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to Inclusion & IntegrityFrom Indignation & Inequality

@BIZ INDIAIssue No. 9, OECD Forum 2012Special

Debt, Eurozone Crisis, Unemployment, Deficit

G R O U PMedia India

Governance challenges in 2012

BIZ@INDIA OECD Forum May - June 20125

Regaining the trust of citizensThe OECD plays a key role in providing analysis and policy advice to help its member governments and other partners withinthe G20 address the major global challenges we all face. With the OECD’s own annual Ministerial meeting and public Forumtaking place from 22-24 May 2012, the Organisation’s Secretary-General Angel Gurría explains why gaining the trust of citizens is crucial to good governance. Why sound institutions make a difference for effective economic policiesThe globalcrisis and its aftermath have seriously challenged the relationship between citizens and government. The public finances arein a perilous state in many countries, unemployment is still stubbornly high, and the recovery has been in general slow andfragile. In parallel, income inequality has soared, with the gap between rich and poor reaching its highest level for over 30years among OECD countries. Against this backdrop, people are taking to the streets: the indignados in Spain, the OccupyWall Street Movement in the United States and the March for Jobs in the United Kingdom are just a few alarm bells for changethat are resonating around the world. Governments and central banks have taken bold action at the national and international levels to regain the trust of their citizens. They have adopted supportive macroeconomic policies to buttressactivity during the recession, they have committed to consolidation to restore the sustainability of the public finances, whereneeded, and they have embarked on structural reform programmes to revive the growth potential of their economies. Theseendeavours often entail difficult decisions that require the support and trust of citizens to succeed. We have argued that governments need to “go structural” and “go social” with a bold reform agenda in different policy fronts, fostering new sourcesof growth and investing in people, skills and education.

However, confidence and trust cannot be regained through economic and social policies alone. “Going institutional” is aprecondition for economic policies to work! Policy action to strengthen institutions needs to be comprehensive and multi-faceted; we need to tackle lobbying, improve procurement systems, deal with conflict of interest and improve political party financing. To do so, governments need to adopt clear and transparent principles for public integrity in theirlegal frameworks.

For example, lobbying is estimated to “cost” $3.3 billion a year at the federal level in the United States and to occupy thetime of an estimated 1500 professional lobbyists in Brussels. Though it is a legitimate element of the political process, allowing governments to make informed and balanced decisions, lobbying is not always perceived as fair and transparent.Implementation of OECD principles that help governments in areas such as setting up registers of lobbyists and mandatingthe disclosure of monies received from lobbyists would give citizens greater confidence in the lobbying process. This also applies to OECD principles on public procurement to ensure fair and open contracting decisions.

In addition to more comprehensive legal frameworks, regular monitoring of compliance is also required to persuade citizens that the law and regulations are being observed. For example, an increasing number of countries are legislating againstconflict of interest in public life. In fact, disclosure of outside income by public officials is a requirement in all OECD countries. However, our analysis shows that in most OECD countries top officials do not have to disclose either previous employment or current unpaid employment. Another issue is the financing of political parties, which has long been a tabooand is perhaps the area that has received the least attention and analysis. It has often been argued that political party financingis so closely tied to specific political, administrative or cultural contexts that it is impossible to identify good practice. Yet, financing of democracy is a crucial element in the trust equation. Citizens need to be reassured that the huge amounts ofmoney raised during political campaigns do not buy undue influence on public policy. We need to take a hard look at whatworks across countries and try to promote reform efforts. Let’s be clear: public integrity is not only about honesty and morality, it is also about laying the foundations for long-term sustainable growth. We will not successfully emerge from thecrisis without the trust of our citizens and the confidence of markets. Good national and global governance depends as muchon integrity and trust as it does on choosing the right policies. World leaders would be wise to add these important issues ofgovernance to their national and international agendas. The OECD stands ready to support them in their efforts.■

Angel Gurría, Secretary-General of the OECD

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How has the global economic crisis since 2008 impacted issues like ecology and environment? Has the focus on economic crisis pushed environmental issues on the backburner?

