India’s Knowledge Economy & Education

To truly understand the implications of any concept, it really helps if we can quantify and project the ‘what if’ scenario. What will become of India as a knowledge powerhouse in the world of the future? What will be the value of India’s human capital, looking into the future? How important is education’s role in making it happen. Answering this in a quantitative manner is a forecast done by the World Bank.

Education & India’s GDP: 50% increase in GDP/worker

India has a rich choice set in determining its future growth path. The graph alongside shows what India can achieve by the year 2020, based on different assumptions about its ability to use knowledge, even without any increase in the investment rate. Here, total factor productivity (TFP) is taken to be a proxy for a nation’s learning capability.

For all four projections, capital, labor, and human capital are assumed to grow at their 1991–2000 average annual growth rates for India- 5.41, 2.23, and 0.58 percent, respectively. For the growth-TFP decomposition to be more precise, labor force figures rather than total population are used as a measure of the amount of “labor” available for use as a factor of production in the Indian economy. According to World Bank databases, in 2001 India’s GDP (in 1995 U.S. dollars) was $495 billion and its population was 1.03 billion, of which only 461 million were in the labor force. As such, India’s GDP per capita in 2001 was approximately $480, whereas GDP per worker was around $1,070.

Projections 1, 2, 3, and 4 plot real gross domestic product (GDP) per worker (1995 U.S. dollars) for India assuming different TFP growth rates from 2002 to 2020. The curve to focus on is Projection 4. This is an optimistic scenario that is based on the actual TFP growth rate in Ireland in 1991–2000. Ireland is an example of a country that has been using knowledge effectively to enhance its growth. All things being equal, the projected GDP per worker for India in scenario 4 in 2020 is about 50 percent greater than in scenario 1. Knowledge can make a difference between poverty and wealth.

A 50% increase in GDP per worker! The power to transform  a nation is right here. And from a business strategist and marketer’s point-of-view that turns into a huge opportunity for Education as a business sector. All the allied factors are in place:

a/ The population is set to be one of the youngest in  the world: India’s median age for the population will be 30 years by 2025. There will be 994 million people in the working age group in India compared to 215 million in the US. So the market is there alive, growing and waiting to be schooled and trained.

b/ And the market’s attitude [the parents’] to education has always been positive amongst middle income homes in urban and semi-urban areas- education was always seen as the ticket to a better future. Today, that positive attitude has the backing of investment- 55% of India’s middle class homes SAVE for their children’s higher education. So they are starting to ‘put money where their mouth is’.

The time is very opportune for India to make its transition to the knowledge economy—an economy that creates, disseminates, and uses knowledge to enhance its growth and development. The knowledge economy is often mistaken to be only high-technology industries or information and communication technologies (ICTs). But we need to see the concept more broadly as to cover how any economy harnesses and uses new and existing knowledge to improve the productivity of agriculture, industry & services and increase overall welfare. In India, great potential exists for increasing productivity by shifting labor from low productivity and subsistence activities in agriculture, informal industry and informal service activities to more productive, modern sectors, as well as to new knowledge-based activities.

Undoubtedly, education’s market of the future is India. And institutions the world over and particularly North America need to beat a path to India. Consider some of these facts about what’s happening:

