'Technology Is Central To Economic Progress'
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India is pushing ahead in investment, human capital and innovations. Do Indian business models have a market in other countries?
India is at the forefront of the surge in emerging-markets. Over the last decade, India's exports to emerging markets as a share of total exports has risen from 35 per cent in 2000 to 52 per cent in 2010. According to our research and analysis, the emerging-markets surge could add about 28.2 million jobs in India by 2020. In addition, services, low-cost business models, infrastructure development, focus on middle classes and medical tourism could enhance India's GDP by Rs 7 trillion ($15.4 billion) by 2020, an increase of 4.9 per cent above the current trajectory.
From manufacturing the cheapest car in the world to providing low-cost mobile handsets, India has emerged as a laboratory. A number of Indian companies are using their knowledge to strengthen operations in other emerging countries. Bajaj Auto trained roadside mechanics in Angola to fix their bikes, because many parts of Angola could not support a proper dealer and service-centre network.
To develop and sell products in emerging economies, Indian companies are adopting local approaches to product development and marketing. When Dabur International was set up in 2001, the objective was to get closer to its Indian-origin customers in the Middle East. Today, almost 90 per cent of Dabur's customers are locals-not the Indian diaspora. The company's proximity to non-Indian consumers enabled it to adapt its products to locals' needs and aspirations. The company not only modified existing products' formulations, it also created new products exclusively for these markets.
Do you see opportunities for India in emerging markets? Which countries and sectors should India focus on?
There are enormous opportunities for Indian businesses in other emerging markets. As these markets grow, so do their middle classes and their consumption of goods and services. It is estimated that the number of households in emerging markets with annual incomes above $5,000 is set to rise from 320 million in 2009 to 400 million by 2014.
Buoyed by robust growth in consumer and government spending as well as domestic investment, demand from emerging markets is opening up opportunities across sectors. In services, India has proved its mettle with the sector contributing about 55.2 per cent to the country's GDP. Today, Indian companies are ready to extend their reach to emerging markets in Africa, Latin America and Asia Pacific in information technology, telecommunication, financial services and education. The growth in emerging markets will mean huge infrastructure upgrades. The total urban population in the developing world is expected to touch 5.3 billion by 2050. Some Indian infrastructure companies are seizing advantage of this opportunity-scaling up their operations, acquiring design skills and building strong balance sheets to support projects in other emerging markets. GMR Group became the first Indian company to operate an airport abroad, with the opening of the new terminal at Istanbul Sabia Gokcen International Airport.
The emerging middle class not only provides competition for labour and resources, but also enormous potential for global consumer markets. In 2000, developing countries were home to 56 percent of the global middle class, but by 2030 that figure is expected to reach 93 per cent. India is gaining popularity as a destination for medical tourism as the amount of spent on treatment is between half and one-third that in neighbouring destinations such as Singapore and Thailand.
Your report suggests that three key trends hold enormous promise for India in the decade ahead. Can you elaborate on the trends and the opportunities that are open for India?
Accenture's "New Waves of Growth for India" identifies three key trends-emerging markets surge, multi-technology future and the resource economy-that hold enormous promise for India in the decade ahead. Our findings are based on extensive discussions with experts representing business, academia, government and the non-profit sector and a deep analysis of extensive secondary data and Oxford Economics' econometric modeling.
The growing prominence of emerging markets as engines of economic growth is what we term as the emerging markets surge. Indian companies that ignore trade with emerging markets not only lose a valuable business opportunity but also miss out on the potential to increase their own country's long-term growth prospects. India's increasing integration with emerging markets will open new opportunities in services, consumer goods, infrastructure and medical tourism.
Technology is central to economic progress and the improvement of living standards in India. New technologies have the potential to mobilise communities, enable innovation and increase productivity. Next-generation technologies like mobility solutions, cloud computing and analytics will create new sources of demand in India. They will also give birth to whole new business models for providing education, finance and healthcare to India's massive rural markets, which have lain outside their reach owing to poor infrastructure and connectivity.
The battle for resources is growing fiercer across the globe, driven by rising demand coupled with rapidly dwindling energy sources. This widening demand-supply gap is creating an urgent need to exploit alternative energy sources such as wind, solar, hydropower, geo-thermal and nuclear. With global warming fast becoming a reality, the need for a low-carbon economy will accelerate the demand for intelligent energy solutions such as smart grids, green infrastructure, alternate fuels and hybrid vehicles.
The Indian economy has the potential to grow by 8.7 per cent per year, instead of 8 percent in the current trajectory, over the next decade. This equates to an extra Rs 11 trillion ($244.4 billion) of GDP by 2020 and 37.5 million additional jobs, over and above what India would otherwise achieve. Three quarters of these jobs would arise from India's exports to other emerging markets; one-quarter, from the green and high-tech sectors. The report lays out key actions that policymakers and business leaders can take to leverage these trends and stimulate renewed growth in the Indian economy.
Companies are looking at entering unexplored markets 'non-traditional' markets. Can you tell us more about it?
Emerging markets provide growth opportunities across sectors. An increasing number of business leaders in India are recognizing this potential and are looking beyond the traditional emerging markets such as Brazil and China and placing strategic bets in countries such as Indonesia, Nigeria, Vietnam, South Africa and Argentina. The tried and tested Indian business models that could be replicated in similar economies is giving Indian companies the confidence to make bold moves.