In response to the economic and financial crisis, UNEPlaunched the Global Green New Deal arguing that the multi-trillion dollar stimulus packages being lined up at thetime should be used to kick start a transition to a low

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Green economy can generate growth

Achim Steiner, UNEP Executive Director andUnder-Secretary-General of the United Nations

These are challenging times to head theUnited Nations Environment Programmeas the world tries to recover from one of theworst-ever economic slumps. Has thistaken the attention away from environ-ment and ecology? Achim Steiner UNEPED does not think so. Steiner is fully awareof the uphill task facing him and his team,yet he seems unfazed and ready to takewhatever action may be needed to ensurefuture that the world’s ecological balanceis maintained and brought back from theedge where it finds itself today. In an in-terview with Biz@India, Steiner shares hisvision of the recent developments in theworld.

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BIZ@INDIA OECD Forum May - June 2012 19

carbon, resource efficient Green Economy.Some countriestook the opportunity to invest in future, clean tech industries and their ecosystems such as forests and freshwaters. China for example invested over a third of itsstimulus in broadly environmental sectors such as renewable energies and high-speed rail.The Republic of Korea invested around 90 per cent of its stimulus in such areas. Since then UNEP has provided the analysis and thecase studies underlining that a transition to a Green Economy can generate growth and jobs but without pushing humanity’s footprint through planetary boundaries.A Green Economy in the context of sustainabledevelopment and poverty eradication is one of the two overarching themes for Rio+20 in June.So far from pushing environmental issues onto the back burner, the crisis hasserved as a spark for reflection on real progress and actionon a far more sustainable and forward-looking economicmodel that in many places has resonated with societal andenvironmental concerns.

Are the CEOs reluctant to invest in domains like pollution and emission controls? Is lack of resourcesalso forcing them to pull back from buying new equipment that may be more energy efficient and eco-friendly?

It depends where you look. In 2010 the global cement industry invested some $3.5 billion and is planning to spend$5 billion annually by 2015 in emissions controls.By someestimates, the air quality control market in the United Statescontracted between 2008 and 2010 whereas in Asia it expanded.In the end there will be many factors at play ranging from government policies and regulation towhether a country is in a programme or upgrading or expanding its infrastructure.While some countries andcompanies may perceive investing in environmental technologies as a cost, others may deem it either a responsibility to its citizens or international agreements andan investment in a more efficient future and competitiveeconomy.When UNEP was asked in 2005 to spearhead a final, global phase-out of lead in petrol, some queried thecosts and the benefits.But a recent scientific paper has putthe economic benefits at several trillion dollars a year globally—ranging from benefits such as improved IQ andreduced hospital costs to even cuts in criminality.

Have the governments been forced to abandon/significantly drop the investment in renewables andother forms of ecology-friendly energy sources? Has theprivate sector begun to participate in the necessaryR&D in this domain?

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UNEP, working with Bloomberg New Energy Finance,conducts an annual survey of investments in renewable energies. The latest report, focusingon 2010, shows that investments in renewable rose by over 30 per cent to some$211 billion—more than in new fossil fuels.Government research spending interms of R and D in renewable energieswas also up 120 per cent to $5 billion globally between 2009 and 2010. Over thesame

What role has UNEP played in the above threeareas. How have you ensured that the focus on economicand social issues does not mean lack of attention to theenvironment? How do you entice companies to continueinvestment in new technologies and to continue to support R&D for green technology? UNEP’s main contribution has been the coordination of theGreen Economy report, which is supporting the preparations for Rio+20 happening in June—20 years afterthe Rio Earth Summit of 1992 that set the course of contemporary sustainable development.The Green Economy report suggests that investing 2 per cent of globalGDP in ten key sectors can benefit the economy but withoutthe increasing shocks and rising scarcities linked with theold ‘brown’ economy.Part of this work is stressing some of

the gross misallocation of capital—for example up to $600billion is spent annually on fossil fuel subsidizes

versus around $70 billion on renewables.So themoney is there, it is a question of government

policy in terms of where private sector capitalwill flow.