  • Corporates are starting to invest in linkages with educational institutions to take advantage of the knowledge pool: IBM has partnered with India’s premier Engineering & Technology institution- IIT Bombay, to develop the next generation of mobile device interfaces. IBM has also linked up with NID- the National Institute of Design and the Indian School of Business for similar projects
  • Universities from Europe, US and Canada are entering India. While UK universities are interested in science and technology, Canadian Universities have announced funding for a series of India specific initiatives, among them the Globalink Canada India Graduate Fellowship, to provide scholarships for 51 Indian students, worth US $3.5 million.
  • UK’s London School of Economics and Science are entering India with a collaboration with the City School of Social and Management Sciences
  • On bio informatics, the UK’s Nottingham Trent University is collaborating with the TN Welingkar Institute of Management Development and Research
  • In the hospitality industry, Switzerland’s International Hotel Management Institute has joined hands with Kohinoor-IMI Khandala School of Hospitality Management.
  • International and domestic players plan to invest over $100 million in India to start International schools
  • Vocational training is a HUGE opportunity. Take for example, Centum Learning- 150 learning centres spread across 90 cities to train 12 million people by 2022
  • Another example on vocational training, this time from a global major- Bharti-Walmart. The Indian collaboration of Walmart in the cash-and-carry, wholesale business has signed an MoU with the local state government of Punjab to set up a training facility to address the shortage of trained manpower for the cash-and-carry and retail sectors
  • Learning software and digital content development to aid education is another huge related opportunity- at the higher end, private schools are ramping up the level of multi-media content to add to the classroom education. At the mass end the government is pledging over $2 billion on ICT education in schools and universities

Capping all this is the upbeat mood of Young India. There is that sense of India being at the cusp of an era which would take it onto the international stage. They know that their India and their world is going to see a phenomenal transformation from what it was for their parent’s generation and that, that world will be theirs. And they are ready to relentlessly pursue the needed education, to carry that world on their shoulders.

India Grocery Retail Update: Walmart, Metro, Carrefour & Booker plans.

Walmart, through its Indian Joint Venture Bharti-Walmart for cash-an-carry outlets, will be investing close to $ 240 million in 2012, to open 12 to 15 wholesale outlets, in addition to the 17 that are already up and running. Metro, the German retail giant has added two more wholesale outlets this year already, to add to the tree opened in 2011. Carrefour which operates two cash and carry outlets is to open one more. Booker has aggressive plans as well: with three stores and plans for 20 in the next five years, this UK based retailer is staying on course with its expansion plans despite the general slowing down of the economy.

More significant than these current year plans, is the growth sentiment expressed by the Indian operational chiefs of these global majors. This is significant in the context of their expectancy on the opening up of the total retail sector in India, which has continued to experience hiccups. To quote these business heads, in the Business Standard’s article on the subject:

Walmart, which had opened its first wholesale store in India in 2009, along with Bharti, dismisses the view that the global economic climate could influence its store expansion plans. “Saving people money so they can live better is at the heart of everything we do,” the spokesperson said, adding, “this is especially relevant in an economic slowdown”.

On global investors’ mood, a Bharti-Walmart spokesperson said, “The India story remains strong with the international business community.” Adding, “There is understanding and appreciation of the factors that impact policy making, particularly in India’s vibrant democracy.” Walmart is here in India for the long term, the executive added.

The Metro executive expressed similar sentiments. “We are confident in the big potential of the India market. We are on a growth path and well positioned to expand our presence in other parts of the country,” he said.

The retail industry is the poster child of the growth that is expected to happen in the Indian Consumer Story- the retail industry is an opportunity worth $ 500 billion, of which the cash and carry business opportunity is worth $100 billion. Consumer food brands, packaged goods, retail infrastructure like transportation and logistics, cold chains and such are the related opportunities that medium sized Canadian and US companies should act upon.

To read the complete story in the Business Standard: India expansion on for global cash & carry chains.

Doing Business in the MIddle East: Healthcare & Education Industry Focus

750 schools being built, another 3200 to begin construction. In Saudi Arabia.

Looking ahead into the not too distant future, say the year 2020, social infrastructure  like schools and hospitals are key to managing the growth that the Middle East markets will experience. Particularly Abu Dhabi, Saudi Arabia and Qatar- three of the stable, rich economies with well thought out growth plans.

Canadian and US companies in the education and healthcare sectors and those specializing in infrastructure and services related to these two sectors should sit up and take notice.

Players in the hugely successful private school system is one niche example  of a related opportunity. Are there plans to leverage your private school brand equity and management expertise? If a school is serious about global growth, the Middle East could promise you perhaps a half a dozen schools in the next five years.

