By Sourajit Aiyer
“My dear gentlepeople!” I do hope this is the way in which Indian Prime Minister Narendra Modi starts his address to our American friends, during his upcoming visit to the USA. The quirky title is intentional — replacing “ladies and gentlemen” with “gentlepeople” just like the term Chairperson has increasingly replaced Chairman. The aim is to show a deviation from the traditional, to prove that one has changed with the changing times.
It has nothing to do with gender references, but simply to show a change from what was earlier. In the same manner, India has also changed from what it used to be, from what many foreigners traditionally knew about it. My hope is that the twist in the address might similarly convey that India has changed in the way it thinks and acts, and is now vastly different than what was traditionally perceived.
What is its connection with Prime Minister Modi’s US visit? It is to do with the perception of most foreign businesses, including many American ones, that India represents just a large market for them to dump their products. For many, the perception of India is still that of a large consumer.
But change has occurred in India. The country still remains an attractive consumer for foreign goods, but it has also made major inroads as a producer. India has evolved as a producer of high capability – not just catering to domestic demand, but also as a base for global sourcing to overseas markets.
Global sourcing is a significant opportunity for global businesses to leverage in India. The country evolved as a producer not just with the aid of foreign partnerships, but also by relying on domestic companies and its own entrepreneurship.
The spirit of Indian entrepreneurship is one of the strongest in the developing world, despite the challenges of doing business in India. As much as India offers US businesses a consumption opportunity, it also offers a significant opportunity to forge partnerships for production.
India has skills, both technical and managerial. It has forward and backward linkage capabilities across the entire value-chain in many sectors. It is in close proximity geographically to many rapidly developing Asian and African export markets.
Indian companies have corporate governance standards, and a free media means that corrupt practices are unearthed quickly. India has an English-educated workforce, and a legal system built on the British one.
Among gaps, India has shown decisive intentions to develop its infrastructure. It has developed world-class capabilities in sectors like automobiles, information technology, IT-enabled services, biosciences research, space research, petrochemicals, entertainment. Many of its successful companies have gone on to list in the American exchanges, apart from raising VC/PE funding.
All this matters because the US business community forms a major chunk of the audience that Prime Minister Modi would face during his stay. If corporate America wants to see a decisive partnership forged in US-India relations, then it is imperative to realize that the “water needs to flow at both ends.”
Undoubtedly, many US businesses realize all this already. But those who still regard India solely as a consumer, they should realize another advantage would come from deepening production partnerships.
At the end of the day, India still remains a poor country and its addressable consumer base is only that much. If businesses here can grow even further, be it for domestic or export needs, it will bring more workforce into the process. That includes workers who are currently underemployed or unemployed, but also new workers, due to the incentives for skill addition.
This expansion in the workforce would only enlarge the universe of higher earners – which bodes well for those looking at India as a consumer market. It is the age-old vicious circle of production and consumption.
When Prime Minister Modi woos the US business community during his various engagements to encourage their participation in a reviving India, it is imperative that corporate America realizes that India has changed vastly from their traditional perception.
India has changed to become a producer to reckon with in many sectors. The sooner most US businesses realize this and adapt by forging production partnerships, the better. It might stand them in as much profitable stead as consumption partnerships. Perhaps even more.
— The author works with a leading capital markets company in India. Views expressed are entirely personal.