How will the current high prices of crudeand other forms of fossil fuels impact the

adoption of green energy sources? In the past high crude prices was a

determining factor in terms of renewables investments. But in the past few years investments in

renewable energies has grown irrespective of the oil pricebecause of the multiple benefits—combating climatechange, a faster way of electrifying rural areas, reduced airpollution and health costs and less water demand than saycoal or nuclear in terms of cooling.

What kind of development do you see in this domain? Which countries/regions are leading the surgeand where could more effort be put in? What role canUNEP play in giving a nudge to the laggards? Asia, led by China, is trailblazing ahead. In 2010, China invested $48 billion in new renewables. Renewables investment in India grew almost as strongly but from a farlower base, up 25% to $3.8billion, and the country ranked

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The Green Economy report

suggests that investing 2 per cent of global

GDP in ten key sectors can benefit

the economy

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eighth in the world.Wind projects were the biggest singleitem, at $2.3 billion, followed by $400 million each for solar,and biomass and waste-to-energy.Meanwhile Germany ledthe way in Europe. Large scale new investment in renewableswas $6.7 billion in 2010, up 18%, but this was dwarfed by its$34.3 billion growth n small-scale projects such as rooftopPhoto Voltaics.By highlighting these transformations, UNEPis many ways is alerting those behind the curve to the opportunities they are forgoing now and in the future.

This year marks two landmarks - Stockholm+40 andRio+20. Please give your view and analysis of how theworld has changed since these two events and what arethe challenges facing the world in these two areas? Howwould these two agreements go down in the history ofmodern world - as failures or partial success or reallyexemplary successes? Both events led to increasing awareness of environmentalconcerns and the link between environment and development. The intervening years have witnessed anevolving landscape of treaties ranging from ones on thetrade in endangered species and trade in hazardous wastesup to those on climate change, biodiversity loss and persistent organic pollutants.However the sheer scale andpace of environmental change has outstripped the response

including the ability of existing institutions such asUNEP—a result of the Stockholm conference in 1972—tomake a fundamental difference.

So the world of 2012 is markedly different—economically, socially and environmentally. The challengeof Rio+20 is to take the ideas, ideals, agreements andprogress of the past 40 years and now implement the policies to accelerate and scale-up positive environmentalchange.Rio+20 has also the opportunity to reform and re-focus the international institutions charged with realizing sustainable development including strengtheningUNEP to make it fit for the 21st century challenges and opportunities.

Do you see any resolution of the climate change issue?Where are the blocks and how can they be overcome?What is UNEP's role in this? Well there has to be. The world cannot keep muddling andprevaricating through given the science and the economicsof what is likely to happen to the planet if temperatures riseby 2 degrees C, even 1.5 degrees C.There are multiple reasons for reducing greenhouse gas emissions from climate change to energy security to reducing vulnerabilityto oil price shocks, air pollution and crop damage.If theworld’s nations can be convinced of the imperative to act and

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can be convinced that one country is not going to securesome competitive advantage over other by acting, then away can be found through.UNEP’s role is to continue to support the work of the Intergovernmental Panel on Climate Change, which along with the World MeteorologicalOrganization, was established by UNEP in the late 1980s toproduce the essential risk assessments in respect to climatechange.UNEP has also been for two to three years coordinating climate modeling centresworld-wide on the‘emissions’ gap—the gap between scientific reality and current ambitions of nations.

This work is serving to ‘keep the negotiations honest’ bygetting back to basics—what needs to be done, how far awayis the world from bridging these emissions gaps and whatare the policies and actions available to bridge this divide—from renewable energies and energy efficiency to the carboncapture and storage potential of the world’s ecosystems suchas forests, mangroves and wetlands.For example, UNEPalong with UNDP and the Food and Agricultural Organiza-tion of the UN, is preparing some 12 countries for ReducedEmissions from Deforestation and forest Degradation including developing safeguards so that local communitiesbenefit.Analysis of the carbon capture potential of coastalecosystems such as salt marshes, mangroves and sea grassesis also illuminating the urgency to invest and re-investmentin these natural assets. A combination of reducing defor-