The same goes for hospitals. Finding the right partner to lend their expertise is key.

To read the Gulf News article on these sectors:  gulfnews : Mideast needs more hospitals, schools.

Unsure about expanding into India? Consult with Goldman Sachs.

Earlier this year, the Global Board for Goldman Sachs met for it’s annual meeting in India. A first for Goldman Sachs and a silent vote for what the US banking major thinks of India’s role in its global plans.

And now Economic Times [ET] reports that Goldman Sachs have just concluded a deal to lease office space that is the size of nine football fields- 1.6 million sq.ft, in Bangalore. Touted to be the biggest recorded commercial real estate deal in India. This deal just eclipsed the 700,000 sq.ft. Cisco deal for office space in Bangalore and the 297,000 sq,ft. corporate HQ  building bought by Citigroup in Mumbai in April this year.

“A deal for office space of this size suggests a major ramp-up by Goldman in India in the years ahead, with commercial property market experts estimating that one million square feet of space can seat around 10,000 people”, says ET. Currently Goldman’s India operations employs 4,000. Certainly Goldman seems to be bullish about India.

So, if you are in real estate, construction or in any infrastructure related business this piece of news should be talking directly to you. If you’d like to know more about this sector in India check out this earlier blog entry here: Doing business with India: Real Estate & Construction Industry

And if you are interested in ET’s full article on the Goldman Sachs deal, click: Goldman Sachs seals India’s biggest office space deal – The Economic Times.

American doughnut makers Krispy Kreme and Dunkin’ Donuts now play out rivalry in India – The Economic Times

American doughnut makers Krispy Kreme and Dunkin’ Donuts now play out rivalry in India – The Economic Times.

The most recent add-on to the exploding Food Industry in India. Indians love food- as a nation the average home spend over 40% of its income on food. New food concepts, new formats, new brands creating new eating habits, leading to new consumers.

With urban India slated to account for over 60% of the population, coupled with the entry of big names in food retailing and rising disposable incomes & changing aspirations at the consumer end, there is perhaps no better time than now for Canadian & US food brands and food service operators to step in.

The Opportunity Triangle- Revealed.

At the FITT National Conference in Ottawa, I presented the concept of how Canada-India-Middle East combined, presents an Opportunity Triangle for Canadian businesses.

One of the key barriers to Canada’s stellar performance in the global markets is our mindset of relying heavily on trade with the US market. Hence,  the lack of diversity in our country portfolio when it comes to international trade.The Top 10 markets and the level of exports done with those Top 10 for US vs. Canada says a telling story.Continue reading “The Opportunity Triangle- Revealed.”

Doing Business with India: Real Estate & Construction Industry.

While Infrastructure growth is the biggest growth story in India, within that sector, the real estate/construction industry’s growth is slated to be huge. Here’s a peek at some numbers, trends, what’s fueling the growth and the potential it holds for players in this field:

Construction/Building/Real Estate Industry

  • At $ 66.8 billion FY10 total revenue, real estate [Residential and Commercial] accounts for 5% of India’s GDP.  In China the sector contributes to approximately 12.6% to China’s GDP. This ought to underline the huge potential for growth that the real estate industry holds in India.
  • Talking of future growth, the market size will more than double in five years- from $ 55.6 billion in 2010 to an estimated figure of $ 126 billion by 2015- a compound annual growth rate (CAGR) of 19 per cent, up from a 10% CAGR previously
  •  And is this growth largely happening in small towns and in rural India? NO. Tier 1 metropolitan cities are expected to account for about 40 per cent of the market over these five years.
  • Government support for this industry is very positive as well: 100 per cent foreign direct investment (FDI) is allowed [with government permission] for developing townships and settlements. FDI of up to 100 per cent is also allowed, through the automatic route, in the hotel and tourism sector. Growing requirements of space from sectors such as education, healthcare and tourism provide opportunities in the real estate sector. FDI of more than US$ 9 billion was infused in real estate in the last decade.
  • Global investment in the industry:  Over $ 9 billion FDI in real estate for 2001 to 2010. Real estate vied with automotive and power sectors for the leading sector for private equity [PE] investments in 2011. 347 deals were made totaling to an investment of $ 7.7 billion, just in 2011. In 2010, over 11 per cent of total FDI in India was in the real estate sector.
  • Education, Healthcare, Retail and Tourism sectors are fueling the need for ever increasing floor space. Rural housing need is big as well- the government has allocated $ 625 million for this segment. Special Economic Zones [SEZ] are another huge factor catering to demand for built up space- over 550 SEZs’ approved.

