TECH TALK: The Best of 2005: Chindia

12. Business Week

India has been the flavour of the year even as China consolidates its economic power. 2005 saw a steady stream of investment announcements through the year as businesses see the potential of the market within. Business Week marked the shift in the balance of power to the East with a series of stories in August. It wrote in its lead story:

China and India. Rarely has the economic ascent of two still relatively poor nations been watched with such a mixture of awe, opportunism, and trepidation. The postwar era witnessed economic miracles in Japan and South Korea. But neither was populous enough to power worldwide growth or change the game in a complete spectrum of industries. China and India, by contrast, possess the weight and dynamism to transform the 21st-century global economy. The closest parallel to their emergence is the saga of 19th-century America, a huge continental economy with a young, driven workforce that grabbed the lead in agriculture, apparel, and the high technologies of the era, such as steam engines, the telegraph, and electric lights.

What makes the two giants especially powerful is that they complement each other’s strengths. An accelerating trend is that technical and managerial skills in both China and India are becoming more important than cheap assembly labor. China will stay dominant in mass manufacturing, and is one of the few nations building multibillion-dollar electronics and heavy industrial plants. India is a rising power in software, design, services, and precision industry. This raises a provocative question: What if the two nations merge into one giant “Chindia?” Rival political and economic ambitions make that unlikely. But if their industries truly collaborate, “they would take over the world tech industry,” predicts Forrester Research Inc. analyst Navi Radjou.

13. Fortune

Fortune, too, had a series of stories of India in a recent issue. It wrote in its November 4 issue: India, by contrast, is the global economy’s idiot savant. It excels at the impossible, turning out hundreds of thousands of brilliant engineers a year. Its software houses manage complex data across thousands of miles of undersea cable for the world’s most sophisticated clients. India has world-class business leaders and, unlike China, solvent banks. And yet India flubs the obvious stuff. The national roadway network is a shambles and the power grid even worse. Nearly a third of India’s populationand more than half its womencan’t read or write. India has moved grudgingly to lower tariffs and balked at turning money-losing state-owned enterprises over to the private sector. Red tape and corruption discourage foreign investment, as do restrictions on how firms deploy workers.

14. Stephen Roach

Stephen Roach of Morgan Stanley captured the essence of the India success story in an October newsletter: India is on the cusp of something big. After my third trip there in 18 months, I am as enthusiastic about India as I was about China in the late 1990s. While comparisons with China are inevitable, the case for India is very different. What excites me the most is the potential for an increasingly powerful internal consumption dynamic — an ingredient sorely missing in most other Asian development models, including China. Indias constraints — infrastructure, saving, foreign direct investment, and politics — are well known. Yet on this trip, I saw visible progress on most of those fronts. Moreover, the consumption story — the organic sustenance of sustainable growth and development — casts India in a very different light Dont get me wrong — the Indian consumer is hardly a powerful force on todays global stage. As the accompanying chart shows, Indias per capita income and consumption levels are about half those of Chinas. But it is growth at the margin that always drives powerful macro and market trends. And the Indian consumption story is, first and foremost, one of accelerating growth off a low base.

Tomorrow: Entrepreneurship and Management

TECH TALK The Best of 2005+T

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Rajesh Jain

An Entrepreneur based in Mumbai, India.