Africa is emerging as one of the top choices of Indian companies. In shops across the continent, there are a plethora of India products available. Emami's 'Fair and Handsome' fairness cream for men and Dabur hair care products vie for space on shop shelves with drugs by Lupin, Dr Reddy's Laboratories and Ranbaxy. Bajaj-made bikes, NIIT training classes, Lava mobile phones and Godrej soaps are increasingly in demand in several countries in the continent.
There are other opportunities in Africa in which Indian businesses are uniquely placed to take advantage of their home knowledge in India. Healthcare is one such area. Infant mortality in Sierra Leone is as high as 123 per 1,000 births and average life expectancy in Zimbabwe is just 45 years. For many Indian companies Africa could be the emerging India market equivalent in pharmaceuticals in the next decade.
What are some of the key issues/main business problems that clients are coming to you for?
We see many issues that are of interest to our clients. One is business models. Unlike some of the business agendas in Europe and America focused constituencies and optimising models, in Asia there is much greater focus on growth. Therefore, the favourite topics of our clients are business models that they need to employ in their businesses in order to manage dramatic growth. We do a lot of work with clients in Korea, China and Japan who are interested in expanding their businesses in South East Asia or the Middle East. They want to know how they can be successful in overseas markets.
How are companies de-risking businesses?
We have been working very closely with clients to improve their risk management capabilities and help drive better business outcomes. Executives understand that the challenges facing their organizations have never been greater. They are increasingly looking to risk management leaders to provide guidance. As a result, depending on your vantage point, it is either a great time or a stressful time to be a risk professional.
What we are witnessing is a maturation of risk management capabilities across all industries. There are clear signs that risk management capabilities are more critical, more connected, more strategic and overall more valuable to enterprises as they execute their business plans. Therefore, companies are spending more time and effort advancing their risk management capabilities as a business priority.
What are some of the trends that will pave the way for the next phase of growth in M&A?
An M&A rebound will pave the way for the next phase of growth. Perceptions of a new and emerging India have been given credence by the success of Indian businesses on the global stage and rising Indian investments abroad. Successful takeover of global brands by India Inc. have often been cited to predict that the country would become a dominant power in the 21st century.
Indian activities in M&A have increased manifold over the last decade. According to India Brand Equity Foundation, outward investment to the tune of $80 billion has been made between 2000 and 2010; the UK and the US have emerged as favoured destinations. A CII survey-based report shows that Indian companies actually helped save and create thousands of jobs in the US through acquisitions of local firms there. It says that since 2005, nearly 65 percent of the Indian companies operating in the US have added jobs to their operations; more than 80 percent of the hiring was local.
Deal-making in Asia got off to a strong start in 2011, with cashed-up companies tapping investment opportunities in sectors from energy to industrials, and bankers say the transaction pipeline for the rest of the year looks healthy.
Do you see areas such as alternative energy and food processing providing answers to the need for resource security in India?
As grow scarce, India is facing an uphill battle to secure its pipeline of all kind of resources? energy, food, minerals. Yet, the quest for resource efficiency can become an important source of economic growth and job creation. Accenture research shows that, with appropriate regulation, skills development, investment incentives and technology spillovers, this sector could raise India's GDP by Rs 458 billion ($10 billion) by 2020, 0.3 per cent above the current trajectory. This could help generate 821,000 additional jobs by 2020.
To harness this potential, India needs to explore alternative resources, source traditional resources from new locations and leverage efficiency-enhancing technologies. Alternative energy sources such as wind power, hydro-power, bio-energy and next-generation solar power can create new markets and export opportunities as well as provide an impetus to domestic manufacturing. The Indian government is working to expand supplies of alternative energy sources, while overhauling the country's energy infrastructure. Alternate fuels will help reduce dependency on scarce, high-priced conventional fuels and can turn India's energy situation into a position of surplus. More futuristic technologies, particularly hybrid cars, can play a critical role in reducing dependence on oil.
Intelligent-energy solutions will promote India's low-carbon agenda while also addressing its inefficient power supply. At present, energy losses during transmission and distribution in India exceed 30 percent, one of the highest in the world. The advent of a low-carbon economy will accelerate the growth in smart grids, carbon capture and storage, remote sensors and meters.
We know technology has played a role in diminishing borders. Has it given birth to new business and service models?
The maturation and convergence of a range of technologies is enabling a new wave of technology-driven growth. Information technology has revolutionized the way people interact with companies. They have transformed customer relationships, supplier relationships and entire business models. The rapid spread of mobile phones to help farmers and fishermen become more efficient and improve their livelihoods is just one example. Technology is bringing to life whole new business models that previously would not have been profitable-or even possible.
Rising incomes and increasing consumer awareness are driving demand for digital goods and services across India. Gartner estimates that notebook sales will outgrow desktop PC sales in India by 2012, with most of the demand coming from consumers as well as small and medium enterprises.
Growth possibilities springing out of the core technologies, such as analytics based on extensive use of data and statistical analysis to guide management decision making, and cyber security to safeguard increasingly complex information flows across networks. India has a billion-plus consumers, and very little is known about the consumption patterns of most of them. This makes business intelligence and analytics critical for companies in sectors such as retail, healthcare, telecom and financial services.