Construction Equipment Demand

  • Demand for construction equipment is expected to increase to USD4.1 billion by 2014 from USD1.8 billion in 2009, a CAGR of 17.9 per cent
  • The allocation of total infrastructure spending in the 11th Five Year Plan of as slated by the Planning Commission is going to be $428 billion for the period 2007-12. From a FY 08 spending of $56.3 billion, this has grown to the estimated spending of $124 billion in FY12.
  • With the material handling equipment industry being de-licensed, global majors in the machinery and equipment filed in construction are here or have clear plans in place to enter: Komatsu, JCB, Volvo, Caterpillar, Hitachi, John Deere, Case, Ingersoll-Rand, Poclain, Lieberr and many more.

With 100% FDI being allowed under the direct route, many are bound to follow.

  • Roadways and mining are the key areas of emphasis that will contribute to the equipment demand in the years to come. A case in point being the growth in spending on roads- FY08 spending of $10.8 billion estimated to go to $16.7 billion in FY12. And under the 12th Five Year Plan, allocation for roadways is $ 64.5 billion, up from the $30.4 billion in the previous plan period. And mechanization and equipment is what is going to help such ambitious goals real.

So, the bottom-line? I guess it is appropriate to quote an EDC e-report on the Infrastructure sector on India:

“The bottom line? Infrastructure is critical to India sustaining its robust growth potential. But even with the size of the population, India does not have the capacity to build solely with domestic players. This is fertile ground for Canadian participation, and huge rewards face those who rise to the challenge.”


“A sense of calling from God..”. Reason to start a business in India.

“A sense of calling from God – if you want to see the exciting things I’m going to do in India, you should come.”

So they came. So says Anna Hambly of Red Moon Bakery, New Delhi, who mov ed to India along with David Hambly, her husband, from British Columbia, Canada. [Picture courtesy: The Globe and Mail]

Coming out of the holiday season, I thought recounting how India is taking to Christmas and how the Hamblys are a success story, due to their daring, faith inspired venture in India, would be a great way to start 2012.

I got to know about the Red Moon Bakery from a couple of stories in  The Globe and Mail. A fascinating read- this success story of a couple from Victoria in British Columbia who are by nature ‘not adventurous’, ‘don’t like big cities’ [thought Vancouver was big and then landed in New Delhi which is some seven times in population], ‘don’t like the heat’ and ‘risk averse’  but today, have this to say: “It’s been great”. Inspiring words for a businessman or entrepreneur looking to start a business in India.

Take a look at the success that the Hamblys have made of their business: “from an original operation in a pocket-sized kitchen with four employees, the Hamblys have moved to a big space in an industrial area, hired 20 more people, and will soon have a store in an upscale shopping area. Ms. Hambly is approached daily about franchising into other Indian cities”, reports the Globe  and Mail. Not a surprise at all, if you look at some facts and figures about the food industry and food retailing in India.

