Index

1. Introduction..03 2. Foreign Direct Investment (FDI)..07 3. Shining Indian Multinational0 !. Im"act o# M$%s on Indian Industrial Sectors..11 &utomo'ile Industr(.12 Manu#acturing Sector...1! )elecom Industr(..1* +esearch , Develo"ment.1 I) Industr(.21 Food , -everages Industr(..23 .. %ase/Stud(10 Im"act o# 1la2o/Smith3line Merger.2. *. 45 mar6s Indian 7m"lo(ment Milestone27 7. %ase/Stud(20 5e"si %o.2 8. India v9s %hina.32 . %onclusion3!
2

10. :e'liogra"h( , -i'liogra"h(....3.

Introduction
)ill 1 1; India <as more or less a closed 7conom(. )he rate o# gro<th o# the econom( <as limited. )he contri'ution o# the local industries to the countr(=s 1D5 <as limited that <ere the main cause o# shortage o# #unds #or various develo"ment "ro>ects initiated '( the government. In an e##ort to revive the industries and to 'ring the countr( 'ac6 on the right trac6; the government 'egan to o"en various sectors such as In#rastructure; &utomo'ile; )ourism; In#ormation )echnolog(; Food and -everages; etc to the Multinational %or"orations. )he M$%s slo<l( 'ut reluctantl( 'egan to "our ca"ital investment; technolog( and other valua'le resources in the countr( causing a surge in 1D5 and u"li#tment o# the econom( as a hole. )his <as the "ost 1 1 era <here the government 'egan to invite and <elcome giant M$%s into the countr(.

Opportunities for Developing Economies

)he o""ortunities #or develo"ing economies are signi#icant as <ell. )hrough the a""lication o# ca"ital; technolog(; and a range o# s6ills; multinational com"anies? overseas investments have created "ositive economic value in host countries; across di##erent industries and <ithin di##erent "olic( regimes. )he single 'iggest e##ect evidenced <as the im"rovement in the standards o# living o# the countr(?s "o"ulation; as consumers have directl( 'ene#ited #rom lo<er "rices; higher @ualit( goods; and 'roader selection. Im"roved "roductivit( and out"ut in the sector and its su""liers indirectl( contri'uted to increasing national income. &nd des"ite o#ten/cited <orries; the im"act on em"lo(ment <as either neutral or "ositive in t<o/thirds o# the cases.
Foreign direct investment is alread( having a dramatic im"act on the <a( com"anies do 'usiness and develo"ing economies integrate <ith the glo'al econom(. %om"ared to its "otential; ho<ever; it?s >ust a dro" in the 'uc6et.

Impact On Developing Economies & Policy Implications:

Investments '( multinational com"anies (M$%) allo< develo"ing economies to share in the considera'le 'ene#its o# the glo'al econom(. A##icial incentives; trade 'arriers; and other regulator( "olicies; though; can result in ine##icienc( and <aste.
%ase studies reveal that in virtuall( all cases; M$% investment had a "ositive to ver( "ositive im"act on the host countr(. +ather than leading to the e2"loitation o# lo<er/<age <or6ers; as some critics have charged; the investments

#ostered innovation; "roductivit(; and an im"roved living standard. )here#ore; government see6ing those advantages <ould 'e advised to #avor "olicies o# o"enness; rather than regulation; <hen it comes to #oreign direct investment.

The world's service provider

)he services sector; <hich has 'een gro<ing consistentl( at a rate o# 7 "ercent "er annum; accounts #or almost hal# o# the countr(?s 1D5. 72"ort revenues #rom the sector are e2"ected to gro< #rom B8 'illion in 2003 to B!* 'illion in 2007. 1lo'al investment 'an6s; 'ro6erages and accounting #irms have set u" large research esta'lishments in India. & gro<ing num'er o# CS com"anies are hiring Indian mathematics e2"erts to devise models #or ris6 anal(sis; consumer 'ehaviour and industrial "rocesses.

Indian Exports Overview in !s" #rore$

%E&! ,--./-, ,--,/-1 ,--1/-0 ,--0/-5 ,--5/-2 ,--2/-6 ,--6/-4 ,--4/-3 ,--3/-,---/1... 1.../., E'PO!T( 01223 55.51 20633 6-42, 31645 ,.6020 ,,33,4 ,0.,., ,0-420 ,2-26, 1.024, )!O*T+ !&TE ,4"4 02"0 1,"1-",3"2 13"6 ,,"4 -"2 4"5 ,5"1 14"6

1..,/.1 1..1/.0 1..0/.5 1..0/.5 &pril/7an$ 1..5/.2 P$ &pril/7an$

1.-.,3 122,04 1-0064 111360"-. 1450,0"04

1"63 11".6 ,5"-3 / 10".-

1ross Domestic 5roduct (1D5)

%ear

)otal 1D5 1.*.** 2122.3 213 83 22.2*8 2388*! 8*10*! 2*!12 8 78 10! 1 1 111220*

1 8./8* 1 0/ 1 1 1/ 2 1 2/ 3 1 3/ ! 1 !/ .D 1 ./ * 1 */ 7 1 7/ 8 1 8/

Total GDP
1200000 1000000 800000 600000 400000 200000 0
198586 199091 199192 199293 199394 199495* 199596 199697 199798 199899

(In Rs. Crores)

years

)he <orld?s service "rovider

)he services sector; <hich has 'een gro<ing consistentl( at a rate o# 7 "ercent "er annum; accounts #or almost hal# o# the countr(?s 1D5. 72"ort revenues #rom the sector are e2"ected to gro< #rom B8 'illion in 2003 to B!* 'illion in 2007. 1lo'al investment 'an6s; 'ro6erages and accounting #irms have set u" large research esta'lishments in India. & gro<ing num'er o# CS multinational com"anies are hiring Indian mathematics e2"erts to devise models #or ris6 anal(sis; consumer 'ehaviour and industrial "rocesses.

)he 'ric6 and mortar com"anies

India is not merel( a "rovider o# services. -esides 'eing an outsourcing hu'; it has gro<n into a glo'al manu#acturing hu'. :orld cor"orations are no< leveraging its "roven s6ills in "roduct design; recon#iguration and customisation <ith creativit(; assured @ualit( and value addition. &'out 20 "ercent o# Indian automotive "roduction in 200! is e2"orted to develo"ed countries.
7

India: & (ervices and 8anufacturing (upplier to the *orld

(ector I) Services #ompany In#os(s )ata %onsultanc( :i"ro Outsourcing #lient 1oldman Sachs; &etna; $orth<estern Mutual; &rm 72; D4E; FeriGon 17; 4onda; C-S; 4S-% )ransco; 45/%om"a@; $ortel; 1eneral Motors; %IS%A; Son( %iti grou"; &ccenture; &utoHone; %a"ital Ane Dell; &merican 72"ress; %a"ital one Ive2; :atson 5harma; 7on Ea's 7li Eill(; 1S3 5harma &"ote2; &55; :atson; 5harma Manu#acturing -harat Forge )ata Motors Moser -aer 7ssel 5ro"ac6 Meritor; %ater"illar; )o(ota; Ford; F&:(%hina) +over Imation; -&SF 5,1; Cnilever; %olgate

I)7S

M"hasis -FE S"ectramind

5harmaceuticals

%i"la Shashun %hemicals Eu"in Ea'oratories

Foreign Direct Investment

FDI or Foreign Direct Investment re#ers to the investment o# #oreign currenc( and other valua'le resources '( Multinationals into the host countr(. FDI allo<s the host countr( to earn valua'le #oreign e2change that can 'e used #or #uture im"orts or to "a( o## e2isting loans o# the countr(. )he 1overnment o# the host countr( controls the FDI levels in various segments o# the econom( such as )elecom; +etail; )ourism; In#rastructure; +esearch and Develo"ment; &utomo'ile and so on. 5erha"s the 'iggest advantage o# M$%s is the in#lu2 o# valua'le Foreign 72change. FDI is re@uired '( a develo"ing econom( such as ours to ta" une2"lored resources and "ut them to more "roductive use. A series of ambitious economic reforms aimed at stimulating foreign investment has moved India into the front ranks of the rapidly growing Asia Pacific region.

