal record shows that India risks missing its widely trumpeted “demographic dividend”  — 40% of its 1.2 billion-population are under the age of 18. There’s not much point in having one of the youngest populations in the world if they are under-educated.

Technopak, a Delhi-based investment consultancy, estimates that the current private-education market is worth $40 billion a year, and that this could roughly triple to $110-120 billion in ten years’ time. The potential is attracting foreign companies such as Pearson Education (PSO), part of the UK-based publishing group, and McGraw-Hill (MHP), as well as private equity firms that include Blackstone (BX), New Vernon, and Deutsche Securities, part of Deutsche Bank (DB).

Government regulations, however, restrict what Indian and foreign private-sector companies can do. For-profit investment in schools and universities is banned, but it is allowed by charitable trusts, which run some 50,000 schools. Many of the trusts have been formed by companies that theoretically plough back the profits, though many siphon money into other businesses. One of the largest companies, the family-controlled Amity University, has 50,000 students across the country.

There are also about 50 for-profit schools, which are allowed to slip through the controls because they are affiliated with international bodies like the International Baccalaureate (IB) examination program. Some private-sector groups run a profit-making IB programs alongside (notionally) Indian-affiliated nonprofit programs.

Real estate companies have also found a way into the country’s education business by linking up with firms like Educomp (considered to be India’s biggest education provider) and foreign firms to equip and run charity-registered schools for children of families that buy their homes.

There’s a debate in the government about whether formally to allow private-sector companies to investment in education for profit – instead of tolerating these sorts of loopholes – but the idea has been blocked by Leftist Communist-led parties, which oppose limiting the role of the public sector.

This leaves two major areas where the private sector is not restricted.

One is vocational training, which is attracting several major Indian companies like Larsen & Toubro, the Singhania family-controlled JK group, and Bharat Forge, the world’s second-largest forgings company. These companies are not after profits so much as a steady stream of young people who are educated and trained in urgently-needed subjects and skills. They have found that the only way to fill the void left by the public sector’s failures is to act themselves, supplying colleges with appropriate curricula, and guaranteeing jobs for successful students.

Bharat Forge has an engineering college on its factory campus in Pune that runs a masters degree program with Britain’s Warwick University. It also has a bachelors’ program run with an Indian institute that, says Baba Kalyani, the chairman, “enables workers to become engineers.” Below that there is a “talent pipeline project” with technical colleges in small rural towns, developing work-related courses and identifying bright students to work in his company during vacations.

The second major area for private-sector investment is providing educational systems and support services to schools and colleges of all types. This is the opportunity that has attracted international companies such as Pearson and McGraw-Hill, as well as universities like Oxford from the United Kingdom and the Georgia Institute of Technology from the United States. The services range from teaching aids to teacher training, examinations, and language tuition.

Indian companies are also active. Delhi-based Educomp, founded in 1994, is a Indian market leader. For five years starting in 2000, it had a small private-equity investment from the Carlyle Group. It has 4,000 employees and is boosting teaching standards in Indian private schools by providing a range of IT-based distance-learning aids. It also provides learning labs for 6,000 Indian government schools. It has just bought Learning.com in the United States, which gives it access to two million American students, and has expanded in Asia, including China, through a link-up with Raffles Education Corp of Singapore.

So there are plenty of companies with the skills and the interest in boosting India’s education. Since there is little chance of government schools and colleges improving significantly on their own, the only sensible course is to open up the system to the private sector. But for that to happen, the government needs first to recognize that there is a real risk of losing what it grandly calls its “demographic dividend!”

 While I was in Mumbai and Pune last week, I talked to engineering companies about how they can sometimes compete successfully with China – and why. One strong theme about “why” was that India’s openness, its democracy, and its people’s flexibility enables companies to be entrepreneurially better.

Put another way, those aspects of India that frequently drive investors crazy – especially its chaotic democracy, general confusion, and lack of discipline – can be turned into advantages that encourage the entrepreneurship and flexibility needed to be successful.

No one is of course claiming that India can beat China overall, but the views I heard are interesting because they show the growing confidence in some Indian companies that India has some special advantages.

M.V. Kotwal, a director of Larsen & Toubro (L&T), India’s largest and most international heavy engineering group, said that China is a “regulated economy which means suppression of independent thinking, and that limits entrepreneurial activity.” Kotwal knows the market – L&T has sold ten coal gasification plants totaling $350 million to China in the past three years. By contrast, in India “there is a lot of freedom of thought which means that talent is available, and people come out with solutions whenever they are given a chance.”

A similar view came from someone else with direct China experience – Anand Mahindra, managing director of Mahindra & Mahindra, a tractors-to-cars company that has bought a tractor plant there. He said that though Chinese workers on machine tools could beat deadlines, they did not have the flexibility to switch instantly to a different machine. “The Indian mind is not fazed by confusion and apparent disorder,” he said, “If there is a wrinkle on a dye, an Indian engineer will sort it, but a Chinese will want to fly in an expert.”

Baba Kalyani, chairman of Pune-based Bharat Forge, the world’s second largest forgings company which has a joint venture in China, made the same point when he told me that India won in manufacturing in “areas with multi-technological touch-points such as high grade metal castings.” But he warned that this was “the only advantage that we have” and that it “wouldn’t last long.” China would catch up fast.

I discussed this with Nandan Nilekani, a founder and co-chairman of Infosys, one of India’s top three IT companies, at a Delhi party this week, and he said that “for genuine innovation, you need an open society.” When I scribbled that down on the back of my invitation card, he said it wasn’t that profound a remark. Maybe he was right, but it’s interesting that it’s now being cited by engineering entrepreneurs to explain why they can beat China.

A different point came from Rajiv Bajaj, who I talked about in my last post. He said that “China does not have the same incentive to innovate because someone down the road copies you.” He cited as an example that, while Bajaj Auto is the only company producing its Pulsar motorbike in India, “there are six copies of Pulsars in China.” (Ironically, two days after he told me this, Bajaj became embroiled in a legal patent battle over motor bike ignition technology with another Indian autos company, TVS of Chennai).

Mahindra also made the point that China beats India massively with its vast and efficient network of highways and ports that enable raw materials and components to be delivered to factories, and products to be taken on to other destinations.

That India lacks such infrastructure was apparent when I was being driven last week to Bharat Forge’s Pune headquarters. Twenty minutes before my appointment with Kalyani, we were only moments away from the factory gates, but then we hit a traffic jam at a railway crossing. Twenty five minutes later we hadn’t moved as many yards so, after agonized phone calls between the driver and Kalyani’s office, Indian innovation came into play. I walked through the worsening gridlock of cars, dilapidated trucks, motorcycles, and bikes to the other side of the jam, where I was picked up in a motorized auto-rickshaw and chugged along to my interview, twenty minutes late.