Surging China, India take aim at our markets
HAROON SIDDIQUI

Not so long ago, it was common wisdom that China and India were getting dragged down by their huge populations. But numbers are proving to be their biggest economic asset, providing huge domestic markets and an inexhaustible labour force for exportable products. 
 
This prompted the head of Intel Corp. to say that the two Asian giants are out to eat America's lunch. He could have added that they may have similar intentions toward Canada, Europe and others. Craig Barrett, CEO of the world's largest computer chip maker, sees the tectonic economic shifts under way and sighs: "I worry for the U.S. and I worry for my grandchildren." He is dazzled not only by the energy and enterprise of the Chinese and the Indians but the quality of their work, especially India's software engineers. Which is why India is Intel's third largest operation, after America and Israel. 
 
China is, of course, way ahead in the economic race. But India is brimming with self-confidence on its unique set of assets. Besides democracy, it boasts: 
 

1. The largest skilled workforce, of 472 million, most of them literate and English-speaking. 
2. The second-largest pool of scientists. 
3. A hi-tech medical sector, already attracting more than 100,000 foreign patients a year — Arabs avoiding America, and Europeans avoiding long waiting lists at home. 
4. A solid manufacturing base, turning out, among other things, the world's largest output of motorbikes and three-wheelers. 
5. The largest railway network, including a just-opened, indigenous $2 billion subway in New Delhi, the capital. 
6. An information technology sector, which has grown 40 times in a dozen years to $20 billion a year and is poised to cut into the coming boom in software services, from the $650 billion worldwide today to $3 trillion in five years. 

 
More than these economic indicators, though, something more profound is underway, five decades after independence. India was stripped clean under British rule, its vast riches plundered and its manufacturing capacity squashed. Independent India's economy, therefore, had to be built almost entirely by the state. Socialist the model was, but it did lay down a rudimentary national infrastructure.

What's happening now is that the economy is freeing itself of government. "Permit Raj," wherein most economic sectors depended on the say-so of the ruling party, is dying. Changes in government no longer matter. In last year's federal election, the left-leaning Congress defeated the so-called free enterprise Bharatitya Janata Party. In this southern state of Andhra Pradesh, the party that pioneered hi-tech got trounced. Neither change made a difference to business. India is experiencing its fastest economic growth in 15 years.

When Jet Airways, the nation's first private airline, was listed on the Mumbai Stock Exchange recently, $350 million of stock was snapped up within minutes.

Union strikes, which plague Europe, are becoming a thing of the past here as opportunities proliferate.

Meritocracy is taking hold. Gone are the days when the only route to a job was a recommendation from a political bigwig.

Also gone are the Soviet-era suspicions of Westerners and Western governments. It helps that just about everyone has a cousin in North America.
Media are thriving. For example, this city of 6 million, the nation's fifth largest, has 14 daily newspapers — four in English, five in Telugu, two in Hindi and three in Urdu, for a total daily circulation of 3.5 million copies.
There are still problems galore.

The federal budget, tabled last month, allocated huge sums to electrify the 125,000 villages that still aren't, bring drinking water to the 74,000 villages that don't have it, and provide land phone lines to 66,822 villages that have no connection.

But the economic revolution is well underway, without the tyranny that still marks China.

India Inc. Oozes Cool Confidence
Haroon Siddiqui breathes in the unbridled optimism sweeping the land
HYDERABAD, India

The headlines are about cricket and cricket diplomacy — how Indians are all agog over the arrival of the Pakistani team and how its 50-day tour would help advance peace between the two nations. But the real news is that this is happening because India is at peace with itself.

I have never seen the country so brimming with self-confidence, born of a roaring economy, an attitude of openness to the world and an awareness of its emergence as a global power.

In the cricket-mad subcontinent, an India-Pakistan series is nirvana. Yet it remained mostly suspended under a Hindu nationalist government. Only last year did the Bharatiya Janata Party allow play to resume, in Pakistan. With the secular Congress party back in power, India is welcoming the Pakistanis for the first time in six years. New Delhi is issuing 10,000 visas to Pakistani fans. Indians are opening up their homes to them. Pakistanis had done the same last year for the Indians. But it clearly counts for more when India, by far the greater power, plays host.

The festive mood matches the unbridled optimism sweeping the land. The economy is firing on all cylinders. With an annual growth of around 7 per cent, India is among the world's top 10 growing economies. In purchasing power parity — what your money can buy — India is fourth, behind only America, the European Union and China.

