India's Reality and Mumbai
Trip Start Jul 08, 2007
143Trip End Ongoing
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India, one of the oldest and most sophisticated civilizations on earth, is a world where duality takes all its sense. After spending 10 days here, mainly as part of a Quebec economical delegation focused on IT and the Telecom market, I got the opportunity to discover and appreciate this raising monster. India counts 1.1 billion people and given its huge population and religious/philosophical/mysticism diversity it is impressively peaceful. India is the home of Hinduism, of Siddhartha Gautama the Buddha, of Mahatma Gandhi, of Mother Theresa and of other great human beings who have made world history. It now has a GNP (Growth National Product: value in $ generated by the country each year) as big as Canada's but benefits of a growth of nearly 9% annually compared to 2% for Canada. It has an increasing "middle class" of 200 millions Indians and at the same time, it's one of the poorest countries in the world with 70% of its population living in rural areas and most of them with less than $1/day. All of those extremes were mind boggling at first but soon became a fascination for me. After a few days spent among the richest of this country as well as seeing the worst human conditions in my life, I was compelled to try my best to summarize what I have learned and talk about my first impressions.
We (my dad and I) landed in Mumbai (Bombai) on the 8th of December after 2 flights and approximately 20 hours end to end. An army of custom agents were awaiting us and after less than 2 minutes, we were waiting for our luggage. Something Indians do well is using their number everywhere they can. The first thing that I noticed coming out of the airport, as it seems to be the case with most people unaccustomed with such an environment, was the chaos: Intense pollution, more people than I have ever seen in my life and traffic jam that made Montreal's one small and insignificant. However, I was so happy to finally see India, that I was more fascinated and excited than bothered by it. I got into the right state of mind and I quickly felt like a kid at the zoo, opened for any kind of magic.
One of India's biggest problems from a modern point of view, as I will discuss further, is their lack of proper infrastructure. The airports of Mumbai and New Delhi are among the most backwaters I have ever seen and are clustered with a crazy bureaucracy. India is also lacking proper roads, highways, buildings, housing and other similar infrastructures. However, as adaptation is one of human's best skills, Indians are consequently doing their best. Among other things, they have become expert drivers. I have never seen anyone optimizing a 3 lanes highway into a 5-6 lanes highway like Indians do :) Here is a video I have found on Youtube.com that represents what I mean.
China as well as all the high growth markets in the world I have seen have construction cranes everywhere. Somehow, after 10 days here and visiting 2 major cities, Mumbai (18M people) and Delhi (16M people) and spent about 20h in buses driving around those areas, I have only seen 3 cranes. As construction sites are everywhere I concluded that they prefer to use more people than using modern and efficient technology to get the job done. Also, they do not seem to be building high sky scrappers. I believe the highest tower in India is merely a 100 meters tall. As discussed, this lack of infrastructure creates a lack of proper housing and office capacities, making Mumbai one of the most expensive cities in the world. As an example, you will find very cheap hotel: 1-10$/night for basic hotels, and if you want a middle class hotel, there seems to be very little available but there seems to be a good availability for deluxe hotel at $300-$600/night. The price for a bag of peanuts in the hotel mini-bar was $10, the cost to print one black and white page was $1 and such examples are endless. To rent a very normal decent apartment in the surrounding of downtown Mumbai costs about $3000-$5000 per month and you can't seem to be able to buy anything below $½ millions in the same areas and the list goes on and on. There are many talks about India's increasing middle class, but I must say it is far from being obvious where this middle class is. It is certainly not what we call middle class in the West. Here, you will find some of the richest people in the world (owner of Reliance Corporation), lots of insanely rich families as well as very poor people... but not many people in between. The "middle class" earn, as an example, around $150/month for a call center agent and around $900/month for a good software developer. How can such salaries pay for the atrocious cost of downtown area housing? This situation creates the need for long distance commuting and increase the heavy traffic. As an example, 7 million people commute through Mumbai's train station day and night. The 20 million travelers' going through Pierre-Trudeau airport in Montreal yearly is no match. The economical distortion in this country is crazy and accentuates the gap between the very rich and the very poor. As most of India is structured in a cast system, many people of the lower and higher casts are not allowed to talk to each other. After investigating and asking the officials of the companies we were meeting, I found out that if you want to hire a salesperson (for example) who will take care of big deals with big companies or the government, you need to hire an Indian of the higher cast who will require a much higher salary. I was starting to understand...
