Posts Tagged India Business Checklists
The Non-resident Indian's India
A recent article in in the Wall Street Journal’s online edition was forwarded to a newsgroup I frequent. Called “The Brain Boomerang,” it spoke about Indians who, after years in the US, go back to India.
When researching my book, India Business Checklists, I met people in just this situation. Some find it more difficult to adjust that do non-Indian Americans who’ve never lived there. Returnees look Indian, may still speak Indian languages. But India’s so different from the West, they have a hard time doing business there, or even dealing with the million small hassles of daily life. Others, even if frustrated, are better at dealing with India than Western people who don’t have third-world experience.
Me, I love visiting India and feel right at home there. A line in the article resonated with me: “Leaving India makes you love it, too. Hustle. Innovation. Growth. Golgappas.“
But researching my book was frustrating. Traffic was a major problem. I could barely manage 1-2 interviews a day in person: I had to allow an hour or two of transit time each way because of unpredictable traffic jams. Unlike before – and unlike many Asian cities – the business centers are now dispersed, so interviewees might be anywhere. (On the other hand, people were very helpful, giving me information and introductions.)
People who have projects in India find it harder yet. Here’s the experience of one manager, who responded on the newsgroup. (If the language is unguarded, it wasn’t meant for publication until I asked permission to put it here. Anonymously.)
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“Having worked in India for over six years after [graduating from an Indian Institute of Management], then moving to the US for 20+ years, I think I have an idea of both sides – yes, current India too, to an extent, since I go there at least two or three times a year for work.
“The biggest issue is corruption – totally rampant. You nearly need to pay someone money to scratch your butt (I’ve personally done the cash-in-briefcase-to-govt-official thing).
“Second, the idea of infinite time – commitments mean little.
“Third, the endless hustling to get anything done.
“On the plus side is the refreshingly aggressive, can-do attitude that the current kids have – I would really like to see them land a succession of powerful kicks on the backsides of slothful babus whose main role seems to be to gum up the works.
“Bigger picture, I don’t think Mother India is mentally ready for the responsibility that a democracy entails. Autocratically run businesses – most of them – do well; democratically managed enterprises – government operations, for example, are mired in self-generated goo.
“Yes, there is always the issue that the government subsidized my education [note: Higher education in India is tax-payer-subsidized] and I need to repay it, that I am a gaddar who got my MBA on some poor guy’s khoon-pasina [blood and sweat] etc.
“True. I tried to repay, but they want it in a plain, unmarked brown envelope, small denominations.”
4 comments December 6, 2009
Labor Trouble and Death in the Line of Duty
Soldiers might expect it. Business executives generally don’t. But in September 09, Roy George, a Human Resources professional working at Pricol in Coimbatore was killed by agitating workers. George had joined Pricol – an auto components manufacturer – only months earlier. He was, incidentally, an alumnus of IIM Calcutta, a leading management school and a sister school of my own alma mater, IIMA. Here’s his LinkedIn profile. And here’s his blog.
It was a sad reminder of another labor-related murder that I noted in India Business Checklists: In September 08, Lalit Kishore Chaudhury, the Indian CEO of an Italian-affiliated auto parts company in NOIDA (near Delhi) was also killed by angry workers. (For IIT alums reading this blog – he was IIT/K, I believe 1986.)
But managers aren’t the only ones getting killed; in October 09, Ajit Yadav, a 26-year-old worker was killed during a labor dispute at Rico Auto Industries in Gurgaon. Rico is also an auto components manufacturer.
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Quite aside from the human tragedy involved, this leads to the obvious question: Is India’s labor environment deteriorating? The data from the government’s Labor Bureau don’t appear to indicate that.
Industrial disputes in India, 1999-2007
This shows a decline in the number of disputes. The Labor Bureau hasn’t yet published any full-year stats after 2007, but the graph below is based on comparing the provisional or estimated Jan-Sept figures for 2007, 2008, and 2009. (I’ve adjusted the 2009 figures to make them roughly comparable.) That, too, seems to indicate things are getting better, not worse.
India Labor Trouble: Jan-Sept 07, 08, 09
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Yet anecdotal evidence suggest that the number of industrial disputes have risen sharply, particularly in new industrial areas. Some have linked this to national Unions attempting to gain traction with the workers, and companies resisting unionization, trying to substitute in-house unions instead.
