US Univs Coming to India

The New York Times writes:

Among Indians ages 18 to 24, only 7 percent enter a university, according to the National Knowledge Commission, which advises the prime ministers office on higher education. To roughly double that percentage effectively bringing it up to par with the rest of Asia the commission recommends the creation of 1,500 colleges and universities over the next several years. Indias public universities are often woefully underfinanced and strike-prone.

Indians are already voting with their feet: the commission estimates that 160,000 Indians are studying abroad, spending an estimated $4 billion a year. Indians and Chinese make up the largest number of foreign students in the United States.

3G in Indonesia

WSJ writes about something we should have been doing in India:

Indonesia’s rapid adoption of cutting-edge cellphone technology for Internet access is helping Southeast Asia’s largest economy to catch up with its technologically savvier neighbors.

HSDPA technology, pioneered in Indonesia by PT Indonesia Satellite Corp., or Indosat, offers Internet download speeds at least six times as fast as connections relying on cable, a wider difference than in a more-developed economy. And because it’s an add-on to 3G technology, it doesn’t need any major new telecom infrastructure — just some equipment attached to existing mobile base stations.

Business Week on India

The cover story in Business Week discusses the challenges: “Crumbling roads, jammed airports, and power blackouts could hobble growth.”

[The] economic boom is being built on the shakiest of foundations. Highways, modern bridges, world-class airports, reliable power, and clean water are in desperately short supply. And what’s already there is literally crumbling under the weight of progress. In December, a bridge in eastern India collapsed, killing 34 passengers in a train rumbling underneath. Economic losses from congestion and poor roads alone are as high as $6 billion a year, says Gajendra Haldea, an adviser to the federal Planning Commission.

The infrastructure deficit is so critical that it could prevent India from achieving the prosperity that finally seems to be within its grasp. Without reliable power and water and a modern transportation network, the chasm between India’s moneyed elite and its 800 million poor will continue to widen, potentially destabilizing the country. Jagdish N. Bhagwati, a professor at Columbia University, figures gross domestic product growth would run two percentage points higher if the country had decent roads, railways, and power. “We’re bursting at the seams,” says Kamal Nath, India’s Commerce & Industry Minister. Without better infrastructure, “we can’t continue with the growth rates we have had.”

Indian Economy

India Knowledge@Wharton writes about the views of two economists on what could derail the ‘India Express’:

Shanta Devarajan, who serves as chief economist for the World Bank’s South Asia region, takes issue with the popular notion that there simply isn’t enough infrastructure — power, water, transportation networks, etc. — to sustain India’s robust economic growth rate of more than 8.6%.

“All this talk about infrastructure is missing the point,” Devarajan insisted. In many cases, the problem lies in mismanagement of the existing infrastructure, which gets gummed up in patronage politics. For example, he said, the “free” provision of water means that little money exists for maintenance or upgrades that could supply water around the clock. Clean, ubiquitous water on demand, meanwhile, is one of the marks of a fully developed country. Such well-developed infrastructure makes a country more attractive to foreign investment.

Arvind Subramanian, a division chief for the IMF’s Research Department, thinks that people need to adopt a more nuanced view of government’s role. He lamented the popular notion of “private sector ingenuity and public sector ineptitude” as an oversimplification. India’s blistering economic growth, which took root in earnest during the 1980s, actually owes much to having serviceable, if imperfect institutions, and to considerable reform within them, he said.

India’s Budget

The Economist writes:

Responding to the domestic pressures, Mr Chidambaram produced a budget whose central theme was curbing price rises. It also gave a much-needed boost to spending on agriculture, education and health care. The stockmarket’s first reaction was gloomy, made worse by plummeting markets around the world, and businessmen found little to cheer about. But, while defending the pursuit of growth, Mr Chidambaram was aiming at different targetsfor economic and social as well as political reasons. He increased funds for education by 34%, while money for health and family welfare went up by 22%. By comparison, spending on defence will go up just 7.8%.

Enjoying the surge in revenues brought by rapid growth, Mr Chidambaram said that agriculture must hold the first charge on our resources. He announced plans to boost credit to farmers, as well, disappointingly, as to increase fertiliser and water subsidies, which tend to benefit the better-off, and help cripple the budget in leaner times. The Confederation of Indian Industry, a business lobby group, said more should have been done to increase private-sector investment. But Mr Chidambaram said later that agriculture had to be tackled through the millions of small farmers with less than a hectare of land rather than corporate investment. The hope is that such measures to boost agricultural supply will curb prices.

