Indian Tiger

While Dutt sahib was selecting couple of titles for Shivjash at the Saighals bookstore in South Ex last Sunday, I was, as in any other bookstore, looking for the original version of Benjamin Graham’s Intelligent Investor. I could not get that one but my attention was grabbed by the elegantly kept ‘Riding the Indian Tiger – Understanding India the World’s fastest emerging market’ by William Nobrega & Ashish Sinha. The Introduction ‘History of India in eight pages’ is very informative. I decided to buy it. Though I was reading a few pages a day during the last week, today I determined to complete it in one go and it in fact kept me glued till the last page.

A former member of US Army Special Forces, William obtained MBA from Leuven and BA from Ohio University. He is President and founder of the Conrad Group, a consulting firm specialising in emerging market strategic planning, advisory services for institutional investors. His understanding of Indian subcontinent, its culture, society, economy, strengths & weakness is displayed in full vigour in the Riding the Indian Tiger. At the outset, one feels whether he is obsessed with India and Indians and singing its music. As you go through the pages, you will come across an elaborate chronicle of the unfolding Indian growth story and the author’s authority on the subject.

After explaining the size of the markets in general and financial markets in particular in first two chapters respectively, William embarked on a journey to compare India and China. He believes that India would ultimately outperform China. He says India’s strength lies in three Ds. They are Democracy, Demography and Determination. Democracy is an entrenched institution in India with participation rates that are higher than the US. To further his augment, he cites the World Competitive Report 2006- 2007, published by the World Economic Forum. Property rights, judicial independence, and freedom of the press are three important facets of a democracy. The report ranked India above China on all three parameters and gave it a rank of 43, compared to China’s 54. In fact, India ranked higher than Russia and Brazil as well who come in 62 and 66 respectively. The report stated that China’s most worrisome development is a marked drop in the quality of its institutional environment, as witnessed by the steep fall in rakings from 60 to 80 in 2006, with poor results across all 15 institutional indicators, spanning both public and private institutions. Factors that influence the institutional environment ranking are property rights and quality of the judicial system, among others. Comparatively India attained a rank of 34 in institutional environment, close to the United State’s 27. On freedom of press ranking, India is at 26 whereas China is placed at 99.

Second D relates to Demography. China is aging as India is getting younger. Williams quoted the BBC report of 1994 which stated that China’s over-65 population was the fastest growing in the world. The report further noted that the aging of China’s population is outstripping its economic development. The sad part is that China’s population is becoming old before it attained significant economic development. On the contrast, India has the largest population in the world of people 25 or younger, and by 2015 there will be 550 million teenagers in India. It is described as demographic dividend. The irony is that our failure to contain the growth of population is slowly emerging as our strength, whereas China’s success with ‘one child policy’ is going to gradually dilute its economic prosperity in the near future.

On the Determination front, though the discussion is short, it throws out an important point. Chinese are very determined and industrious people. However, most of the large companies in China are state owned and until that country adapts democratic institutions the totality of China’s entrepreneurial spirit and its economic capabilities would not be realized. Whereas India is a country of entrepreneurs and they are beginning to realize the true extent of their capabilities in a liberalized economic setting.

Apart from the above, Chinese manufacturers have been operating on razor-thin margins – 15 percent or less, in some cases. If the Chinese government is forced to allow its currency to appreciate, or if the US and other countries place an equivalent tariff on Chinese goods, Chinese manufacturers will go out of business overnight.

In chapter 4, the author explains that with the government accelerating various economic and social reforms, there are golden opportunities lying to be untapped in the infrastructure sector. In chapter 5, William takes us through an elaborate list of growth-driving sectors in India like high tech manufacturing, distribution & logistics, pharmaceutical and medical devices, financial services, education, renewable energy, agriculture, fashion apparel, media & entertainment, hospitality and leisure, private health care etc..

Chapter 6 & 7 are focussed on the important aspect of understanding the psyche of Indian businessman and customers. The case studies of PepsiCo and McDonalds are very well illustrated, similarly the failures of French Pal Peugeot Ltd, German BMW, Australian Kerry Packer etc. The failures were attributed to lack of India research and planning.

Williams concludes ‘The Tiger begins to roar’
When you think about India, imagine a boulder. When you first attempt to move a boulder it will not budge. Then, after some time, you begin to rock it back and forth, slowly gaining some forward momentum. At a certain point the boulder will begin to roll – slowly at first, but continuously gaining speed. Before you know it it’s not possible to stop the boulder, and the path it takes can no longer be influenced by external forces. India is like a boulder, for many years the economy remained stagnant and resistant to change, stifled under the misguided direction of a socialist government and a command economy – but now it’s starting to move.

A well researched and lucidly written book by a non-Indian on India’s journey is a fascinating read to all those who wish to keep in touch with the economic developments taking place around us. Of course, those who want to do business in India and render services to this nation of billion plus people, it is a must read. For those interested in assessing whether India is China plus/minus something, it throws new insights.