Tuesday, June 13, 2006

Can India fix its `Macro' ?



The ISB-IIM battle seems to have hotted up a little, going by the furious exchanges flying around. I wonder why..a friend whos familiar with the turf says its because students have returned to their colleges. Ah, the privileges of being one !

Am tempted to throw some fresh fundas into the fire (like who the hell cares anymore) but will desist for a day or two. Meanwhile, am posting a column that appeared in Business Standard this morning !


China Will Fix Its Micro, Will India Fix Its Macro ?

What does the average Chinese businessman think of India ? I put this question two months ago to an Indian trader I met in China’s textile capital Shaoxing, some four hours south-east of Shanghai.

Over a vegetarian pizza, he told he that most of his Chinese clients considered India with respect, some even with fear. After all, Indians were teaching otherwise crafty Chinese entrepreneurs a trick or two about the textile trade. And then there was the tale of a school teacher's son and his six colleagues setting out with $250 in their pockets 25 years ago and creating the $2 bn Infosys Technologies.

A few months ago, the owner of a large Chinese textile unit accompanied him on a visit to India. The mill owner was sewing up some big contracts with Indian garment exporters. And of course to see this `fast growing nation' for himself. "Guess what," said the Indian trader, "The moment we landed at Mumbai and emerged from the airport, something changed. I could see the Chinese mill owner breathing a visible sigh of relief."

Perception On Arrival

He said other traders had similar stories to narrate. Visiting Chinese businessmen would speak well of India for its market potential and entrepreneurship. But on India as competition, they changed their opinion. The moment they cleared immigration. The perception they had built up did not match the reality they experienced. "We don't have much to worry," the mill owner told me," the Shaoxing businessman said, polishing off the last piece of the pizza.

Two weeks ago, GE chairman Jeff Immelt towered over Mumbai's corporate who's who as he outlined his firm's revised India vision. "$8 billion by 2010," he announced to an attentive audience. How ? "Well, for an economy to grow 8%, you need power, planes." Immelt said broad-based consumerism, which wants basics as power, transport and water supply, was the driver. "Once people have tasted an economy that grows at 8 percent a year, they get used to it," he said.

And then Immelt dropped his gem for the day. "The government and everything else works in China. The expressways and airports are just like those in Chicago and New York. China has got the macro picture right, India the micro picture. India’s pluses are fantastic companies and systems." So, he said, with a flourish, India has to fix the macro picture. China has to fix the micro picture.

Focus On The Perception !

Since then, I've been posing that question to myself. Lets for a moment focus on the perception of whether we can fix the macro rather than whether we will fix it. Lets also assume, this writer's perceptions are clouded by journalistic pessimism.

Take the case of Mumbai, the city I live in. After years of debates, protests and court cases, a `new’ airport will rise in the place of the only, old one. Will it be bigger ? Not sure, that depends on whether the slum dwellers who muscled in alongside can be rehabilitated. Will it have better access. Not sure, looks like I will have to pass the same shanty towns to reach the international terminal. And no direct road. So, its a look and feel show. A new airport is under consideration though, for, possibly two decades.

A city metro system was under debate and discussion for as long, if not more. Work should start later this year. With the city’s population straining over 17 million inhabitants, a metro (as and when it sees light of day) will help. Unlikely, it will change life much.

New York, Chicago & Shanghai

An island city like Mumbai needs a water transport solution: think Star Ferry in Hong Kong. We must be in the third or is it fourth decade of planning and announcements. No solution is even in sight. So, don't expect dramatic quality of life changes for a few decades. What about power ? Mumbai city scores here, though northern suburbs suffer. Lets not even talk of Bangalore.

In my last column, I talked about how investors are pouring money into China’s mega bank IPOs. Only because they feel China is fixing its micro, to use Immelt’s term again - he spoke of airports like New York and Chicago. Actually, China might do a little better. Particularly if you were to consider Shanghai’s Pudong International which is going from two runways to five. Or the recently completed 1,142-km Qinghai-Tibet railway line, a massive engineering feat.

So, will India fix its macro ? And more importantly when ? If I haven’t seen real action for the past two decades, what do I see today that suggests a magical transformation in the next two. Very little. I've heard of $150 billion opportunities number for a decade at least. Funny, the figure does not change. Will we win the marathon against China in the next three or four decades ? Probably. But chances are I may not be around. Nor, if you are reading this, will you. But China will fix its micro a lot sooner. That I am sure. And I am sure Immelt is sure too.

Micro Or Macro ?

So, what should the average Chinese think of India ? What should the average Indian think of India ? The Shaoxing businessman tells me India has opportunity but should stop comparing itself with China. "Forget the infrastructure. Even we are treated better here," he tells me. Now, is that a macro or a micro problem ?

7 comments:

Kapil on 11:35 pm said...

Dear Govind,

I don't claim to know it all(or anything at all) So before we get pessimistic about living in India I would like us all to consider the following.