In the 1990's, the government opened its market to outside investment, started to reduce drastically its heavy legislations and this combination caused the market to boom! Last year, India has recorded a growth of about 9% (same as the last few years) and along with China, represents the biggest growing market in the world. As an example, in 2002 there were about 40 million cell phone users. In 2008, there will be 250 million users and the government is forecasting 500 million users by the end of 2010. At the same time, the average revenue per user (ARPU) is currently the lowest in the world, enabling the poorer to be able to get and use a cell phone. India's telecom companies add 8 millions new subscribers per month. It's hard for us in the West to really understand this growth. Assuming everyone in Canada had a cell phone, this growth would mean that our entire market would be covered in 4 months! Everything is bigger here and this is the reason why there are more than 10 operators on the market (with new players knocking at the door) as most of the other mature markets in the world counts 3 to 5 operators (similarly, India counts more than 100 political parties). More players mean more competition and as a result, there is a price war going on between the major telecom companies (Bharti, Vodaphone, Reliance, etc). Two big challenges Indian's telecom companies are facing is the employees' turnover (about 20% per year) and the fact that 95% of their subscribers don't have a contract (all prepaid). As a result, companies have to fight and innovate constantly to become the best as well as retain their key employees and clients. One of the operators has even proposed a lifetime free incoming calls promotion for as long as you remain with them. I was quickly realizing how expensive mobile phones are in Canada. The world in general holds petrol, gold or other similar resources as their most valuable resources. Here in India, the scarcest resource is spectrum. Spectrum is the wave length allowing the telecommunications signals to be communicated in the air. Economic issues soon become political issues and in turn become media issues. As a result, spectrum issues have made the front page of the Indian Times 3 times while I was there.
One of India's greatest strength is education. Yes, Indians are extremely educated! As a matter of fact, more than 1 million engineers are produced by Indian's universities each year. India has a huge service economy, as China has a huge manufacturing economy. More and more CEOs of the biggest non Indian company in the world are now Indians. An example of this is the world largest bank, Citi Group, who have named an Indian as their CEO. Part of our economical mission was to assist to the TIE event. TIE focus on enabling entrepreneurs all around the world to have the adequate resources to achieve their goals and bring the proper solutions to the economies of the world. At the conference, we assisted to the speech of C.K. Prahalad, an Indian who teaches at the University of Michigan. He was recently declared the world #1 thinker by thinkers50.com followed by Bill Gates and Alan Greenspan. The essence of its speech revolved around inspiring entrepreneurs to focus and find solutions to help the 70% Indians who live in the rural areas. It's my opinion that too often capitalism sucks up as much energy and money from its citizen as possible in the pursuit for bigger profits. In this process, it denaturizes the human's condition of the very people it is supposed to serve. However, from my short stay in India, I got the feeling that the entrepreneur's community here is really trying to find solutions to make the life of the poor better (even if the initial spark to do so is to generate profit). As I must recognize we now live in a global world where capitalism is the leading wealth creation engine. Part* of me thinks that innovation combined with entrepreneurial energy and enthusiasm can, under the right conditions and under the right legislations, move much faster than any other means to improve the conditions of the citizens of the world. So much need to be done in India and the government (I did not study much of India's politics to say this) seems to really enable itself and the corporate community to find solutions. The objective of the government is to have an extra 500 million people to move from the rural areas into the cities in the next few years. To my knowledge, no such rapid change has ever been accomplished on planet earth and in many ways, I see India as a testing ground for what will become of all the emerging markets in the world.