India Mobile Space

India Knowledge@Wharton has a good overview with an analysis of the Vodafone-Hutch deal:

The growth numbers explain most of the market’s fervor. India’s cell phone user population doubled during the past year to 150 million at the end of 2006. More than 6 million new subscribers are signing up for mobile services each month, making India the world’s fastest growing mobile market. Cell phones are not just a way to keep in touch with loved ones in a country that loves to talk, but in a booming economy they also become workstations for millions in India’s unorganized sectors. Vodafone’s India-born CEO Arun Sarin said in a speech in Barcelona recently that he expects the 150 million subscriber base — which represents a penetration rate of just 13% — to grow to 500 million in a few years. Much of this growth is expected to come from more than 600,000 villages where millions of Indians live. “We are really excited to move into the rural areas,” Sarin said in his speech. “Whenever we get into these rural areas, we find people love to talk. They light up our base stations immediately.”

Ravi Bapna, professor of information systems at the Indian School of Business in Hyderabad, notes that Google’s co-founder and president Larry Page has said he wants cell phones to be free. Low-cost phones like Motorola’s MotoFone F3 will allow for “m-commerce” capabilities to emerge in the industry, including banking, insurance and other financial services. “What I see on the horizon is more localized search with phones that connect to GPS (satellite-based global positioning systems), so they [the service providers] know your location,” he says. “Google will tie in these things; if you type in an SMS saying you are looking for a restaurant in Brigade Road (in Bangalore’s main shopping district), it will send you the information, and maybe also give you a restaurant coupon.”

Innovation in India

San Francisco Chronicle writes:

Academics like [Ashok] Jhunjhunwala — along with the country’s business leaders — want more for their students than good jobs. They’re hoping to instill in their graduates the spirit of innovation and incubation that has been the earmark of Silicon Valley for decades. They want to use technological invention to help India ascend.

To put it bluntly, India is sick and tired of simply cranking out the world’s best engineers. It now wants to create the world’s best ideas.

To do so, it will borrow heavily from the model perfected in Silicon Valley, where the academics of Stanford mix with bankers and business experts to create opportunity. Not surprisingly, many of the top supporters of IIT’s push into “entrepreneurism” are the very graduates who found their way to the Bay Area over the past 20 or 30 years. The lessons they’ve learned are now being passed back to their alma mater.

India: Beyond the Back Office

Knowledge@Wharton along with Boston Consulting Report has put together a report on India: “In December 2006, Mumbai-based Tech Mahindra won India’s biggest outsourcing deal to date — a five-year, $1 billion contract from British Telecom to provide technical support. While the deal further underscores India’s rapid ascent in global business, it also signals a transition for the world’s “back office” from its current status as a provider of data processors and call-center workers to its new role in outsourcing high-end, knowledge-based skills. In this special report, experts from Wharton and Boston Consulting Group look at India’s move up the service value chain through KPO, or knowledge process outsourcing, as well as its increasingly successful forays into global manufacturing, driven by the emergence of a vast domestic market and the availability of low-cost, highly skilled workers. In addition, the report looks at India’s attempts to overcome the problems with power and infrastructure that have stood in the way of a sustainable GDP growth rate, as well as the key part that foreign investment and competition will play in the upgrade.”

Mobiles in Emerging Markets

WSJ writes:

For years, developed nations provided the cellphone industry with most of its growth and fat profits. Now, that growth has slowed, it is the emerging markets that are rising fast. As a result, cellphone-service providers are reaching into the world’s remotest regions.

Developing regions such as Africa, China and India together account for roughly 1.6 billion cellphone subscribers, about 59% of the global market, according to Wireless Intelligence, a joint venture between the GSM Association and Ovum Holdings Ltd. that tracks cellphone-industry data.

Analysts expect these newer cellphone markets to contribute the vast majority of growth in mobile subscribers in the coming years. Only about a third of people in developing markets currently have mobile phones. In India, less than 15% of the population has a cellphone, but the market is increasing by more than six million new subscribers a month. By contrast, roughly 70% of the U.S. population own a cellphone and some Western European markets have reached saturation point.

India Superpower?

Fortune writes: “ndia should put aside pride about its growing economy and concentrate on improving the lives of average citizens.”

India is not a superpower, and in fact, that is probably the wrong ambition for it, anyway. Why? Let me answer in the form of some statistics.

* 47 percent of Indian children under the age of five are either malnourished or stunted.
* The adult literacy rate is 61 percent (behind Rwanda and barely ahead of Sudan). Even this is probably overstated, as people are deemed literate who can do little more than sign their name.
* Only 10 percent of the entire Indian labor force works in the formal economy; of these fewer than half are in the private sector.
* The enrollment of six-to-15-year-olds in school has actually declined in the last year. About 40 million children who are supposed to be in school are not.
* About a fifth of the population is chronically hungry; about half of the world’s hungry live in India.
* More than a quarter of the India population lives on less than a dollar a day.
* India has more people with HIV than any other country.

(Sources: UNDP, Unicef, World Food Program; Edward Luce)

You get the idea.

TV Booming in India

The New York Times writes:

Television ownership is growing fast here, and it has plenty more room to expand. There are roughly 105 million homes with televisions in India, up from 88 million in 2000. The current number of television households is about the same as in the United States, though for India that amounts to only about half of the countrys households, compared with 98 percent in the United States.