If you look at the the snacks and confectionery market in India, the numbers and projections are staggering:

Distinctive branding 
•The Indian market holds enormous growth potential for snack food, which is estimated to be a market worth US$   3 billion. The market is clearly and equally divided into the organised and unorganised sector. The organised sector of the snack food market is growing at 15% – 20% a year while the growth rate of the US$ 1.56 billion unorganised sector is 7% – 8%.
•BMI has predicted a 22 per cent growth in value terms in India’s confectionery market till 2012.
Food retailing is the fastest growing in India’s retail industry

To understand the true potential of the organized food processing market, it is important to know what is happening to food retail in India. The changes & trends in food retail will have a direct impact on urban consumption of packaged and branded food products. And these are trends that have been contributing to Red Moon Bakery’s growth as well:

•The food and grocery market in India is the sixth largest in the world. Food and grocery retail contributes to 70 per cent of the total retail sales. According to industry estimates, the segment is growing at a rate of 104 per cent and is expected to grow to US$ 482 billion by 2020.
•According to a BMI forecast, India is likely to see a huge 443 per cent increase in mass grocery retail (MGR) sales during the 2007-2012 period.
•Ninety nine per cent of this segment is unorganised, and therefore, there is immense scope for growth for the organised sector.
Red Moon Bakery: Upscale product & marketing
The Hambly’s  & Red Moon Bakery with their new menu, adherence to high quality, distinctive branding, neat presentation [] and real customer service had the right product at the right time. And as we all know, that, in essence, is great business sense.
Which brings me to the changing customer behaviour and trend relating to Christmas that is showing up in urban India, which leads to Canada’s Nanaimo bars, from Red Moon, finding new die-hard fans in India. Urban India is teeming with young, educated, aspiring consumers whose lifestyle is getting westernized in many ways. And Red Moon Bakery is at the confluence of two such trends- one is the adoption of a more westernized lifestyle, like taking to the festive times during Christmas; the second being a more open, liberal  eating habit, eager for new taste experiences.
Consider this as a litmus test for a sense of how Indians are taking to Christmas and the attendant festivities: in a country where the Christian population accounts for just 2%, Christmas is all over in schools in urban India. Take a look at the the set of pictures of a kindergarten school in Red Moon Bakery’s New Delhi [Picture Courtesy: Hindustan Times]. And if you juxtapose this with how secular and non-committal we are becoming in our schools in North America when it comes to religious festivity, the starkness of the contrast in the way the East is moving will be very apparent to all of us.

 So it must not be surprising at all for the Hamblys’ to find that their Christmas time sales doubles. “Christmas doubles our volume,” said Ms. Hambly. “Some of it is expats – but more and more of it is for Indians. They want gifts to give, and they want all those traditional Christmas-y things like mincemeat and gingerbread houses.”
To quote The Globe and Mail further: The Hamblys, who are evangelical Christians, have watched bemused as Christmas has become an ever-bigger deal over their eight years in India.

“Christmas for us is about the birth of Christ,” said Mr. Hambly, as young assistants ebbed around him in the kitchen. “But from a business standpoint, having it become this big commercial thing is – well, it is good for business. The thing that I hope doesn’t happen in India is that the West comes in and then they lose the good things about Indian culture.”

It is this sense of empathy that you develop for India and the kind of business success that you experience, that has made the Hamblys feel that India is indeed, their second home.

 [For those of you keen on checking out the Globe and Mail stories on the Hamblys and Red Moon Bakery: and ]

The Keystone Tipping Point in Canada’s International Trade

Newton’s Third Law of Motion- “For every action, there is an equal and opposite reaction”- is in play in Canadian International Trade, following what I would like to call the Keystone Tipping Point.

Consider some of these headlines in Canadian Media:

Canada’s trade vision shifts beyond the United States/ The Globe and Mail
Canada’s oil industry faces an urgent search for new markets/The Globe and Mail

This weekend was a traumatic one for those involved with the Keystone pipeline project. The Keystone XL pipeline that was to carry crude oil from Alberta to the Gulf of Mexico suffered a major setback that would turn the clock back by at least a year. The US State Department reckons that a decision on the project would take till end 2012 or even 2013- environmental issues being the ‘apparent’ reason.

So sans Keystone, what now? Just as water finds its own level, so will oil. Because, without the Keystone pipeline, Alberta’s oil sands have no market for their oil in the United States and will now have to look towards Asia to sell the crude. This  could be a positive or a negative outcome, depending on a variety of issues.