*Nothing is ever that simple. I believe that we consume way too much and simply a change in our consumption patterns would probably heals the world faster than anything else. But that is another story :)
Globalisation is one of the hottest subjects of the hour. We hear that it is often done against the poorer for the benefits of the richer. A lot of IT developments and call center, accounting and even legal services are now outsourced to India or other emerging countries at much cheaper rates than in the West (at around 20%-50% of the cost). It becomes normal to think that the West is taking advantage of the emerging countries such as India, China, Vietnam, etc, and that it has little interests for people and only care about profits. After many discussions here in India with government representatives and businesses of all sizes (from the start-ups in their basements to the KPMG of this world), it seems like Indians are in general greatly benefiting from this. Here's how: Firstly, India is sending more money to Canada ($1.9B) than receiving in various investments ($1.67B). I had the opportunity to meet with representatives of the giants Reliance Communications and VSNL recently named Tata Telecom. The former is 100% controlled by Indian's interests, have revenues of more than $27B, have acquired 50 million cell phone subscribers in the last 5 years and have a worldwide telecom network allowing them to serve clients for wide telecom services. The latter have a worldwide fibre optic network, bought the Canadian's company Teleglobe (while the West was struggling following the burst of the dot com era) and employs many thousands of employees. All of that to say, many Indians companies who have natural market conditions for formidable growth for the years to come (they under perform when their growth is lower than 20%), are and will keep on expanding and acquiring companies all around the world.
Secondly, many Indians companies, who a few years back were strictly doing outsourcing development for the West, are now buying western companies in order to control the final clients, increase their added value and position on the market. This will certainly helps to balance the world wealth and move it from the West to the East. In doing so, it can only bring more wealth to India and other emerging markets. I have seen extreme poverty in India and it feels like all this change will help India to balance itself even more. Dhirubhai Ambani, founder of Reliance in 1999 (who died in 2002), had a dream. He wanted the cost of a cell phone call (cell phones are important in emerging markets because their implementation costs are much cheaper than hard lines) at a cheaper price than a stamp. As of this year and because of the telecom boom and increased competition, his vision has been achieved. The next question is, how will this increase of wealth be distributed in India? Will it be fair and will it really help the middle and low class Indian to have a better quality of life?
This is India's case however and it might be very different for poorer countries where the big organizations of this world (World Bank, FMI, etc.) exert a bigger control over the local economies. I have met recently a few people in Mexico and Guatemala working for various organizations who were telling me sordid stories where western companies (often Canadians) are exploiting local people and resources while having to give so little in return (see my article from San Cristobal de Las Casas, Mexico).
Duality and India
As I wrote earlier, India really lacks the proper infrastructure it needs to support its growth and this makes the cost of urban rent and/or purchase of houses very difficult for the middle class. The majority of our Canadian middle class would not be able to sustain an appropriate life style in a city like Mumbai for example. As very poor Indians live with less than $1/day, this economically distorted world makes it impossible for them to get a chance to get out of their misery. Lots of them wander around the cities and when the cars stop, which is most of the time thanks to the constant traffic, they stand next to the car and beg for money. I have encountered women with their new born babies, looking at me with deep penetrating eyes and staring for minutes in order to get my attention. I have seen kids with Santa Claus mask trying to get my pity. The most imaginative of them try to sell different things such as magazines. One of those kid who could barely stand on his feet, came to our taxi window with a business/economy magazine with the title: How to make a million $. I think this is the perfect and most shocking example I have seen of India's duality. There also have been numerous reports of people injuring kids (cutting limbs, etc.) in order to have them beg more easily. What a contrast with the other India, the corporate India, who is preparing to invade the world.
Spending 10 days in the richest Indian environment and experiencing this poor troubling reality simultaneously, helped me to emphasize my understanding of the world and its Reality. All is a matter of perspective. I saw business people who where here only to make money (the ambiance is like the one I can imagine the Klondike was a few years ago), others who have a social conscience, I saw great thinkers who are helping to change this country and a lot of people in between, excited, perplexed, shocked and often without words to describe what they were seeing. I believe in the energy and enthusiasm of entrepreneurs to find solutions for this country. India seems to contain everything at once: a huge population, a great spiritual and religious diversity, a strong growing economy and great social and environmental issues. I like to think of India as the world social and economical microcosm (a crystal ball) where the future of our world can be tested and foreseen (a little how Antarctica is for environmental issues). India is truly an eye opener and the reality going on here have been a great inspiration for me in my search for reality and solutions to make our world a better place. I would like to thank my dad for taking me here and looking forward our next trip together. I am looking forward my next coming here (in a few months) during which I hope to connect with the spiritual India. Until then, Ohmmmmmmmmmmmmmmm