GE and Emerging Markets

WSJ writes that GE expects to get as much as 60% of its revenue growth from developing countries over the next decade.

Instead of counting on the U.S. and Europe, GE now is looking to China, India, the Middle East and Asia to buy its turbines, aircraft engines and medical devices. In addition, it expects to sell mortgages and credit cards to a growing middle class in Eastern Europe, including Russia, and Southeast Asia — and eventually China. Some developing countries, China in particular, are growing at rates high in the single digits, compared with 3% to 3.5% for the U.S., and half that for Europe and Japan.

Deane Dray, an analyst with Goldman Sachs, says, “It’s not by choice but by necessity. Developing countries are where the fastest growth is occurring and more sustainable growth.”

Banking on developing countries also means more outsourcing of back-office jobs, from processing paperwork to basic accounting, something that GE started doing in the 1990s in India. In another twist, to take further advantage of the outsourcing growth, GE sold 60% of its captive India business-processing operation last year to two private-equity firms to take the business commercial.

India, which has long disappointed GE in terms of industrial sales, is now at the beginning of its growth cycle, GE noted recently in a presentation on China and India. GE expects India’s services sector to grow as much as 8.3% by the end of the decade, and its industrial sector to grow by 6.7%.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.