Brand “India” - Reading Between The Lines

For over a decade now, India has been a synonym for outsourcing and off shoring services. This has propelled the Indian economy and the recent Union Budget announcements encouraged further Foreign Direct Investment, thus painting a picture of prolonged growth in the coming years.

However, let’s ponder over the repercussions and the practicality of achieving these growth figures, especially after the steadily increasing inflation and interest rates, emerging alternative low-cost destinations and the possibility of reverse brain drain.

India has been achieving near double digit growth for a number of years now but the scams exposed in the past year have had such a detrimental impact that the growth story suddenly seems very uncertain. Arguably, the best decision made in the past decade by the government has been the passing of the Right To Information Act, where any citizen (excluding citizens of the state of Jammu & Kashmir) has the power to request for information from a public authority and requires every public authority to publish and make available certain categories of information. This has empowered not only the common man but also the media. The media has also gone a step ahead by taking it upon itself to reveal the ugly truths of Indian bureaucracy on national television.

On top of that, with the opposition party scrutinising every move of the ruling party, there is little room to manoeuvre or hide facts. Through sheer resolve and determination to improve the system, the empowered citizen has convinced the Government to draft a Bill against corruption. Deals are now so much in the open that the media somehow gets its hands on the contracts and joint venture agreements and analyse them in the daily news, exposing loopholes and questioning the basis of the agreements. This is extremely powerful stuff to lay the foundation for transparent functioning in the long-run but it has a negative impact on the short-term goals.

It is this transparency that has exposed the 2G and 3G scams (involving several ministers and corporate honchos), the Housing scam (involving defence personnel), the Pilot Licencing Scam (involving senior bureaucrats) among many others. These scams have made the large corporates (or the game changers) very wary of their actions.

Add to this the consistently increasing year-on-year near-15% wage increase, which translates to exploding demand of a rising middle-class, resulting in unstoppable inflation and interest rate rises. After all, how can a 15% wage increase be sustained when the GDP grows at 8% a year and the developed world’s (who fuel the emerging markets) GDP grows at an even lower rate?

Thanks to rising inflation and interest rates, borrowing funds are now more expensive and raw material costs have gone through the roof. On top of that, the steadily rising competition acts as the final nail in the “growth” coffin.

Is this really happening? Well, all this holds true when one reads about the approaches corporates are taking to minimise costs and maximising margins. The best names in the business are only hiring from within or considering referrals to fill openings. Increasing salaries are making outsourcing more expensive year after year. Alternative destinations like Philippines and China are becoming more and more attractive. European economies going into default are impacting commodity prices and stock exchanges the world over.

How do we get out of this? Entrepreneurship has been the true agent of real sustainable growth and the good thing is that the future managers of India are treading this path early in their careers, which indicates a healthy appetite for risk and reward. What works in India’s favour is the abundance of talent and the increasing power of the digital world. With only 10% broadband penetration in the country and 25% mobile penetration in rural India, there lies a huge infrastructure and education gap that needs to be filled. Whether the game changers take it upon themselves to fill this gap or join hands with foreign direct investors or whether the next-generation leaders become the agents of change is what will shape the future of Brand India.