)he Finance Minister cleared !* "ro"osals o# #oreign direct investment (FDI) amounting to +s !08.22 crore (CSB 3.! million) in Iul( 200!. :ith a hal#/'illion strong middle class; consumer demand in India <ill gro< s6( high. &ccording to some estimates; !87 million middle/ class Indians <ill s"end an additional B!20 'illion during the ne2t #our (ears.

It is evident. The investment scenario in India has changed. And the figures say that it is for the better.

)here has 'een a shar" rise in the num'er o# FDIs a""roved in 200!. During the #irst seven months o# 200!; 'et<een Ianuar( and Iul(; +s .;220 crore <orth o# FDI <as a""roved. )his #igure; <hich accounts #or onl( seven months o# 200!; amounts to * "er cent o# the total FDI a""roved during the #ull (ear o# 2003. )he actual FDI in#lo< too is e2"ected to sur"ass last (ear?s #igure // during the #irst seven months o# 200! actual FDI in#lo< at +s ..03 crore <as more than 80 "er cent o# <hat the countr( received in 2003.

In a bid to stimulate the sector further, the government is working on a series of ambitious economic reforms.

)he %entre has divested some o# its o<n "o<ers o# a""roving #oreign investments that it e2ercised through the Foreign Investment 5romotion -oard (FI5-) and has handed them over to the general "ermission route under the +-I. )he FDI ca" #or aviation has 'een hi6ed #rom !0 to ! "er cent through the automatic route. )he government has scra""ed 5ress $ote 18; <hich <as acting as a deterrent to #oreign investors. It has set u" an Investment %ommission that <ill garner investments in the in#rastructure sector among others; and "lans to increase the limit #or investment in the in#rastructure sector.

India's foreign exchange reserves rose !"" million to a record high of #$".!% billion in &uly $""'.

%om"arison 'et<een India and %hina <ith res"ect to FDI India vs" #hina 9DI 9lows %hinese re#orm "rocess Indian re#orm "rocess 1 77 1 1 . (ears since 1 82 %hina CSD !.08 m 10 (ears since 1 82 %hina CSD 137 1 m . (ears since 1 CSD !!88 m 10 (ears since 1 India CSD 1.!83 m 1 India

Shining Indian Multinationals

India Inc. is #l(ing high. $ot onl( over the Indian s6(. Man( Indian #irms have slo<l( and surel( em'ar6ed on the glo'al "ath and lead to the emergence o# the Indian multinational com"anies. :ith each "assing da(; Indian 'usinesses are ac@uiring com"anies a'road; 'ecoming <orld/"o"ular su""liers and are recruiting sta## cutting across nationalities. :hile an &sian 5aints is "ainting the <orld red; )ata is rolling out Indicas #rom -irmingham and Sundram Fasteners nails home the #act that the Indian com"an( is an entit( to 'e rec6oned <ith.

(ome instances:

Tata 8otors sells its "assenger/car Indica in the C3 through a mar6eting alliance <ith +over and has ac@uired a Dae<oo %ommercial Fehicles unit giving it access to mar6ets in 3orea and %hina. !an:axy is the ninth largest generics com"an( in the <orld. &n im"ressive 7* "ercent o# its revenues come #rom overseas.

10

Dr !eddy's ;a:oratories 'ecame the #irst &sia 5aci#ic "harmaceutical com"an( outside Ia"an to list on the $e< Jor6 Stoc6 72change in 2001. &sian Paints is among the 10 largest decorative "aints ma6ers in the <orld and has manu#acturing #acilities across 2! countries. Small auto com"onents com"an( <harat 9orge is no< the <orld?s second largest #orgings ma6er. It 'ecame the <orld?s second largest #orgings manu#acturer a#ter ac@uiring %arl Dan 5eddinghaus a 1erman #orgings com"an( last (ear. Its <or6#orce includes Ia"anese; 1erman; &merican and %hinese "eo"le. It has 31 customers across the <orld and onl( 31 "ercent o# its turnover comes #rom India. Essel Propac= is the <orld?s largest manu#acturers o# lamitu'es / tu'es used to "ac6age tooth"aste. It has 17 "lants s"read across 11 countries and a turnover o# +s *0 .2 crore #or the (ear ended Decem'er 2003. )he com"an( commands a staggering 30 "ercent o# the 12.8 'illion/units glo'al tu'es mar6et. &'out 80 "ercent o# revenues #or Tata #onsultancy (ervices comes #rom outside India. )his month; it raised +s .!.2 'illion (B1.17 'illion) in &sia?s second/'iggest tech I5A this (ear and India?s largest I5A ever. Infosys has 2.;*3! em"lo(ees including *00 #rom 33 nationalities other than Indian. It has 30 mar6eting o##ices across the <orld and 2* glo'al so#t<are develo"ment centres in the CS; %anada; &ustralia; the C3 and Ia"an. (undram 9asteners is not merel( a nuts and 'olts com"an(. It 'elieves in thin6ing out o# the 'o2. 5ro'a'l( that is <h( it decided to ac@uire a "lant in %hina. )he "lant in Iia2in cit( in the 4ai(an economic Gone has ensured one #act0 that its customers <ho <ere earlier 'u(ing Sundram "roducts in 7uro"e and the CS; did not have to go #ar #rom home to access the "roduct.

11

Im"act o# M$%s on Indian Industrial Sectors

So #ar; <e have anal(Ged the Indian 7conom( and the <a( in <hich multinational have added more value and increased the e2"orts; 1D5 and "roductivit(; resulting in all round develo"ment. Further more; <e have the actual anal(sis o# the e##ect o# M$%s on various Indian Industrial Sectors. %ertain im"ortant sectors are considered and the actual e##ect o# M$%s i.e. the "ractical <a( in <hich the( are a##ected are studied viG.
1. 2. 3. !. .. *. 7. 8. . 10. 11. 12.

%ement &viation &utomo'iles &uto %om"onents -iotechnolog( Financial Services Food Industr( 1ems and Ie<eller( 4ealthcare In#ormation )echnolog( I) ena'led Services Media , 7ntertainment
12

13. 1!. 1.. 1*. 17. 18. 1 . 20. 21. 22. 23.

Ail , 1as 5harmaceuticals +eal 7state +etail +esearch , Develo"ment Science , )echnolog( Steel )e2tiles )elecommunications )ourism , 4os"italit( )raining , 7ducation

