No Wonder!

Essay- a tale of trillions


“If you don’t have a competitive advantage, don’t compete.”
Jack Welch

“Control your own destiny or someone else will.”
Jack Welch


No Wonder!

Jack Welch, prescient as ever, identified the India opportunity for GE in 1992, pointing also at China and Mexico at the same time. Till then, GE in India was puttering along peacefully, ploughing the conventional furrow along with a dozen or so global giants who thought it was as well to have a look-out, a Nissen Hut operation on Indian soil - just in case the mahout decided to unshackle the Great Indian Elephant when they weren’t looking.

It was prescient of Jack Welch to ring the bell on India, but also alert, because the elephant had been quietly unshackled in 1991 already, thanks to a near default on our foreign debt, dramatically assuaged by the Chandra Shekhar Government. It was that minority government that put our gold reserves on a plane to Switzerland to avoid the ignominy of just such an outcome. Then, it was Manmohan Singh’s turn to take things forward as the FM in the Narasimha Rao Government. And gradually thereafter, the economic liberalisation process unfolded.

In 1992, GE’s India operations turned over at just $100 million per annum. Scott Bayman, GE’s satrap in India for 14 years, till he retired only this summer, came in 1993. This makes Bayman the longest serving expatriate country boss in recent times, a kind of evangelical Jesuit of the firangi boardroom. For GE, to keep him here this length of time reveals a surprising, European style orthodoxy, a country-experiencing-policy more often associated with the imperial designs of the white nabobs in and around the fabled John Company in the eighteenth and nineteenth centuries. And Bayman, rather like those nabobs of yore is now widely regarded as an expert on how to “deal” in and with India.

Scott Bayman who, in his own words, “survived two GE Chairmen; six (Indian) governments and five prime ministers,” has also left behind a creditable legacy at GE India, now turning over at $3 billion p.a. via the labours of 13,000 employees and with the many GE global businesses all represented in the country.

Jack Immelt, Welch’s successor at the global HQ corner office, says GE is on track to reach targets of $8 billion for both turnover and assets by 2010. But, you know, these days, awe is not so easily inspired in the desi heart. General Electric, despite being No. 6 on the Fortune 500 list (Wal-Mart Stores is No. 1 in 2007), sounds like yet another good size MNC doing well in India. We feel good that this is so but there is a sense of “No Wonder” smugness about it.

“No Wonder” smugness, in the sense that how can any corporation worth its global salt afford to stay away after all? Just because we Indians are none too aware of our impending greatness does not excuse a Wal-Mart or a VW or BMW, to name just a few, to wake up to the opportunity we present - late. They insist they are here at the right time of course, out loud that is. After all, they’ve scurried into the big tent well before the banned high technology and nuclear power floodgates are thrown open. So maybe they have a point after all.

Scott Bayman, with his 14 years on the ground, has had an impressive India career. When he came, in 1992, Indian industry was worried about being swamped by foreign competition, but now, as he put it at a farewell dinner in June this year, Indian industrialists “no longer worry about multinational companies; they are or want to be MNCs…..They no longer talk of level playing fields. They argue for open markets, free trade and view the globe as their marketplace.”

Still, Bayman concludes with a familiar line: “You need patience and persistence. This is a difficult place to get things done quickly.”

This may be so in a comparative sense, and fair comment too, particularly if you come from the US which is some 200 years old and has been wealthy for just 70 of those years. And if you come at a time when a young republican India is struggling yet with the rigours of its parliamentary style democracy and universal suffrage too. But the fact is, we’ve seen it all. From Ram Rajya to Colonialism. It’s taken us elephantine types through at least 3,000 years of being everything from fabulously rich to abysmally poor, from ruling, being ruled, ruling again. We may therefore be permitted a mere moment or two to adjust to changed circumstances, particularly if they are for the better.

It is therefore entirely appropriate for a desi bhai to be taken aback when the morning papers quote another American icon, IBM this time, from its Institute for Business Value’s recent study entitled “Get Global Get Specialised or Get Out” echoing Jack Welch’s famous aphoristic prescription on corporations that ran “fix it, close it or sell it”. The Study predicts that the Indian stock market, currently capitalised at just under $ 1 trillion will grow to $17 trillion by 2025! That’s 17 times in 18 years! It is hard to imagine such a gut wrenching, dizzy ride to the stratosphere. If this is our destiny going forward what chance do we have of being ponderous at all?!