Do the data tell the story? They are based on voluntary reporting, and companies may choose not to bother. Also, the estimated data for 2009 may be the least accurate of all; I’ve adjusted 5-month data into 9-month data, but may have underestimated it. The summer of 2009 was reportedly one of the worst periods. When the final numbers come out, in about 2 years, it may show an upsurge in labor trouble.
In this case, the anecdotal evidence is probably the more reliable. The combination of rapid economic growth, critical mass for unionization in some geographic areas, and a sudden slowing of growth in some sectors is a potent combination. Companies situated in new industrial areas need to be particularly cautious.
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Edited to Add:
I received this thoughtful comment from a reader:
” …You need to draw a distinction between legitimate industrial disputes (legal and necessary in any industrialized nation), unauthorized disputes and strikes and lastly, violence in the work place.
“Murder/ physical assault of management and/or workers falls in the last category and should be categorized as crimes – no different from violence resulting fom mob frenzy fomented by political or religious strife.
“So, the number of disputes and violent crimes are not necessaily correlated.”
Good point. The deaths may be more correlated with general levels of violence and and anger in society, rather than the number or severity of labor disputes.
1 comment November 30, 2009
Corruption in India: Worse?
As I noted in India Business Checklists, there’s no getting round it: India has a problem with corruption. At the time, I posed the question to the people I interviewed: Is corruption getting better or worse? I got a mixed response.
Well, Transparency International recently released their 2009 report on Corruption Perceptions across 180 countries. When I saw India’s rank – 84th – I went Ouch! In 2007 this organization ranked India at 72 (on par with China and Mexico). In 2009, India ranks with El Salvador, Guatemala, Panama and Thailand. Serbia is ahead (83), as is Burkina Faso (79). China also slipped in the rankings, but only to 79th.
Lighter is better
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When I looked at the actual score, though, I found the situation somewhat less dire. Transparency International scores countries on a ten-point scale, where 10 is the best, and 1 the worst. In 2009, top-ranked New Zealand made 9.4 , and Somalia 1.1 at the bottom.
India came up with 3.4, which is of course not great, but also not that far behind China’s 3.6 score. In fact, if you look at ten year’s worth of surveys – as I did in the graph- you find India’s score (green line) has actually been rising, while its rank (red line) has been bouncing around between 69 and 90.
India: Corruption Indicators from Yr 2000-09
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So what’s the takeaway? By this measure, Indian corruption seems to be improving gradually – but perhaps not as fast as in other places. A rank of 84 is still a problem. On a global scale, “acceptable” levels of corruption are going to be set by nations such as the US (graph below) and Japan (Rank this year 17th, score 7.7).
USA: Corruption Indicators over Ten Years
ETA: Just as a coda, I came across this amusing story in my friend R. Balakrishnan’s weblog. Comic, but serious.
2 comments November 18, 2009
India: Market of the Month
It’s nice to have the spotlight turned on India by the US Government’s Export.gov, which has chosen India as its Market of the Month, right behind China, which was its ‘market of the month’ in September 09.
Export.gov’s profile on India suggests a number of sectors as presenting opportunities for US firms:
- Civil Nuclear Energy
- Renewable Energy Aerospace and Defense
- Mining and Coal
- Safety and Security industry
- Healthcare
- Retail: Beauty and Personal Care
- Franchising
- Automotive
And, fortuitously, lists these upcoming events :
(The registration deadline was Aug 09)
- Oct-Nov, 2009 – Focus Franchising: U.S. Wellness, Beauty & Healthcare Franchise Concepts
- November 7-13, 2009 – Aerospace Trade Mission to India
- November 16-20, 2009 – Energy Efficiency Mission to India
- February 14 -19, 2010 – 2nd Solar Energy Trade Mission to India
- March 3-7, 2010 – U.S. Pavilion at India Aviation 2010, Hyderabad
- March 8-13, 2010 – Medical Trade Mission to India 2010
It’s all good. India’s made up of opportunities.
Well, not quite. The attractiveness of the market is undeniable; India and China are unsaturated markets, and currently, oases of positive growth. But India shouldn’t be perceived as a short-term opportunity by any company; that way madness lies.