Im"act o# M$%s on &utomo'ile industr(

)he "resent scenario is a highl( trans#ormed one. Multinational giants are v(ing <ith one other to launch their models. -ig names o# the vehicle industr( li6e the 3orean giant; 4(undai; 1eneral Motors; Mitsu'ishi etc. have alread( o"ened their account. In other vehicle segments too; Folvo; Mercedes -enG; &udi etc. have carved out their niche. In the t<o/<heeler segment 'esides the other ma>or M$% 'rands made availa'le to the Indian consumers. &s a result conducting 'usiness in the &utomotive Industr( has 'ecome more com"etitive and so"histicated; <hich increases the demand #or multi s6illed "ersonnel. 7m"lo(ment o""ortunities are emerging <ith Manu#acturers; Dealershi" A"erations including 5arts; Sales; Service; Eeasing , Financing; as <ell as in the #ast develo"ing &utomotive &#termar6et sector. An the other hand; Manu#acturing in India has also come o# age. )he "ost li'eration economical scenario has resulted in all the 'ig names such as 1eneral Motors; Ford; )o(ota; 4onda; SuGu6i; Mitsu'ishi; Mercedes/-enG; Fiat to come u" <ith "lants in India. )he Indian automotive giants li6e )elco; Mahindra; &sho6 Ee(land; -a>a> are revam"ing their "roduction strategies and launching ne< models designed and develo"ed indigenousl(. )his has o"ened u" numerous o""ortunities or em"lo(ment in this sector #or
13

trained and s6illed "ro#essionals <ho are <ell versed in the latest manu#acturing "rocess. )he gro<th curve o# India &uto Inc. has 'een on an u"s<ing #or the "ast #e< (ears. )he high gro<th o'served since 2001/02 in automo'ile "roduction continued in the #irst three @uarters o# the 200!/0.. &nnual gro<th <as 1*.0 "er cent in &"ril/Decem'er; 200!K the gro<th rate in 2003/ 0! <as 1..1 "ercent. %onse@uent to li'eralisation; the arrival o# ne< and contem"orar( models; eas( availa'ilit( o# #inance at relativel( lo< rate o# interest and "rice discounts o##ered '( the dealers and manu#acturers a""ear to have stimulated the demand #or vehicles and a strong gro<th o# the industr(. )he automotive industr( is the 'arometer o# an( ma>or econom( and the same holds true #or India as <ell. )here has 'een a "henomenal gro<th in the automotive manu#acturing sector in our econom(.

India has 'ecome a launch "ad

+ising sales and strong gro<th "ros"ects heightened the "o"ularit( o# auto stoc6s in Iul( 200! as #oreign institutional investors (FIIs) increased their sta6es in 6e( automo'ile com"anies li6e Mahindra , Mahindra; &sho6 Ee(land; Maruti Cd(og; )FS Motors and 4ero 4onda. 1lo'al names such as Daimler %hr(sler and 5orsche have 'egun introducing their ne< o##erings in India. Daimler%hr(sler "lans to launch the ne< Mercedes SE3 roadster; <hich has >ust hit 7uro"ean roads; in India '( Acto'er/$ovem'er 200!. 5orsche is 'ringing in the %a(enne and )o(ota is "lanning a simultaneous release o# its IMF. $ote; these models are the latest cars Gi""ing on international roads and not the dated versions that <ere "assed on earlier.

1!

Im"act on the Indian Manu#acturing sector

)he resurgence o# India?s manu#acturing sector has 'een @uite magical. $ot onl( are "ro#its soaring; the sector is #ast s"reading its tentacles a'road as man( Indian manu#acturing #irms inch close to 'ecoming true 'lue multinationals. )he Indian econom( gre< '( 7.! "ercent in the &"ril/to/Iune @uarter; FJ200.; 'uo(ed '( gro<th in manu#acturing and services. Manu#acturing gre< 8 "ercent in the @uarter; com"ared <ith 7.* "ercent in the "revious @uarter. )he "icture is a'out to 'righten #urther.

&ccording to a %II/Mc3inse( re"ort; manu#acturing e2"orts #rom India are li6el( to gro< to B300 'illion in 201. #rom B!8 'illion in 2003. )he countr( <ould then have a 3.. "er cent share o# the <orld manu#acturing trade. )o reach the B300 'illion target; the industr( has to cloc6 a gro<th o# 17 "er cent ever( (ear as against the 11 "er cent rate at <hich it is gro<ing at "resent. Manu#acturing e2"orts #rom India gre< 20 "er cent in 2003 over the "revious (ear. A# the total B300 'illion; B70/ B 0 'illion is e2"ected to come #rom >ust #our sectors / a""arel; auto com"onents; s"ecialt( chemicals and
1.

electrical and electronic "roducts. India?s e2"orts in these sectors <ere B10 'illion in 2002.

8anufacturing firms on expansion :inge

Manu#acturing com"anies are "lanning to invest as much as +s 200;000 crore over the ne2t t<o (ears. A# +s 200;000 cr; +s 100;000 cr <ill come #rom internal generation 4al# o# this de't ma( come through the 7%- route Most cor"orates are going #or 'ro<n#ield e2"ansion +ising interest rates <on?t im"act India Inc?s investments :ith annual out#lo<s averaging at B1 'illion; the countr(?s ran6ing in C$%)&D?s out<ard FDI "er#ormance inde2 has alread( shot u" #rom the 107th "osition in 1 to the *1st s"ot in 2003.

)he t<o most im"ortant destinations #or Indian FDI last (ear <ere the CS and the +ussian Federation; accounting #or around 37 "er cent o# the total Indian overseas investments during last (ear; <hile 7uro"e accounted #or !0 "er cent o# the total out#lo<.

(ome large Indian investments

A$1%?s 2. "er cent sta6e 'u(/out in a Sudan oil #irm #rom )alisman 7nerg( o# %anada #or B720 million (around +s 3;312 crore) )he 4indu>a?s "urchase o# controlling interest in %3; a call centre in the 5hili""ines Msource?s S"anish language centre in )i>uana; Me2ico

8anufacturing Outsourcing
India is #ast develo"ing into a manu#acturing hu' #or <orld cor"orations <anting to leverage the sector?s "roven s6ills in "roduct design; recon#iguration and customiGation <ith creativit(; assured @ualit( and value addition. &'out 20 "ercent o# Indian automotive "roduction in 200! is e2"orted to develo"ed countries.

1*

:hile some M$%s enter into A7M deals to source com"onents; others have Indian arms to su""l( to glo'al mar6ets.

17 has entered into an A7M deal <ith )herma2 India to su""l( chillers #or the latter?s "o<er s(stems. South 3orean t<o/<heeler ma>or 4(osung is ma6ing India the manu#acturing hu' #or its 2.0cc cruiser 'i6e; &@uila through a technical tie/u" <ith 5une/'ased 3inetic 7ngineering. Ford Motor %om"an( is aiming to source CSB 120/1*0 million <orth o# auto com"onents #rom Indian manu#acturers over the ne2t t<o (ears under its India Sourcing 5rogram. 1lo'al consumer electronics giant Matsushita o# Ia"an has decided to source 5anasonic colour television sets #rom India #or its international mar6et. %olgate is setting u" a 'rand ne< tooth"aste #acilit( in <estern India <hich <ill 'e one o# 1. such #acilities across the <orld.

Im"act on )elecom Industr(

Ane o# the #astest gro<ing sectors in the countr(; telecommunications has 'een gro<ing at a #everish "ace in the "ast #e< (ears. )he s"eed o# gro<th can 'e gauged '( the #act that in 200!; ten (ears a#ter "rivate tele"hon( <as introduced in India; the mo'ile su'scri'er 'ase had crossed the num'er o# #i2ed line connections. :hile #i2ed lines touched !! million at the end o# 200!; the cellular user 'ase registered a *8 "er cent gro<th to touch the !8/million mar6. More than a third o# these su'scri'ers <ere added during 200!. )he total telecom su'scri'er 'ase; consisting o# #i2ed as <ell as mo'ile users; registered a gro<th o# 31.!2 "er cent to touch 2.7* million at the end o# 200!. )he gross telecom user 'ase stood at 70..8 million at the end o# 2003. (&ccording to the )elecom +egulator( &uthorit( o# India ()+&I); the gro<th in the mo'ile su'scri'er segment "ic6ed u" in Decem'er 200! a#ter remaining at around 1.. million "er month #or the "revious t<o months.) )he (ear 200! ended <ith the tele/densit( reaching an all/time high o# 8.*2; as com"ared to *.*. at the end o# 2003; an increase o# over 30 "er cent. In the mo'ile segment; additions consisted o# 1.!2 million 1SM su'scri'ers and 0..3 million %DM& su'scri'ers. )he total o# 1 ..1
17

million mo'ile users in 200! mar6s an increase o# 11.. "er cent over the 17.! million additions made in 2003. 7ven in #i2ed line; 2.*7 million su'scri'ers <ere added as com"ared to 2.1. million ne< users during 2003; registering an increase o# 2! "er cent.