The Study, conducted in collaboration with the Economist Intelligence Unit, developed a model to trace the effect of globalization across 35 of the world's largest economies. They also surveyed 848 financial markets executives from around the globe and 107 of their corporate clients. The findings include the insight that the worldwide opportunity is large – but the goodies won't necessarily be found in the same old places, meaning, in the main, the US, Europe and Japan, though these developed markets will still account for 40 percent of projected growth and keep their places at the table.

This, even as worldwide investments are expected to double by 2015 to almost US$300 trillion. By 2025, the opportunity is sized at $700 trillion! However, 60 percent of this future growth will come from non-traditional places. This means the emerging markets in general, and China and India in particular. While this has been highlighted, in various ways, a number of times already, the IBM study points out that most of the financial services world in the West is not geared to take advantage of these emerging market opportunities as yet.

What a change it will mean for India if the Study is right. We are then indubitably contemplating a developed economy and a prosperous people if this comes to pass. But, even as we exult, let us remember that this is the same IBM that walked out of India lock-stock-and-barrel in Indira Gandhi’s time rather that conform to the nationalist demand to dilute their shareholding to a minority status in those heady, if misguided, socialism inspired times. And the Economist Intelligence Unit, pundit No.2 for this Study, has been calling the recent Indian economic progress “unsustainable” for most of 2007 because of severe infrastructure bottlenecks and has dubbed the Indian stock market “overvalued” with metronomic regularity over the last couple of years.

Still, to be fair, IBM has been back on our shores for quite a while now, along with Coca Cola, another US icon that had seen fit to walk out in a huff at the time. So who knows what twists in the tale could upset the applecart going forward. But, if the past is any guide to sober assessment, it makes quirky policy aberrations such as the one perpetrated by Madame Gandhi the First seem like so much obsolete junk in the backyard of history. Change, it appears, is about tomorrow and has scant respect for inconvenient precedent. They are handing out the Happy Masks and it may be seen as party pooping behaviour to refuse to don them. Besides, they will be handing out silly hats too and whistles that blow raspberries on the down draft.

And wreathed in them smiling masks, let us do some perceiving of our own, a kind of metaphor for the winds of change. But all is not airy fairy. There are real possibilities. Such as this: we could be waiting for the fun and island games to begin shortly at Havana. That is, after 81 year old Fidel moves on. Though it is true enough that he does have a brother nominally in the saddle and also a couple of sons dying to inherit the mantle. But the trick question is - will it be a socialist mantle that descends on whomsoever succeeds? Are they still making them in Shanghai because if not then they’ve gone out of production. There’s Hugo Chavez and his discounted oil of course. But will this alone be incentive enough to stay in poverty any longer than the fifty years endured already? One’s mirthful self thinks, or is it that it suspects, that we may have a very active emerging market buzzing shortly within a short boat ride of Miami. I can almost see the neon lighting up and the ghosts of all those pre-revolution croupiers preening in their bespoke dinner jackets, their customers wreathed in the world’s finest cigar smoke and Papa Hemingway smiling into his beard from the cumulus forming above.

But as things stand, the IBM study implies, none to subtly, that the global financial services think-tanks should urgently review “the situation” unless it’s other Fagins, including the localised ones, they are willing to be losing their business to. This is because, most of the worthies interviewed opined that they did not operate in a “globally integrated” manner. So if the powers that be in Wall Street and Broad Street and The City and so on, listen; a study, like this one, may cause US, European, Japanese and Australian financial services firms to reorganise. But, even then, it also implies, for reasons of practicality if none other, that home grown financial services firms, those who know their own yards, inclusive of its niche segments and contours, could end up being the major facilitators of this growth opportunity. And then, if BMW ends up selling more Beamers in New Delhi than it does in Frankfurt it should not be the German, or even the American case, to wonder.

(1,736 words)

Title: No Wonder!
By Gautam Mukherjee
Monday 17th September 2007

This and all other essays on GHATOTKACHSERIES are copyright 2005-2007 by Gautam Mukherjee. All rights reserved.