Happy days are (almost) here again!
02 June 2009
Early in the month of May 2009, India attained two very significant inflexion points. Firstly, it became the world’s fastest growing mobile telephony major market, overtaking China. Secondly, it became the country with the largest CDMA connections.
Bearing in mind the general rule of thumb that for every 1% increase in ‘teledensity’ there is a 0.6% increase in the growth rate of GDP, it was apparent that the Indian economy was definitely on a positive track despite the prevailing international economic slowdown.
Accordingly, I started to write a piece on the significance of the Indian telecom ‘boom’ in relationship not only to electronics manufacturing but also on the country and its economy as a whole.
Then, three even more significant things happened. Firstly, and belying all the prophets of doom, the Indian electorate turned in an extremely positive mandate for the Congress party led coalition, giving rise to huge expectations of further liberalisation of the economy and also for substantially increased expenditure on infrastructure coupled with efficient, performance targets based ministerial oversight.
Secondly, the official GDP growth figures for fiscal April 2008 – March 2009 were announced. The 6.7% GDP growth again exceeded all earlier expectations.
The positive election results, the better than expected GDP growth figures and the forecast for a 7% to 7.5% growth in the next fiscal led to the third significant event; a rise of almost 29% in the Stock Market Index in the month of May alone: the highest in 17 years. Suddenly there was abundant new found confidence, not only amongst Indian companies and business but also amongst foreign entities and investors as reflected in rapidly increasing foreign investment.
So what does this bode for the future? Clearly, for the next few years the future in India is in the telecom business in all its facets on the back of an installed base of 450 million plus phone users increasing at the astounding rate of some 10 million a month. With the new government now formed, the long awaited 3G process will now be put in place giving a further fillip to the telecom business. Of course Nokia, Ericsson, NSN, Huawei, are already well positioned to tap into this rapidly burgeoning opportunity.
Unfortunately, assemblers and sellers of low cost handsets would now be kept out of the market as instruments without an IMEI identification number will no longer be allowed to be used because of security considerations.
With massive expenditure expected in other sectors such as power (nuclear, thermal, solar, wind, and hydro), healthcare, I.T, and transportation, one can forecast substantial opportunities for electronics and instrumentation as applied to these verticals. Let us not forget that for obvious geopolitical security reasons, India would need to considerably increase its defence and security related expenditure. With the policies now favouring the participation of the private sector in local manufacture of defence related systems, there has recently been a flurry of joint venture announcements between major Indian companies and large multinationals (that between Indian engineering giant L&T and EADS Defence and Security is an example). The mandated requirement of local production and assembly would obviously result in a quantum jump in electronics manufacturing in the country.
The companies that are well poised to take full advantage of India’s growth in the coming years are principally those that have well established themselves in the country either as manufacturers and/or those with large research and development centres. In the first category are companies such as Emerson Electric and Honeywell as well as Nokia, and Nokia – Siemens Networks, etc.
Emerson Electric took some 28 years to develop its India business to a level of $525 million but now is set to double that figure in the next three to four years to become a $1 billion entity. In 2008, when many large International companies in India were cutting back their India operations, Emerson Electric invested an additional $150 million to bring its total investment to over $600 million with another approximately $100 million to follow in 2009 on capacity expansion. Their Chief Operating Officer recently went on record to state that: “An economic downturn is the best time to be heard,” and more significantly: “We are using the economic downturn to focus on getting strategic investments done, so we will be ready when the market turns.” Emerson Electric has emerged as the local market leader in several categories such as Uninterrupted Power Systems, racks, monitoring solutions and enclosures for IT server protection and power distribution units, climate control solutions for IT and telecom sectors, a range of measurement instruments and more recently, high performance alternators for wind power applications.
Honeywell’s India operations, although not quite as large as those of Emerson Electric, nevertheless registers a healthy $600 million in turnover, comprising four business segments; aerospace, automation and controls, and speciality materials. From just 1000 employees in 2002, Honeywell now has five manufacturing operations in the country with a staff strength exceeding 10,000. Honeywell has also invested $50 million in a new R&D and engineering facility in Bangalore which will have a staff strength of 3000. The Bangalore Technology Solutions Centre has recently developed and patented a highly sophisticated Security middleware solution addressing the requirements of modern Access control and IT Security systems.
In one of my pieces for EMT Worldwide (Disruptive developments and technologies during recession), I wrote about development of disruptive technologies during a period of recession. Well it turns out that many of the world leading technology companies are doing just that in their India based R&D and Technology Development Centres and would be very well placed to take advantage of the growing Indian economy as also be well positioned when the global recession has ebbed.
The world may not recognise it but it is Intel’s Bangalore based Platform Definition Centre which first conceived the ‘Classmate PC’ and brought it to market in 2006. Further developments of this technology and with extensive ethnographic research led to the innovative and now hugely successful new genre of products called the ‘netbooks’.
Microsoft’s Bangalore based India Development Centre is in the process of releasing ‘Velocity’, an explicit distributed in memory cache that enables building highly scalable applications by caching data closer to the application tier. This application cache fuses memory across machines into a single unified cache. Another Microsoft Development Centre has just launched ‘multipoint’ which makes use of multiple computer ‘mice’ connected to a USB port with the help of an adaptor. This is set to revolutionise the use of computers in rural education globally.
IBM’s India Research Lab has announced the development of ‘Spoken Web’ that helps create voice sites using simple telephone instruments thus bringing the power of the internet to the masses through telephones especially in parts of the world where people have little education and do not have the availability of conventional internet but may otherwise be well served by simple mobile telephony or land line connections.
Nokia has recently announced the development in India of ‘Nokia Life Tools’ that enable the rural user to use his or her mobile phone for simple education purposes such as how to speak better English. The software enables a user in an Indian village to have the possibility of learning one new English word per day with correct pronunciation and with a vernacular equivalent. The ‘Nokia Life Tools’ are now seeing a roll out in Africa and Latin America.
H.P. in its India Lab has announced the development of the ‘Gesture Keyboard’, a writing tablet that enables a user to write on a touch sensitive surface in Indic languages (having some 1500 unique codes against only 26 alphabets and 128 unique codes in English), a great boon to not only vernacular users in India but also to users of languages such as Sinhalese, Thai, Indonesian, etc.
It is perhaps only proper that such disruptive developments are coming out of India. After all, this country gave the world its most disruptive development of all – the concept of ZERO in the Year 499 AD!
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