The information technology sector, worth $19 billion U.S. a year and providing nearly a million high-paying jobs, is not the only area of growth. Manufacturing, agriculture, pharmaceuticals and bio-tech are all performing well. Even the textile sector has bounced back, thanks to policy changes by the World Trade Organization.

The service sector is booming, from health care and financial services to auto and retail.
Conspicuous consumption is replacing the traditional values of thrift and saving. About 1.6 million mobile phones are sold every month and 300,000 motorcycles. Auto makers can't cope with demand. Banks lend $15 billion a year for housing.

(Yet with more than 7 million people entering the workforce every year, unemployment is still at 9 per cent. That's 36 million people without jobs. And while the World Bank credits the economy for the miracle of pulling 100 million people out of poverty within the last decade, 300 million are still mired in it. About 75,000 villages do not have drinking water and 125,000 any electricity).

But overall, India and Indians have never had it so good. More important, the two Indias of haves and have-nots are, at last, merging into one economy. New Delhi not only declined post-tsunami help, it is also terminating the annual $50 million aid from the Canadian International Development Agency.

The U.S. National Intelligence Council, in its long-range growth forecast, puts India right behind China. But it is more optimistic about India, due to its democracy. India is also asserting itself regionally.

It mobilized its navy to help Sri Lanka's post-tsunami recovery.

It has initiated more than cricket with Pakistan. A bus link is to be opened in the disputed territory of Kashmir. Prime Minister Manmohan Singh has pronounced President Pervez Musharraf as "a man we can do business with." Officials are developing a nuclear protocol to avoid accidents. An Iran-Pakistan-India gas pipeline is under discussion.

With soaring energy needs, India is also competing with China for foreign investment to explore its own oil and gas resources. But India and China are co-operating in several ventures, having set aside their traditional rivalry.

In Afghanistan, India's $400 million aid includes daily protein packages for 1 million schoolchildren. It is supplying army trucks and offering assistance with training the Afghan army and the air force.

There's no mistaking the growing geo-political heft of India, nor of the sizzle of India Inc.

India wants to ride next wave of infotech revolution
Haroon Siddiqui explains how `offshore' firms plan to expand operations
HAROON SIDDIQUI

BAHADUR PALLI, India

Just past the small shops of this dusty village is the leafy 120-acre campus of the information technology company that may be updating your credit card account or your financial portfolio and confirming your airline booking.

Satyam Computer Services Ltd., started in 1987, is already drawing annual revenues of $936 million, providing software and back-office support to 350 corporations in 45 countries, including Canada. But what it really wants is to ride the next big wave of the information technology revolution. From its headquarters here, 20 kilometres from the city of Hyderabad, Satyam is planning to take over entire departments from companies in Canada, America and Europe. Not just that. It wants to make inroads into non-English-speaking Latin America, Germany, Russia, China, South Korea and Japan.

"Services make up two-thirds of the world's GDP of $36 trillion (U.S.)," says Ramalinga Raju, the founder and chairman of Satyam (truth, in Sanskrit). "Half those services can be virtualized." Translation: Your corporation may in Toronto, New York or London but most of its work can be done from anywhere, such as here, over high-speed satellite networks.

His senior vice-president of corporate strategy, Shailesh Shah, walks me to that next frontier. Low-end First World jobs moving to the Third World is an old story. The current story is of companies doing a second migration to even cheaper locales. It is the next big story that Satyam wants to help India write. Instead of doing contract work for your I.T. department, he wants to take it over. "You don't need to own all that hardware." Or have it sit idle for 16 hours a day and on weekends. He would get into your PC when you have gone home. With a wire, he would access its computing capacity from here. He would do so without disturbing the privacy of your data because you have the technology to protect it. Shah, in fact, has even bigger plans.

Most productivity gains of the last two decades have come in the manufacturing sector, through automation or outsourcing. The next big savings will come from the service sector — and not just by trimming costs but by changing the way services are provided. Shah is not talking of the hospitality industry or health services, such as your MRI being read overnight in Mumbai and Bangalore, as is happening now.

Take a widget-maker, he says. Beyond production, it must keep track of inventory, marketing, sales and delivery. Similarly, corporations have research, payroll, accounting and other departments. "All such services can be provided from any location," cheaper, quicker and, in the case of India, better, given the high quality of this country's software.

Satyam is the 4th-largest Indian I.T. company, after Tata Consultancy Services, Infosys and Wipro. Worth $20 billion a year, the I.T. industry has made this country the largest provider of offshore services for global clients, most of them American. All four companies have opened offices in America, and "near-shore" offices in Toronto. Not that they need to, technically. But such presence gives clients a backup data storage capability in North America and provides them "psychological comfort," while most of the work is done in other parts of the world, such as here.