Advertising spending on Indian television increased by 21 percent a year, on average, from 1995 to 2005, when it reached $1.6 billion, according to ZenithOptimedia.

Black-and-white televisions still account for an estimated 40 percent of all TVs in use, and about 56 percent of rural households do not have electricity, according to Indias 2001 census. And because most homes in India that have a television have just one set, watching TV can be a communal activity that brings together the entire family, and often the neighbors, too.

India Inc as Buyer

The New York Times writes in the wake of Tata Steel’s acquisition of Corus:

The takeover of Western companies by Indians is seen by many here as a reversal of fortune: a once-proud civilization that became a colony is now buying out the once-hallowed corporations of the West.

Now, in the takeover boom, are portents that as economic fundamentals change, culture changes with them.

A pulsating, dynamic new India is emerging, Amitabh Bachchan, a Bollywood actor, says in a television ad for The Times of India. An India whose faith in success is far greater than its fear of failure. An India that no longer boycotts foreign-made goods but buys out the companies that make them instead.

Economist on India

The Economist writes that the Indian economy is overheating.

Fast growth is essential to pull millions of Indians out of poverty, so it is sad to pour cold water on this story. But that is precisely what is needed when there are so many alarming signs of overheating. Across India prices are rising fast, factories are at full capacity, loans are piling up. Yes, the economic reforms of the early 1990s spurred competition, forced firms to become more productive and boosted India’s trendor sustainablerate of growth. But the problem is that this new speed limit is almost certainly lower than the government’s one. Historic data would suggest a figure not much above 7%well below China’s 9-10%.

When you mention overheating, many analysts point towards China. Yet India displays far more symptoms of the disease. Inflation has risen to 6-7% (compared with 2.8% in China); a record 99% of Indian firms report that they are operating above their optimal capacity; and credit is expanding at an annual rate of 30%, twice as fast as in China. Unlike China, India also has a widening current-account deficita classic sign of overheating, as domestic output fails to keep pace with surging demand. And if you are looking for a stockmarket bubble, Indian share prices have risen more than four-fold over the past four years, far more than in China. If something is not done, then a hard landing will become inevitable.

Mobiles and Digital Divide

Kevin Maney writes:

Cellphones aren’t at all like mocha lattes. They are miniature self-improvement machines. They can make as much difference in individual lives as literacy, without the steep learning curve.

“In places like India, the impact of cellphones on the gross domestic product is huge,” [Nokia CEO] Kallasvuo tells me.

Stories abound, for instance, of farmers or fishermen who start using cellphones to sell goods to the highest bidder instead of the lone buyer in the village, thereby vastly improving their lot. In one little way after another, cellphones act like extra pushes on the economic flywheels of developing nations — actually improving economies so people can, well, buy more cellphones.

TradeNet in Africa

The Economist writes about an innovative use of mobiles: “TradeNet, a software company based in Accra, Ghana, will unveil a simple sort of eBay for agricultural products across a dozen countries in west Africa. It lets buyers and sellers indicate what they are after and their contact information, which is sent to all relevant subscribers as an SMS text message in one of four languages. Interested parties can then reach others directly to do a deal.”

Investing in India

Sramana Mitra has an interview with Paul Asel of IFC. I have met Paul on a number of occasions and have been very impressed with his thinking. This is what he has to say on investing in India:

We are optimistic about prospects for India. We believe that India is on a long term high growth path that is sustainable for the next 20 years and are looking at opportunities that will benefit from this growth trend.

At the same time, we are cautious on valuations. There are now 120 venture and private equity firms investing in India. Most have entered India in the last two years so we are seeing a rapid escalation in prices. Infosys and Wipro have achieved earnings growth of 40% per year for the last four years but are only now returning to their 2000 valuation levels. The challenge will be to dig deeper to find hidden gems at valuations that stand the test of time over a 5-7 year period.

PC Ecosystem in India

Financial Express says the PC ecosystem, unlike that for TVs and Mobiles, is just not happening in India.

Industry experts list quite a number of reasons for Indias low PC penetration, ranging from high computer prices to lack of local language content. But most of them point to something as elementary as this (possibly biggest block): People dont find computers very relevant to their lives. Not the way they find phones, fridges, cars, homes and so on. Will broadband change that perception into a compelling need? Or, what can be done to effect such a change?

Optimists say that all the elements are gradually coming together – various technologies (optic fibre, wireless and gadgets etc.), low priced computers or computing devices, the governments desire to push broadband, local language content (gaming, music, distance learning material, e-governance projects) and an increasing awareness and desire to be connected. They say that the success would lie in tying them all up properly.

2007 India Tech Predictions

From iLeher (Madhur). Among them:

1. Broadband growth in India will continue to disappoint by not showing an exponential growth.

7. Mobile payment and mobile ticketing will hit mainstream.

8. We will find Indians spending more time playing games (mobile, PC and console).