Companies need to tread carefully. Promotional pieces like this one, which can encourage unprepared companies to rush in (“The world’s business is coming to India, are YOU?“) were one reason I figured a really pragmatic book of checklists was needed. Take a look; it’s here on Amazon, which has finally at long last added the “Look Inside” and “Surprise Me” functions. If you have a business interest in India, this may be a good starting point. India, like the universe, is not only more complex than most companies imagine, it’s more complex than they can imagine.
As I noted when I wrote India Business Checklists, it’s the kind of market that needs a practical approach to dealing with the the good, the bad and the very complicated.
Add comment October 12, 2009
Nielsen: The thin layer of Indian affluence
Companies planning on selling luxury goods in India should consider Nielsen’s August 2009 survey. For some, it will be a reality check.
When I read the press release from Nielsen’s survey of Upper Middle-class and Rich (UMAR) households in India, I thought they’d made a mistake… maybe lost a decimal point or so. They figured India had 2.5 million Upper middle-class households, defined as those that both owned a car and a computer. I thought it must be understated; after all, India is reportedly making 2.8 million cars each year. (Income is considered to be widely under-reported in India, so surrogate indicators are used in surveys like this one.)
Nope. I checked with Nielsen, and they stand by their survey, which covered the 35 largest cities in India.
India has perhaps 220 million households in total; 65 million in urban areas; of which these 35 cities have about 26 million households. Around 10% of the households of these 35 cities are affluent.
Nielsen note that India has a stock of 14.5 million cars on the road, and 7 million computers on people’s desks. The intersection of those two sets, they estimate, is 2.5 million.
From this 2.5 million, they break out two further segments:
- The 200 thousand households of the Upper Upper middle class, which not only own a car and a computer, but also an LCD television; and
- the 100 thousand Rich families, which own all those things and have taken at least one holiday overseas.
For companies seeking to attack India’s luxury goods markets, this is a reality check. While the magic of large numbers – the 1.2 billion population – certainly exists, for many international consumer goods companies, their markets will be here: In the top 35 (or even just the top 5) cities; with consumers numbering in the hundreds of thousands rather than in the millions.
According to the survey, the top ten cities were: Delhi, Bangalore, Mumbai (Bombay), Chennai (Madras), Hyderabad, Kolkata (Calcutta), Kochi (Cochin), Pune (Poona), Jaipur and Ahmedabad.
8 comments September 7, 2009
Harley Davidson Goes to India
If you’re wondering why I’ve tricked out the Harley Davidson logo below in saffron, white and green – it’s because the cool bike is going to India. They’ve set up an office in Delhi, and are planning to sell the bikes there. Vrooom-growl!
Companies undecided about entering India might want to watch the motor-cycle manufacturer.
Two years ago, when I was researching India Business Checklists, Harley Davidson was in an dilemma.
India had changed its emission standards, so now its bikes were legal in India. Earlier, there was no question of selling their bikes in India because they didn’t comply with the standards. But import duties of 60% and other taxes that added another 30% or so priced it out of the market.
Or maybe not. Because the news now is that Harley Davidson has decided not to wait any longer. True, duties might fall, but meanwhile, other automotive companies are establishing market share. They think India’s rapid growth is generating enough of a market for them to gain some traction in the leisure riding market. In a country where the main use for two-wheelers is as family transportation, the leisure-rider is a luxury consumer. This may be among the fastest-growing market segments in India, albeit on a tiny base.
3 comments August 28, 2009
India: Vodafone Offshore Tax Case
Foreign investors in India – and people considering such investments – should be keeping an eye on the Vodafone case, which broadens India’s tax net.
The Government of India is about to ask Vodafone PLC why it shouldn’t pay up nearly $2 billion in taxes on its 2007 purchase of an Indian cellphone company. It’s the tax case that every anxious foreign investor and multinational tax attorney has been watching.
It all started in 2006, when Hutchison, a Hong Kong-based company, wanted out of its majority stake in the Indian cellphone company Hutchison Essar. It sold its share to Vodafone, which wanted in. That part was simple enough. The way the transaction was set up wasn’t. Hutchison sold a Cayman Islands company, which had a majority stake in the Indian company, to Vodafone International Holdings BV, registered in the Netherlands.