)he non/voice mar6et (message and data services) #or mo'ile o"erators has also registered tremendous gro<th in 200!. &ccording to a stud( '( ID%; it had a gro<th o# 13 "er cent (ear on (ear in 200!. &t "resent non/voice revenue contri'utes around !.7 "er cent to the total mo'ile services revenue; <hich is around +s. 1!;.*0 crore (CSB 3.3 'illion). &nal(sts 'elieve that i# the current rate o# gro<th is maintained; it could add u" to amaGing #igures in the ne2t #e< (ears. & stud( released '( 7rnst and Joung sa(s revenues #rom the sector could touch CSB 2. 'illion '( 2007.

Telecom statistics
7anuary' .2 )otal su'scri'ers )ele/densit( Fi2ed line !. 2mn 8.80 !..1.mn 9e:ruary'.2 7.03mn .0 !...!mn 0.3 mn .1.! mn 1.*7mn 1.13mn 0..!mn 8arch'.2 8.08mn .08 !.. 0mn 0.3*mn .2.17mn 0.73mn 1.2!mn 0..2 mn

&dditions during the 0.3 mn month Mo'ile )otal additions during the month 1SM additions %DM& additions
Source: TRAI

! .77mn 1.77mn 1.27mn 0..mn

9oreign interest
)he gro<th statistics com'ined <ith the government?s decision to increase the #oreign direct investment ca" in the sector to 7! "er cent is generating interest among glo'al investors. :hile the government e2"ects over CSB 800 million investment #rom #oreign telecom com"anies in the coming (ear; a num'er o# them are alread( here.
18

Ia"anese conglomerate 3(ocera; <hich has ac@uired the mo'ile e@ui"ment division o# %DM& technolog( "ioneer Lualcomm; is setting u" a mo'ile "hone manu#acturing "lant in India; and e2"ects to shi" "hones to &#rica '( the end o# the (ear. It "lans to start shi""ing to countries in South 7ast &sia; &ustralia and $e< Healand ne2t (ear. &lcatel <ants to ma6e 1SM mo'ile "hones in India. )he French ma>or is "lanning a cell "hone manu#acturing #acilit( in India <ith an annual ca"acit( o# 2../.m units to cater to the &sia/5aci#ic mar6ets. E1 recentl( started assem'ling "hones in India and $o6ia "lans to set u" a manu#acturing "lant <ith an investment o# CSB 100/1.0 million. 1lo'al handset ma>or Siemens India Etd is "lanning to invest over CSB .00 million in India in the ne2t three to #our (ears #or setting u" ne< #actories and e2"anding its e2isting ca"acities.

Indian companies going glo:al

India o##ers an un"recedented o""ortunit( #or telecom service o"erators; in#rastructure vendors; manu#acturers and associated services com"anies. &s the sector has 'een "er#orming <ell; the 'ulging 'ottom lines o# Indian telecom com"anies are ma6ing them invest in assets.

)he )ata grou"?s Fidesh Sanchar $igam Etd. (FS$E) struc6 a B130/ million deal to "ic6 u" )(co 1lo'al $et<or6?s ()1$) 37;208/mile (*0;000 6ilometre) su'marine #i're o"tic net<or6 that connects northern &sia; &merica and 7uro"e. &s "art o# the )1$ deal; FS$E also received a dar6 (uncommissioned) #i're that lin6s Ia"an to Singa"ore and 200 em"lo(ees o# )1$. )he )(co ca'le has the largest ca"acit( glo'all(. It is o# the order o# 7 tera'its on the 5aci#ic route. :ithin da(s o# 'agging )1$; FS$E inaugurated its o<n 3;17./ 6ilometre; ..12/tera'it %hennai/Singa"ore su'marine lin6. )(co has su""lied the o"tic #i're #or the %hennai/Singa"ore lin6. FS$E?s <as the second su'marine ca'le deal struc6 '( an Indian com"an( in 200!. +eliance In#ocomm had also "ic6ed u" FE&1 )elecom #or B210 million a #e< months 'e#ore FS$E 'ought )1$. )he )ata 1rou" has also <on a 'id to ac@uire 2* "er cent sta6e in South &#rica?s second net<or6 o"erator (S$A) that gives the com"an( a mandate to develo" and o"erate 'oth national long distance ($ED)
1

and #i2ed/line net<or6s in the countr(. )he develo"ment hel"ed )ata gain a #oothold in the South &#rican mar6et.

Technology advancements
&mong other tidings in the telecom sector are the technolog( u"gradations 'eing e##ected in Delhi and Mum'ai. India <ill soon >oin the elite clu' o# countries that have 31 mo'ile services. )he Mahanagar )ele"hone $igam Eimited (M)$E); the state/run telecom services "rovider; is setting u" India?s #irst 31 net<or6 in Delhi and Mum'ai. )he net<or6; <hich <ill have a ca"acit( o# !m lines; <ill re@uire a total investment o# +s !;000 crore (CSB 1!. million).

Im"act on +esearch , Develo"ment

India has emerged as the hottest destination #or multinational com"anies (M$%s) starting or relocating their research , develo"ment (+,D) centres over the "ast t<o (ears. %hina comes ne2t; though it continues to 'e the leading destination #or M$%s relocating their manu#acturing o"erations. )hese are some o# the underl(ing trends that emerge #rom the 7rnst , Joung )rans#er 5ricing 200. glo'al surve( that "olled 3!8 multinational "arent com"anies and 128 su'sidiar( cor"orations in 22 countries. &round 10M o# the res"ondents re"orted either ne< or relocated +,D o"erations in the "ast t<o (ears. A# this; 27M identi#ied India as the leading relocation destination #or +,D; #ollo<ed '( %hina <ith 17M. )he 'est/6no<n Indian +,D com"anies are in "harmaceuticals and 'iotech sectors. %om"anies such as +an'a2(; Dr +edd(?s Ea'oratories; Sun 5harma and -iocon and Shanta -iotech are attracting interest #rom com"anies in the CS and 7uro"e; <hich are see6ing a strong "lat#orm #or develo"ment s6ills. Follo<ing in the #ootste"s o# the in#ormation technolog( ena'led services (I)eS) industr(; <hich "ut India on the <orld ma"; (et another sector // +esearch and Develo"ment (+,D) // is <itnessing increasing vitalit( and
20

gro<th. More than 12. Fortune .00 com"anies have o"ted to have their +,D 'ase in India. )he reasons #or this are o'vious. India?s <ealth o# scienti#ic talent is unmatched in the <orld. India conducted its inaugural test #light #or Saras; the countr(?s #irst indigenous civilian light/trans"ort aircra#t; in &ugust 200!. &'out 1*. institutions in the countr( are engaged in genetic engineering research; com"rising .. in transgenic <or6; 2. in thera"eutics and 8. in 'asic research; according to the De"artment o# -iotechnolog(. )he countr( has alread( started commercial cultivation o# geneticall( modi#ied cotton in 1u>arat and some southern states; <ith several other cro"s in various stages o# getting a""rovals #or commercial "lantation.

India is the onl( develo"ing countr( and si2th <orld<ide to manu#acture and launch its o<n satellites in geo/stationar( or'it and even "lans a moon mission in 2008. It has also launched satellites #or #oreign customers such as 1erman( and 3orea.