But one outcome of this debacle is certainly positive: This clamour and consciousness about Canada needing to look past United States and examine its trade ties with the rest of the world- not just for oil but for all its goods and services has just about started. And in my opinion, it is high time.

Canada’s export to Rest of the World- just 14%
A quick look at the graph alongside should make things crystal clear- the top 10 US export markets account for just 67% of total US exports while for Canada, just the No.1 market- the U.S. accounts for 76 % of our exports. The next four markets- Japan, Germany, the U.K. and Mexico account for another 10%  leaving a meager 14 % for the Rest of the World’s contribution to our exports! That’s sad, but true.

And it looks like the Keystone effect will act as a tipping point for Canadian industry to sit up and look at new markets, irrespective of which industry you are from.

The question on every Canadian business owner’s mind should be: Is my mindset ready to be tipped?

GE’s Jeff Immelt would like US business to do an Avis

Jeff Immelt, the CEO of GE, minces no words in his message to businesses in the US: “There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,”  “It’s this country’s only destiny just because most of the consumers are some place other than here.”

He also believes and I quote again: “Our competitiveness in this country today is the greatest it’s been in 25 years- I have never seen our competitiveness as solid versus India and China as I do today. We need to be all-in.”

Strong but inspiring language coming from the head of one of America’s iconic corporate brands, GE. Talking to a packed hall in Times Square, earlier this week, the CEO of the $ 177 billion dollar corporation and the Chair of  Obama’s Job Council sounded very bullish about the US winning in the global economy.

I agree and disagree with his viewpoint.

As a proponent of US and Canada having greater business ties with India, I completely agree with his viewpoint that the balance in terms of global consumption is completely tilting to countries like India. This is because a combination of many factors have collectively reached a tipping point in countries like India & China, making them the globe’s largest consumer base. While China still has to move from being ‘the world’s factory’ to ‘the world’s market’, India is striding confidently towards making internal consumption being the fuel of its growth. [Take a look at my article- “Just one reason to invest in India” in Business without Borders [BWOB], an online resource on Global Business managed by HSBC, Rogers Media and the Economist Intelligence Unit. If you are not a member of BWOB, you can also access this article here on the Rmagine Blog] . So if developed economies like the US or Canada like to have a share of that growing pie, they either have to export more to countries like India or grow their global business by setting up a base in India.

Immelt is spot-on again on observing that the US as a country is at its competitive best today when it comes to countries like India. The equation between these two nations is at its best and both countries have been very overt in their intent and action in strengthening trade ties. Where I disagree with him is on whether the US businesses are as aggressive as the Germans are about tapping that potential.

My disagreement is that I sincerely believe that a lot has been done by the US Commercial Service and US companies of all sizes in reaching out to India’s potential.  But I also understand his anguish that not enough has been done because the US business base and the product & service base that such businesses represent is so huge, that there is enormous potential to do a lot more. And the ailing US economy can certainly do with more, if corporate America can corner a larger slice of emerging markets like India.

While the Fortune 500 from the US are either already there or have plans in place to tap into the Indian economy, Immelt’s message should help in spreading the ‘good word’ to the larger section of the US SME base and the innovative & adventurous US entrepreneurial community. Small and medium-sized companies whose annual sales stretch anywhere from $ 5 to 200 million should sit up and take notice. If these businesses are interested in double-digit growth for the next decade, if not more, they should certainly draw up their plans to get a taste of India.

His message to all of America is : “Let’s do an Avis”  or “America needs to try harder” [Avis Rent a Car’s longstanding campaign against the market leader Hertz used to be ‘We try harder’.]

And as one final point in favor of that, thanks again to Immelt and GE: 18% profit growth declared by GE in the third quarter of 2011, thanks to “Our emerging market growth was very strong” as he says.

Eloquent words and figures for the US and Canadian businesses to follow.

[If you are interested in the Reuters article on Jeff Immelt’s speech at Times Square: ]