The question is, does Vodafone owe the Indian government around $2 billion in taxes, or doesn’t it? (Or in fact, possibly around $4 billion, if India levies penalties.)
If a sale is a purely foreign one — one foreign company selling assets to another foreign company — it is not taxable under Indian law. But if an Indian company sells assets, the seller pays capital gains taxes. That part is also quite straightforward.
However, a gray area exists: the “Business Connection.” If a company has a business connection to India, then the profits it makes in India do become taxable in India. (India Business Checklists goes into more detail.) Indian tax authorities argued that since Hutchison Essar’s business was in India, it made for an Indian connection. Hutchison Essar should have withheld and paid taxes on the transaction.
No, claimed Vodafone. The thing was a totally foreign transaction between Cayman Island companies, and transacted in the tax haven of Mauritius. It just happened to be India-based assets. Anyway, if anyone was liable for taxes, it would be Hutchison, which had left the country.
When India Business Checklists went to press, Vodafone had taken the case to court. Here’s the update: It lost in the Bombay High Court in December 2008; and in February 2009, the Supreme Court declined to hear the case. Meanwhile, India retroactively changed its laws to make buyer responsible for taxes if the seller did not pay (so Vodafone can no longer argue that it’s Hutchison’s problem, not theirs). Now the I-tax department is about to send a notice to Vodafone – and also to the local company, saying they should have withheld the tax in the first place.
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So what does this mean for foreign companies investing in India, particularly if they want to buy an existing company? I’d recommend they factor in taxes. If it turns out that they don’t have to pay them, it’s found money. But don’t count on it. The government could come back years later, asking for taxes they believe they’re owed.
And the Supreme Court has ruled that retroactive changes to the law are legal in India, so long as they aren’t discriminatory.
2 comments August 22, 2009
Indian Government – Online Grievance Procedure
My friend and former colleague R Balakrishnan – one of the interviewees for my India Business Checklists book – drew my attention to this WEBSITE: The Indian government’s online grievance redress process. It’s in the Department of Administrative Reform and Public Grievances (DARPG). Citizens who have a problem with any part of the Indian government can complain about it online. They are supposed to get a response in two months or less.
The DARPG doesn’t actually resolve the grievances; it passes them on to the Grievance Department in the relevant government entity. If the problem is important enough, it may keep an eye on the thing. It’s a sort of supervisory post office for grievances.
Add comment August 19, 2009
An Interview with Beijing Radio
A few days ago, I got a surprise e-mail. ” I’m working with China Radio International in Beijing,” said the writer. She had a copy of my book, India Business Checklists, and quite enjoyed reading it. “I’m doing a radio program in the run up to the G20 summit, and curious to know if i could have the honor to invite you to join my show sharing with our listeners some of your thoughts—”
Sure. It would be my honor.
So I’ve just done an interview for China Radio International.
“The program will go on air next Tuesday” [i.e., 7 April '09] they told me, and “you can always listen to it on the Internet…” Click the CRI logo for a link.
We talked about how India is still looking at 4-5% growth this year, down from 9% it’s true, but still positive. We talked about India’s pragmatic fiscal and monetary management. (I think the Reserve Bank of India does a pretty good job of what must be one of the world’s toughest assignments, managing inflation, growth and keeping a reasonably stable rupee.)
And I said I was surprised to find that the information in my book was still relevant – in some ways, even more than when I wrote it. The only major change is that the labor market is not nearly as tight as it was in the first half of 2008 when I wrote it.
Add comment April 2, 2009
The Unexpected Book Tour
Singapore’s an old haunt of mine, but I’ve been away for years. I planned a visit there, and as a courtesy, let my publisher, John Wiley, know I was coming. Would I be willing to do some meetings, they asked.
Of course.
At the AmCham presentation
They took that and ran with it. They set up interviews with Bloomberg. Channel News Asia. Business Times. And they arranged for me to make a presentation at the American Chamber of Commerce. Amcham was expecting about 20 people; they got an audience of 55. That was as many as they could fit into the room.
I was enormously impressed.
John Wiley have done a marvelous job with the book, too, a few editing glitches aside. It’s easy to read, sturdy, and eye-catching.
1 comment January 8, 2009