4aving "roved its scienti#ic mettle; India has 'egun to a""ear on the outsourcing radar <ith a monotonous regularit(. 1one are the da(s <hen international com"anies retained +,D >o's at home and sent a'road <or6 that <ere clerical and o# a re"etitive nature. $o<; even innovation and design <or6 have 'egun to move o##shore; es"eciall( to India. More than 100 Fortune .00 com"anies N including Del"hi; 7li Eill(; 1eneral 7lectric; 4e<lett 5ac6ard; Daimler%hr(sler and others N have "ut u" +,D #acilities in India over the "ast #e< (ears.

17?s Iohn F. :elch )echnolog( %enter in -angalore is the com"an(?s largest such #acilit( outside the CS. :ith an investment o# CSB*0 million; it em"lo(s 1;*00 researchers and "lans to raise the num'er o# sta## to 2;!00. )he Daimler%hr(sler +esearch %entre in -angalore is involved <ith #undamental and a""lied research in avionics; simulation and so#t<are develo"ment. -oeing is <or6ing <ith 4%E )echnologies to co/develo" so#t<are #or ever(thing #rom navigation s(stems and landing gear to the coc6"it controls #or its u"coming 777 Dreamliner >et.

21

M$% "roducts develo"ed '( +,D centers in India

#ompanies
Sun Micros(stems= India 7ngineering %entre )e2as Instruments= +,D %entre S&5 Ea's

Products
5ortal server; :e' server; Identit( server and meta director(. Full( develo"ed at least 20 "roducts; including the &n6ur Digital Signal 5rocessorK Sangam; a 'ridge router #or the DSEK and Heno; <hich runs multimedia a""lications. )he la' has "roduced some o# S&5=s "roducts meant #or the glo'al mar6et; including the %hannel Management Solution; <hich hel"s chi" manu#acturers negotiate "rices <ith their dealers onlineK Dealer 5ortal #or the automotive industr(K mo'ile la"to" solutions and oil and gas u"stream solutions. )he la' is also <or6ing on a solution #or Falue &dded )a2 (F&)). )he centre has #ull( develo"ed a strategic sourcing solution #or i2; 'esides delivering nearl( eight manu#acturer/industr( tem"lates and retail solutions #rom India. It develo"s most o# the so#t<are re@uired #or 5hili"s "roducts. &lmost

i2 )echnologies= +,D %entre 5hili"s Innovation

Im"act on I) Sector
In#ormation )echnolog( ena'led Services (I)7S) '( M$%s has "ro'a'l( generated the ma2imum num'er o# sunshine stories in the Indian industr( in the last #e< (ears. &ccording to $asscom; the so#t<are industr( has overta6en the gems and >e<eller( as <ell as te2tiles industries; to 'ecome the num'er one e2"orter in the countr(. %urrentl( India is the 5o<er 4ouse; )he <orld so#t<are &rena. I) is no< an industr(; <hich is gro<ing '( lea"s and 'ounds 'oth through "artici"ation '( ca"tive units o# multinationals and third "art( "roviders o# Indian origin. Some o# them are the 'ig home/gro<n I) Services com"anies li6e Infosys> *ipro and Tata #onsultancy (ervices ()%S).

The Top 9ive

)he to" #ive Indian I) com"anies 'ased on FJ0! revenues/)%S; :i"ro; In#os(s; Sat(am and 4%E )echnologies/are the "rime contenders in the race to the Fortune .00. :hile the #irst three have made it to the 'illion/dollar clu'; the remaining t<o are alread( hal# <a( through to that mar6.
22

&ccording to 3arni6; the <a( things are sha"ing u" the com"anies that are most li6el( to ma6e it are going to 'e the ones #rom the current to" 10 'ecause the di"/o##s in siGe are shar" 'e(ond the to" 10. 72"erts #eel that even <ithin the to" 10 the di"/o##s start getting shar"er a#ter the to" three to #ive com"anies. &s a result; the li6elihood is restricted to onl( the to" #ive and; more s"eci#icall(; to the to" three. )he to" com"anies are indeed ra"idl( e2"anding their glo'al outloo6 and reach; setting u" centers across the <orld and com"eting <ith the to" tier glo'al I) com"anies. )%S is located across over 30 countries and serves clients in around *0. )he glo'al locations #or In#os(s; :i"ro and 4%E )echnologies range 'et<een 10/20 countries. )hese com"anies serve some o# the to" clients glo'all( including the li6es o# 17; &merican 72"ress; 7ricsson; Ford; )ransco; 5rudential; Deutsche -an6; and the Standard %hartered -an6. In the last t<o to three (ears; these com"anies have also 'een o"en to #oreign ac@uisitions and IFs; to e2"and their glo'al #oot"rint. &nd the ac@uisition list is ver( long0 )%S ac@uired 5hoeni2 1lo'al Services (technolog( solution "rovider)K :i"ro ac@uired $erve<ire; a CS/'ased #inancial services consultant and utilities? "ractice o# consultanc( &MSK In#os(s ac@uired 72"ert In#ormation Services o# &ustralia and CS/'ased )rade IL "roduct division o# IL Financial S(stems; a Deutsche -an6/o<ned out#itK 4%E )ech has ac@uired ma>orit( sta6e in &ala(ance; a 'usiness integration #irm <ith o##ices in San Iose; CS.
;eading the #harge 1..5

( !amadorai
)%S !an=ing: 1 !evenue: B1.* 'n +ead #ount: !3;000 8ar=et #apB: B21 'n

&?im Prem@i
:i"ro !an=ing: 2 !evenue: B1.3 'n +ead #ount: 3 ;000O*300 8ar=et #ap: B1!.! 'n

Aandan Aile=ani
In#os(s )echnologies !an=ing: 3 !evenue: B1.1 'n +ead #ount: 3.;000O 8ar=et #ap: B1 .8! 'n

(ome IT 8A#s in 1..5 )lo:al 9ortune 2.. Aame I-M 45 !evenues C :n$ *.23 7 . 23 8ar=et #ap C :n$ 1! *3

7DS &ccenture %S%

20.* 1..1 1!.7

10.7 23 8.*

!ules of the game

-ut; <ill this 'e enough #or our to" three to >oin the ran6s o# the li6es o# :al/Mart Stores; -5; Shell 1rou"; %itigrou"; 1eneral Motors; -M:; I-M; 45; etc. :hile )%S; :i"ro and In#os(s ma( have crossed the "s(chological 'illion/dollar 'arrier; achieving the ne2t #e< 'illion dollars is going to 'e a tough tas6; <arranting a much more ra"id gro<th. 3arni6 "oints out that along <ith organic gro<th these com"anies <ill have to go in #or ac@uisitions to 'e a'le to achieve the re@uired ra"id gro<th. P)he organic gro<th <ill continue to ha""en 'ut that is not going to 'e good enough #or ra"id gro<th. &c@uisitions <ill hel" these com"anies to add e2"ertise in terms o# 'oth ne< mar6ets and technologies;P he adds.

2!