You liked Shanghai, New York, Chicago. Did you live there or did you go there as a visitor?

I know a lot of Indians who have lived there are want to be back in India. And have seem a lot of others who want to stay back in these cities, but have seen the way they live. They may talk of posessing a lifestyle but are no better than a migrant labourer in Punjab.

Beware, I am not trying to say that we do not need to improve, only that we all need some amount of optimism and drive to make thinkgs better here. Its alright if a foriegner makes a comment and leaves. But it is upon us to make things better. Things can change if we start to choose the right representatives.

To use your example, infosys would not have been there had the Mr Murthy or six colleagues been this negative about India and had given up.

The problem is too many of us want the best facilities and have the discipline to respect and maintain them but only if we are in a foriegn land.

Take the example of sports. What is the point in building sports facilities if nobody is interested in playing. Point is we do not have a sports culture. We are just too busy trying to achieve other things in life (Probably too many)


We have our politicians ranting about reservations simply because a majority of our people want it. Now that is not to say that I support it. But In the next elections I would simply not vote for that group. Problem is I would not succeed unless enough like minded people vote the same way. But if they start thinking that their vote would not count, these pols would have another shot in the arm.

An economist would have dubbed this as a classical vs keynesian debate. We want most things to be privatises and market driven and blame government for all that is wrong.

What is government after all, if not an instrument of market supply and demand (where the currency is your vote) :)

Kapil on 11:41 pm said...

I apologise for the long comment. But I could not resist the urge.

You have a great blog. Keep up the good work.

Cheers
K

http://equity.blogspot.com

Peter Matthes on 10:58 am said...

What has been up with the Indian stock market these days?

The India fund here in the states has dropped from a high of 62, all the way down to 36 in a matter of days.

Blog-Capt. Anup Murthy on 11:52 am said...

K, I have lived away from India (the West mainly USA etc) for a long time and even now manage around half the year or less back home. The only reason for Indians coming back is not because they are driven to slavery or that life sucks there or anything like that. It is a plain and simple thought that they feel that at home they will be someone to look after them in future. Anyway, Govind, I don't think your article was an effort to dissuade people from living or visiting India. I feel that you are right, most perceive India as an economic superpower and perhaps they are, but it does not reflect outward. As you mentioned, just getting into the country and looking at the teeming millions, polution, traffic, dust, animals and people living on the streets, the enormity of the filth and garbage lying around (don't tell me Indians want to return home because they miss the filth lying all around!).

Mr. K says optimism is the key and i agree. But the people of India depend entirely on the government and the system to work and these entities don't look like they are optimistic about anything. You have mentioned how they expand Airports in China on a massive scale and we in Mysore have been calmouring to get an airport for decades with lots of politicians making nice noises but nothing has come of it as yet. Narayan Infy Murthy is a disappointed man.

Recently, Rahul Gandhi was here in Singapore and we even saw his sis and B-I-L shopping around. Many Indian politicians come here and to other nations, see the system, go back and forget about it. How do you keep the optimism going, in this case?

If India is to be perceived in the right way, for ourselves (forget the foreigners), we need to change our own image. We are what we project and at this point in time, we don't seem to be painting a good picture!

Virtuous Enterprise on 7:35 pm said...

Dear Govindaraj,
It is interesting to read your observation on India-China through micro vs macro perspective.
Though my understanding of China is purely based on what I read - and as you would agree if somebody does some kind of secondary research on this,the output would really be staggering- your interpretation of the situation is absolutely right.
A couple of months ago we had the privelege of listening to a senior journalist who just returned from China in our Campus.Interestingly, I find a common thread between your observations.He was talking about how well China has developed its infrastructure as against our own. He was of the opinion that what India does is right in the sense we use oue capital more efficiently.That actually reminded me how this Trippur Hosiery Cluster developed over a period.It has always been growth chasing infrastructure.
But of course you are arguing for infrastructure chasing investment.
But your micro-macro dichotomy between the countries is legendary in some other respect as well.Indians track record as individuals are exemplery. But when it comes to group work we pale below most countries including China.
A useful Blog for Management Students as well.
S.Gnana Haran.

saurabh said...

when i started reading the post i thought to myself... another india vs china article... seriously we r all getting sinck of reading about it and also cribbing and whinning about how much we lag behind... but it was a nice perspective...
letme try and explain my perspective about this... i am a real estate consultant so i will take a real estate metaphor... now if any of u guys have bought any pre built apartment u wud know there is something called super area.. simply put it is the area which is for common use which everybody in the complex uses but does not own...e.g. lobies, escalators, utilities etc... so in my experience each one of us wants to have grand lobies with air conditioning imported rugs and snak bars but we dont want to pay for what we dont specifically own.... and that my friend is the secret of beauty of any apartment complex.. the super area.... now we all want great roads, 24hr power supply, hospitals, schools.... as long as we do not have to anything out of the way for it.... and dont blame the system or govt or politicians cause "they" are "us"....

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