A walk through Satyam shows dedicated sections for clients like Scotiabank, the World Bank, Nissan, Intel Corp., Emirate Airlines, etc. Such wholesale transfer of work will increase exponentially. It will make products cheaper for consumers.

But it need not cause labour disruptions in North America, says Shah. First World workers will go on graduating to value-added work. They will "keep moving us all to a higher platform, inventing new products, such as hybrid cars to improve the environment or the next wave of personal entertainment products."
Such is the nature of global change, says Shah, a graduate of the Wharton School of Business and a consultant in America before returning home.

"The world does not have a choice."

India's own Quiet Revolution in education
HAROON SIDDIQUI  

HYDERABAD, India - This city of 6 million is booming even more than the rest of India. Its high-tech, medical, pharmaceutical and manufacturing sectors serve as the model for other regions. But I couldn't quite figure out the secret of all this success until I heard Kantamma's story.

Kantamma is riding in the back of my friend's SUV, after a day's labour on his cottage farm. She has worked in his household for 17 years. So has her husband. The couple cannot read or write. But their son Vishwanath has just graduated with a Bachelor of Commerce degree. "It's been a long struggle," she says, "but we've made it."

We have made it. The child's education has been a family enterprise. So it is for hundreds of millions, a journey made possible by democratic India. In the house where I'm staying, all five children of the cook are in school, from Grade 6 to 10. Imran, in Grade 9, is top of his class. The others are also doing well.
Employers often subsidize the schooling and help with the homework. But even without that, the masses are motivated.

Canadian High Commissioner Lucie Edwards calls it India's own Quiet Revolution. She tells the story of a graduation at the elite Indian Institute of Technology. An old farmer there told her it was the third most important day of his life. The first was when India became free of British colonial rule in 1947. The second was when India abolished the feudal system in the early 1950s, letting him own part of the land he had tilled for others. The third was to see "my grandson graduate today." Adds Edwards: "Millions are being liberated through education. As Canadians, we can identify with that. "My grandfather was a lumberjack. My mom (an aboriginal from Gaspe) had a Grade 8 education. My dad went off to war and did not go to university until he was 60."

The ubiquitous Indian sight these days is of kids in uniform: walking, biking, hopping on buses or cramming into auto rickshaws in cities as well as villages. University enrolments are setting records. The insatiable demand for education is driven in part by demographics: Nearly 600 million in this nation of 1.2 billion are under 25. To cope, governments have let the private sector and religious groups open schools and colleges, the latter with accreditation to universities. These mushrooming institutions can charge what the market will bear for a certain percentage of their enrolment. Entrance fee for private medical colleges can run up to 2 million rupees, or $60,000 Canadian, an especially princely sum by Indian standards. For engineering, the going rate is 500,000 rupees.

Governments are also opening the doors to foreign universities. The Wharton School of Business already has a campus. Delegations from American and, increasingly, Canadian universities and community colleges are scouting opportunities.

Osmania University, the oldest post-secondary institution in Andhra Pradesh, a province of 90 million, offers a glimpse into the scene. In addition to its own institutions, it provides academic supervision to 850 affiliated colleges, 112 of whom offer MBA programs and 92 computer courses. Total enrolment: 250,000.

Its student body used to be 90 per cent urban and 10 per cent rural. It is now exactly the opposite.
Uneven academic standards were inevitable. But few doubt the quality of higher education in medicine, engineering, biotechnology etc.

Affordability, ever central to Indian public policy, is managed, rather badly, through admission quotas for "backward classes" and subsidies.

There is still too much reliance on rote learning and do-or-die annual exams. "Exam blues: six suicides and 300 attempts," reads a headline. Another counsels: "Exam time: Don't stress your child."

A national survey reports a dropout rate of 52 per cent at the elementary, and 34 per cent at the primary levels. Part of the explanation is that 12 per cent of children between ages 12 and 14 are in the work force because their families are among the 300 million who are still poor.

But the miracle of the education system is that it is well underway, mostly in English. It is producing 250,000 engineers a year and the world's most numerate and literate workforce, which is driving the economy. And, without meaning to, it is also supplying the most educated immigrants to America and Canada.

I found it instructive that most Internet cafés here are packed, as anywhere, with the young — an overwhelming majority of whom are not playing video games but downloading university admission forms and looking for jobs, here and abroad.