Im"act on Food and -everages Sector

$e< Delhi0 India?s 'ooming tourism sector and its ra"idl( gro<ing :estern/ st(le #ast #ood >oints o##er unlimited o""ortunities #or #oreign #ood and 'everage e2"orters; as Indian #ood im"orts are li6el( to gro< */7 "er cent over the ne2t #e< (ears; sa(s a stud(. 7(eing the over 2.0 million/strong middle class; a CS de"artment stud( sa(s the "ros"ects #or investment in Indian mar6ets could 'e gauged #rom the #act that total 4otel; +estaurant and Institutional (4+I) service sector sales o# F and - amounted to B 8 'illion during 2003/0!. &n u"s<ing in the Indian hotel industr( since 2003 #ollo<ing turnaround o# the glo'al tourism industr(; "ositive im"act o# ?Incredi'le India? tourism "romotion cam"aign and the <orld?s increasing interest in India?s ra"idl( gro<ing econom( are some o# the main reasons cited #or gro<th. )hough Indian consumers; on an average; s"end onl( 2.. "er cent o# their #ood e2"enditure in hotels and restaurants; the 4+I service sector is e2"ected to gro< '( */7 "er cent over the ne2t #e< (ears. P)hough ne<; unorganised and unta""ed so #ar; the 4+I service sector in India has vast "otential #or gro<th as there are a""ro2imatel( ..;000 registered restaurants in the organised sector and in the range o# 1;00;000 to .;00;000 in the unorganised sector; com"rising innumera'le roadside eateries and tea9snac6 sho"s;P the stud( noted. )he institutional #ood service sector consists o# #ood service #acilities #or +ail<a(s; government and cor"orate o##ices; education institutions; hos"itals; "risons; armed services; and airlines. )he Indian middle/class; <hich some estimate is 2.0 million/strong and gro<ing at 30/!0 million a (ear; is the main drivers o# the econom(; the stud( "ointed out. )he econom( o# the countr( is <idel( antici"ated to dou'le '( 2010 (Merrill E(nch 200!) to 'ecome the <orld?s third largest '( 20.0 (1oldman Sachs). &ccording to the stud(; hotels managed to get a miniscule #ive "er cent o# total sales o# Indian #ood service sector <hile restaurants and institutional caterers together cornered .2 and !3 "er cent res"ectivel(.
2.

In recent (ears; the Indian hos"italit( industr( has 'ene#itted #rom a steadil( gro<ing econom( and a 'ooming tourism sector. Foreign tourist arrivals into the countr( in 200! crossed 3.3* million; a gro<th o# 2! "er cent over the "revious (ear. )his gro<th is e2"ected to remain strong over the ne2t #e< (ears; the stud( said; adding that the Indian hotel industr( <as gearing u" to cater to the #ood needs o# the international visitors. & ra"idl( gro<ing Indian econom( (* "er cent annuall( over the last decade) has increased incomes o# the consuming class. -( 2007; a""ro2imatel( 22 "er cent o# households (!! million) are e2"ected to have an average annual income o# B3;1.0 (CSD 17;300 on "urchasing "o<er "arit( 'asis) com"ared to less than seven "er cent in 1 .; the stud( "ointed out. &n e2"anding (oung "o"ulation; more <omen in the <or6#orce and increasing ur'anisation su""ort 4+I #ood sales; the stud( said; noting that close to 30 "er cent o# the "o"ulation live in ur'an areas. )his share <as li6el( to gro< to !0 "er cent '( 202.. Si2t(/#ive million "eo"le are e2"ected to enter the 20/3! (ear age grou" #rom 2001 to 2010 in India and the num'er o# dual income households has 'een e2"anding ra"idl( in ur'an areas; the stud( o'served. )he eating/out culture is evolving #ast in India; as more consumers see6 variet( in their #ood choices. Cr'an Indians are a<are o# international cuisines and an increasing num'er are <illing to tr( ne< #oods. &'out !.. "er cent o# ur'an consumers eat outside their home at least once a <ee6; and a'out 12 "er cent eat out once a month; it said @uoting a surve(. )here has 'een dou'le/digit gro<th in the :estern/st(le #ast/#ood outlets and co##ee sho"s; 'oth multinational chains (McDonald; 5iGGa 4ut; Dominos etc) and Indian chains ($irula?s; 5iGGa %orner; -arista; %a#e %o##ee Da(). It is 'elieved that the multinational and domestic multi/unit restaurant segment <ill drive the #uture e2"ansion o# the Indian restaurant industr(. Most Indians still "re#er Indian #ood; as regional cuisines o##er man( choices; it said; adding PvegetarianismP <as still a <idel( "o"ular culinar( tradition in India. 4o<ever; the (ounger ur'an "o"ulation is increasingl( shi#ting to :estern/st(le #ast #ood items; the stud( o'served.
2*

Im"act o# 1la2o; Smith3line merger on India 7conom(

)he merger o# 1la2o India and Smith3line -eecham 5harma <ill create the second largest "harmaceutical com"an( in India; 'ased on the results #or the (ear ended 31 Decem'er 1 8; a#ter +an'a2( Ea'oratories; <ith its sales o# +s 1;382.0* crore. )he ne< entit( <ill have com'ined net sales o# +s 1;278.2* crore (not counting the sales o# Smith3line -eecham %onsumer 4ealthcare). 1la2o :ellcome holds .1 "er cent in 1la2o India and -urroughs :ellcome India; <hile Smith3line -eecham is a !0 "er cent a##iliate o# the C3/'ased "arent.

Autritional products will stay out

Smith3line -eecham %onsumer 4ealthcare; or S-%4; is unli6el( to 'e a "art o# the merger in India. )his is 'ecause the "arent com"anies have decided to sell their <orld<ide nutritional 'usiness as "art o# their merger "lan. S-%4 India is a !0 "er cent su'sidiar( o# Smith3line -eecham "lc. 1la2o India has alread( sold its consumer 'usiness to 4einG India; <hich com"rised "o"ular 'rands such as %om"lan and 1lucon/D. Smith3line?s consumer 'usiness in India com"rises o# nutrition drin6s (4orlic6s; and -oost; <hich together account #or a *3 "er cent share o# this mar6et)K oral care "roducts &@ua Fresh tooth"aste and tooth 'rushesK and over/the/counter "roducts %rocin and 7no.

;arge mar=et share

In terms o# retail drug sales; the merger o# 1la2o; -urroughs :ellcome and Smith3line 5harma <ould #urther <iden the ga" 'et<een the num'er one com"an( and the rest o# the to" #ive drug com"anies in India. &ccording to the IMS 1 audit (Dec 8 to $ov ); the merged entit( <ill have com'ined annual sales o# +s 1;08!.87 crore and a 7. 2 "er cent share o# the Indian "harmaceuticals mar6et.

27

Mar6et leader 1la2o?s IMS audited sales <ere +s 87 .3* crore; <hile Smith3line recorded a retail turnover o# +s 20...1 crore. Smith3line -eecham 5harma is ran6ed 20 in terms o# retail sales. )he emerging entit( <ill have a com'ined annual "rescri"tion 'ase o# 23.. million (IMS medical audit Dec 8 to $ov ). 1la2o; along <ith its a##iliate com"anies -urroughs :ellcome and -iddle Sa<(er have a "rescri"tion 'ase o# 1 million; <hile Smith3line "roducts generate !.. million "rescri"tions "er (ear. )he t<o com"anies com"lement each other ver( <ell in terms o# thera"eutic classes. 1la2o is the mar6et leader in thera"eutic categories such as ce"halos"orins; "lain corticosteroids; anti/ulcerants and to"ical corticosteroids. Smith3line is the mar6et leader in "ure vaccines and has a siGea'le "resence in 'road s"ectrum "enicillins; anti/in#ective antidiarrhoeals and iron "re"arations.

Pro:lems to :e overcome
)he amalgamation o# the t<o entities is li6el( to "ose some "ro'lems #or 1la2o; <hich is in the midst o# a ma>or restructuring e2cercise. 1la2o has s"lit the "roduct "ort#olio o# 1la2o; -urroughs :ellcome and -iddle Sa<(er into seven 'usiness units; 'ased on thera"eutic categories. P)he e2isting im'roglio 'et<een the -urroughs :ellcome union and the 1la2o management is (et to 'e resolved 'e#ore -urroughs :ellcome can 'e integrated <ith 1la2o. )his ma( cause some dela(s;P sa(s Devinder 5al; chie# e2ecutive o# Mum'ai/'ased %atal(st 5harma consulting. 1la2o s"o6es"erson declined to comment on the merger; 'ut a com"an( source sa(s that a 'oard meeting <as held toda( #or "reliminar( discussions. &nother im"ortant as"ect o# the merger is Smith3line -eecham?s 100 "er cent su'sidiar( in India Q Smith3line -eecham &sia. :hile Smith3line 5harma has alread( announced its intentions to launch research "roducts through this su'sidiar(; 1la2o "roducts too ma( use this su'sidiar( to launch certain ne< "roducts; anal(sts #eel. 1la2o is also not averse to setting u" another 100 "er cent arm in India. Its chairman Sir +ichard S(6es has alread( conve(ed this during his recent visit to the su'continent.

28

45 mar6s Indian em"lo(ment milestone

+ewlett/Pac=ard has :ecome the largest multinational IT employer in India

-eating more <ell/6no<n contenders such as I-M; Intel and Microso#t; 4e<lett/5ac6ard has recentl( 'ecome India?s largest multinational I) em"lo(er; <ith more than 10;000 em"lo(ees. Measuring the siGe o# multinational cor"orations (M$%s) in India is di##icult; as most do not disclose countr(/s"eci#ic revenue #igures. 4eadcount "rovides one relia'le standard; re"orted the (conomic Times; an Indian dail(. 45 is in the "rocess o# ac@uiring the "u'lic sta6e o# Indian so#t<are services e2"orter; Digital 1lo'alSo#t (D1S); turning its current .1 "ercent sta6e into an ac@uisition. Including the D1S em"lo(ees; I-M?s headcount goes over 10;000 sta##. D1S had a headcount o# !;!00 '( the end o# Se"tem'er this (ear; <ith another 2;*00 em"lo(ees in so#t<are o"erations and 3;000 in 45?s 1lo'al e/ -usiness; the 'ac6 o##ice division. :ith another 800 #rom sales and su""ort teams; 45?s total rises to around 10;800 sta##; re"orted the dail(. )his "uts 45 #ar ahead o# its main rival; I-M; <hich has an Indian headcount o# *;000. 4o<ever; I-M is gro<ing @uic6l( in India; and a rise to 8;000/"lus is e2"ected. -ig -lue also has a relativel( <ea6er "resence in India com"ared to 45. A# the estimated 320;000 glo'al em"lo(ees; *;000 is >ust under 2 "ercent; <hile 45 has a smaller overall headcount o# around 1!0;000; <hich ma6es its India o"erations account #or <ell over 7 "ercent o# headcount. Ather large #oreign com"anies in India are also e2"anding. &ccenture; the I) consulting and services cor"oration; <ants to rise #rom its current 3;000 to rival 45 <ith more than 10;000 em"lo(ees <ithin the ne2t t<o (ears. :hile Microso#t o##iciall( sa(s it onl( has 700 sta## in India no<; human resource recruiters in -angalore told the (conomic Times that Microso#t <as aggressivel( recruiting #or 'ac6/o##ice o"erations; and that the( e2"ected it to hire 3;000 "eo"le '( the end o# 200!. %isco has 3;000 no< and Aracle
2

<ill e2"and to !;000 '( the end o# this (ear; and Intel "lans to hit 3;000 in India in 200.. 4o<ever; 'eating 45 and the rest o# the M$%s in India #or I) em"lo(ment '( a 'road margin is CS/'ased 1eneral 7lectric (17). )he conglomerate has 22;000 em"lo(ees in India; most o# them <or6ing #or 17?s 'usiness/"rocess outsourcing and call/centre o"erations. :ith Indian outsourcing a hot to"ic in the CS and other source mar6ets; the (conomic Times said none o# the I) M$% e2ecutives it contacted <ere <illing to comment on their hiring "lans. Autsourcing is seen as a threat to CS I) >o's.

30

5e"si %o. %ase Stud(

5e"sico has 'een an earl( starter in engaging #armers in India. :ith an ela'orate contract/#arming "rogramme under<a( #or the last 1. (ears; there have 'een learnings along the <a( #or the cola and #oods ma>or. 5e"sico=s :orld<ide 5resident and %FA; Indra $oo(i shares some o# them <ith %haitali %ha6ravart( , -hanu 5ande. &n e2cer"t. +as PepsiDs contract farming model changed in IndiaE It hasn=t changed 'ut evolved over time. In 1 8 ; <hen 5e"si came into India; <e set u" a "otato "rocessing "lant #or our snac6s 'usiness and a tomato "rocessing "lant in 5un>a' #or e2"orts. )he latter <as "rimaril( set u" to meet our e2"ort o'ligations. 5e"si=s entr( into contract #arming <as triggered '( the need to ma6e availa'le su##icient @uantities o# tomatoes , "otatoes o# the right @ualit( #or our domestic "lant. )o start <ith; there <as no 'lue"rint availa'le either in India or internationall( o# an a""ro"riate model <hich could 'e emulated to structure our contract #arming initiative. In that scenario; starting #rom the 'asics o# a""lication research; <e created a model <hich has evolved to its current #orm. 4o<ever; <hen (ou ta6e u" contract #arming #or di##erent cro"s in di##erent areas; suita'le modi#ications and ad>ustments have to 'e made to ensure it=s relevant to local conditions. +ave the o:@ectives changedE )he o'>ective o# contract #arming is to 'ac6<ard integrate the su""l( chain to ensure timel( availa'ilit( o# right @ualit( and @uantit( o# materials. )his 'asic o'>ective has not undergone an( change. #ontract farming models rarely generate profits" *hy then should an 8A# expend so much time and energy on themE *hat are the collateral :enefits of entering the rural economyE %ontract #arming in itsel# is not a 'usiness. It is an integral "art o# a 'usiness model <hich ensures that ra< material is availa'le at the right time con#orming to the @ualit( standards in re@uired @uantit( at com"etitive "rices. &ll this to ensure the "ro#ita'ilit( o# the 'usiness. Aur snac6s 'usiness re@uires lo< sugar "otatoes to "roduce the right @ualit( o# "otato chi"s as such varieties <eren=t gro<n in India. So <e had to introduce the suita'le varieties via contract #arming. Aur e##orts <ere also made to increase "roductivit( to ensure higher income #or the #armer and to reduce
31

our "rocurement costs. In order to succeed <e had to underta6e e2tensive trials o# various varieties and evolve agronomic "ractices suited to local areas. :e then "ut in "lace an e2tension team to trans#er these learning=s to the #armers. 7##orts to increase agricultural "roductivit( also go a long <a( in im"roving #arm incomes; there'( 'ringing our e##orts in s(nc <ith the national "riorities. *hy has Pepsi not :een a:le to scale up contract farming of various cropsE The latest seaweed pro@ect started out with a different o:@ective" <ut it suffered delays and is now :eing touted as a liFuid fertiliser pro@ect" DoesnDt this show the lac= of clarity with which 8A#s enter contract farming in IndiaE )he contract #arming "rogramme gets scaled u" in line <ith 'usiness needs. Aur "otato "rogramme starting #rom 5un>a' has a #oot"rint across the countr( to su""ort manu#acturing ca"acities esta'lished in Maharashtra and :est -engal. )oda(; the num'er o# #armers <ho "artici"ate in our contract #arming "rogramme is higher than <hat <e started <ith; and man( o# the "ioneers are still <ith us. %lose to .0M o# the "otatoes "rocessed '( us come #rom our contract #arming "rogrammes. Do 8A#s face any special hurdle entering the rural areas in contract farmingE )he sea<eed contract #arming "ro>ect is a "ath 'rea6ing initiative as cultivation o# sea<eed in the o"en sea had never 'een underta6en 'e#ore in India. Initiall(; e##ectiveness o# the technolog( to deliver a via'le and sustaina'le income model #or the gro<ers had to 'e esta'lished. Its e##icac( had to 'e demonstrated to the #unding and "artnering institutions; <ho <ould manage the Sel# 4el" 1rou"s underta6ing this activit(. East; 'eing a ne< activit(; regulator( clearances <ere re@uired; <hich could 'e granted onl( a#ter due evaluation and o'servation o# the trials. Anl( last month; due to the e##orts o# the %M o# )amil $adu and her team; Sel# 4el" 1rou"s have 'een given the go ahead to ta6e u" this activit(. Fer( soon it <ill <or6 on a commercial scale. %SM%+I; <hich "rovided the technolog( #or this <hile <or6ing on the "rocess o"timisation discovered an additional a""lication o# the <eed. )he( discovered that it could also deliver a '( "roduct N a li@uid "lant gro<th nutrient. It made sense #or us to ac@uire this technolog( #or <hich %SM%+I had ta6en a glo'al "atent. :e ho"e to no< ma6e availa'le this organic and cost e##ective gro<th nutrient to the Indian #armers and <e 'elieve this <ill have a signi#icant im"act on the (ields and their incomes.
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*hat =ind of challenges> if at all> do you see in partnering with farm wor=ersE &n( success#ul initiative re@uires clear understanding o# the ground realities o# the terrain and the needs o# its "eo"leK their resource 'ase and their constraints. &n( cor"orate; Indian or multinational entering this #ield has to ma6e the e##ort and s"end time and mone( to learn in order to 'uild a success#ul "artnershi" <ith the #armers. Indian #armers have no 'ias against the multinationals and our 10 (ears o# success#ul "artnershi" <ith the 5un>a' #armers is a testimon( o# the same.

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For investors; India is less ris6( than %hina

$7: D7E4I 0 India continues to 'e less ris6( than %hina as a 'usiness destination; according to a cor"orate stud(. India has 'een ran6ed 10th among 2 emerging mar6ets in the latest countr( ris6 anal(sis '( 7conomic Intelligence Cnit (7IC); an in#ormation service arm o# the 7conomist grou". :ith a score o# 3 out o# 100 in the ris6 scale; India has got ?-? ris6 rating and has outran6ed %hina (!1); Saudi &ra'ia (!1); South &#rica (!.); Me2ico (!.); -raGil (!8) and 7g("t (! ); <ho have got ?%? rating. 4o<ever; Singa"ore (11; & rating); 4ong 3ong (21) continue to 'e the sa#est "lace #or #oreign investment; #ollo<ed '( )ai<an (2.); Israel; 4ungar( and 5oland (37); <ho have @uali#ied #or ?-? rating. $ot sur"risingl(; Ira@ is the most dangerous countr( to do 'usiness; <ith a score o# 1 out o# 100; #ollo<ed '( &rgentina (7*). & lo< ris6 rating is an im"ortant indicator o# a countr(?s glo'al credit rating and the <illingness o# #oreign investors to invest in a countr(. Industr( re"resentatives said India has an o""ortunit( to gain #rom %hina ?s slo<do<n. 72"erts said countr( ris6 re"ort comes in hand( as a decision ma6ing tool #or M$%s to enter or e2"and in ne< mar6ets. 7IC countr( ris6 ran6ings com'ine measures o# "olitical ris6 (li6e threat o# <ar) and economic ris6 (li6e siGe o# #iscal de#icits). )he( also include measures that a##ect a countr(?s li@uidit( and solvenc( (de't structure and #ore2 reserves). Some o# the o"erational #actors that are considered in determining countr( ris6 include securit(; "olitical sta'ilit(; government e##ectiveness; legal , regulator( #rame<or6; macroeconomic conditions; #inancial , ta2 "olic(; la'our mar6et and in#rastructure. 7IC revie<s the ris6 ratings o# over 100 emerging mar6ets on a monthl( 'asis. +a"id gro<th; highl( s6illed la'our and o""ortunities in outsourcing 'oosted India ?s ratings. :hile change in government 'rings no decline in ris6 #or India ; 7IC sa(s that Manmohan Singh/led coalition must su""ort re#orms to sustain current ran6ing. P India is <atched closel( '( overseas investors on <hether re#orms <ill continue in the Ee#t su""orted government. )here is little a<areness a'out
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economic "olicies ado"ted '( Ee#t in :est -engal ;P sa(s &mit Mitra; secretar( general; Ficci. 4e said FDI investment <ill gather momentum. P India is as sa#e as <hat it <as and change in government has not changed the situation;P sa(s $ Srinivasan ; D1/designate; %II. PIndian industr( is u"'eat and #ull o# sel#/'elie#.P Former +-I governor -imal Ialan is con#ident that the countr( can handle an( economic crisis. %om"ared to %hina ; India has 'ecome marginall( sa#er in 200!. )his "erce"tion could 'e "artl( attri'uted to the strong e2ternal sector "er#ormance and reduced 'order/tension that India e2"erienced a (ear 'ac6. 7IC sa(s that India is "oised to gro< at 8.3M in 2003/0! (&"ril/March) and <ill gro< at 7.3M in 200!/0. N o<ing to a Psmaller harvest and hence less ro'ust gro<th in "ersonal incomesP. It also "redicted a slo<do<n in %hina . P %hina ?s 1D5 is li6el( to gro< '( .!M this (ear and '( 8.1M in 200.; <ith the slo<do<n 'eing led '( an easing o# investment gro<th;P "ro>ects 7IC. India has an edge over other glo'al com"etitors in outsourcing o""ortunities; +,D. %hina has scored over ever( countr( in chea" la'our. Des"ite slo<do<n; %hina <ill continue to 'e among to" emerging mar6ets #or FDI; 'ut India is also 'ecoming ver( attractive to glo'al investors. 7IC has "ro>ected FDI #lo<s to India to touch B13 'illion in 2008 #rom B. 'illion in 2003. 4o<ever; %hina is #orecast to receive B.8 'illion in FDI this (ear. P India ?s "er#ormance as one o# the most attractive destinations #or FDI is 'ased on several criteria; considering Indian authorities? commitment to attract more FDI is (et to 'e #ull( matched '( more investment/#riendl( "olicies;P sa(s 7IC. %II sa(s e##ective communication is 6e( to reduce India ?s ris6 #urther; sa(ing; P)he 'iggest challenge is s"reading the right message to the glo'al investing communit(.P Ialan "ointed out the need to reduce #iscal de#icit.

3.

#onclusion
Multinational com"anies are li6e dou'le/edged s<ord. )he s<ord can harm i# not handled "ro"erl(. Similarl( the Multinational com"anies have their o<n "ros and cons. )he e2tent o# technolog( and management o# 6no</ho< trans#er '( the M$%s de"end to a large e2tent on their cor"orate strateg(K #or e2am"le; #irms desiring to have a longer/term relationshi" <ith the su""liers (rather than those sim"l( using the host countr( as a mar6eting9e2"ort 'ase) <ill 'e more inclined to e##ect trans#er technolog(. &s "ointed out in the :orld Investment +e"ort; 2000; M$%s ma( restrict the access o# "articular a##iliates to technolog( in order to minimise inter/ a##iliate com"etition. It is noted that M$%s are more li6el( to licence older technologies #rom <hich the( have alread( derived signi#icant rents than ne<er technologies on <hich there are still rel(ing #or mar6et leadershi". Further; the( ma( hold 'ac6 the u"grading o# the a##iliate technolog( or invest insu##icientl( in host/countr( training and +,D in accordance <ith their glo'al cor"orate strategies. )here#ore; arguing that FDI in#lo<s and economic li'eraliGation automaticall( #acilitates technolog( trans#er is 'eing e2tremel( naRve.

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:e'liogra"h(
<<<.i'e#.org <<<.google.com <<<.cii.com <<<.#icci.com <<<.indoin#oline.com

-i'liogra"h(
International Mar6eting Management / M.F. 3ul6arni International Mar6eting / Francis %herunilam

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