estation on land, allied to restoring the coverage and healthof these marine ecosystems could deliver up to 25% of theemissions reductions needed to avoid 'dangerous' climate change. Indeed these ‘Blue carbon’ sinks and estuaries capture and store between 235-450 Teragrams(Tg C) or 870 to 1,650 million tons of CO2 every year - or theequivalent of up to near half of the emissions from the entire global transport sector which is estimated annuallyat around 1,000 Tg C, or around 3,700 million tons of CO2,and rising.These ecosystems are also important for coastal defenses, fisheries and tourism—so a dollar spent on theirrestoration and renovation delivers multiple, Green Economy benefits.

Meanwhile the Green Economy analysis is opening eyesin terms of economic, social and environmental returns.Forexample, investing about one and a quarter per cent of globalGDP each year in energy efficiency and renewable energiescould cut global primary energy demand by nine per cent in2020 and close to 40 per cent by 2050, it says.

• Employment levels in the energy sector would beone-fifth higher than under a business as usual scenario asrenewable energies take close to 30 per cent of the share ofprimary global energy demand by mid century.

• Savings on capital and fuel costs in power generation would under a Green Economy scenario, be onaverage $760 billion a year between 2010 and 2050. ■

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Minister, what would you say were the key achievementsof your ministry in the last year?Well, India’s been urbanizing rapidly and urban population

has increased from 285 million in 2001 to 400 million in2011. Most important thing to remember is that India has ayoung age profile. With the young age profile, there is greater

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Lessons from development of OECD nations

Interview: Kamal Nath, Union Minister of Urban Development

At the time of independence nearly 65 yearsago, India was a rural country with 85 percent of the population in the 500,000 villages. Lack of employment, developmentand poor farm output has seen large scalemigration towards the cities and today urban India counts over 450 million peopleliving in hundreds of mid-sized cities thathave sprung up in an entirely haphazardand unplanned manner.This is the challenge that Kamal Nath faces as the urban development minister of India. Acknowledging the enormity of the task,Nath remains unfazed and tells Ranvir Nayar in an exclusive interview about measures being taken by his ministry totackle the problems of urban India & how itoffers an excellent opportunity for compa-nies from the OECD nations to participatein this major renewal effort.


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mobility. Youngsters are much mobile than those who aremuch older, so the pressure on urbanization only increases.And we expect that in the next decade, next decade and ahalf, it will be 600 million people in the urban areas. We haveseen a successful implementation of the Urban RenewalMission Program, the first phase of which lasted five yearsand which has come to an end. And, lots of lessons havebeen learnt from there. So, while we frame the Part 2 of theUrban Renewal Mission, we will be able to enlarge it and giveit more focus to areas which, in percentage terms, have heavyurbanization i.e. medium size cities are going much fasterin percentage terms.Similarly, there is a greater need for capacity building. How do we train urban planners, how dowe provide good urban governance? So we are putting a bigfocus on urban governance also.

The Government of India has decided to support DPRpreparation (50% of the cost of DPR preparation will be metby Centre) for Metro Rails for all cities having a populationof more than 2 Million.The Government has also ‘in-princi-ple’ agreed to a Regional Rapid Transport System (RRTS) inDelhi NCR.

(i) Delhi-Meerut RRTS corridor (90.2Km) (ii) Delhi- Alwar corridor (180 Km)(iii) Delhi- Panipat RRTS corridor (111.2KM)

What were your targets when you took over this ministry and how far have you come?My main aim was to remove the bottlenecks in release offunds to the States and expedite pace of implementation ofprojects and reforms. We have achieved it by releasing nearly

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Rs. 55 bn to the States in the last financial year. In additionto the sanction of new projects, I have laid stress towardsachievement of reforms particularly those which will increase the internal revenues of the local bodies and alsoincrease the pace of interaction with the States, local bodiesand elected representatives.

While preparing the road map for JnNURM Phase II, wewould like to have a vision of next 20 years along with a focused plan of action for next 5 years. There will be greateremphasis and funding for capacity building, which will focus on strengthening institutions as well as human resources. Building capacity of the cities to implement reforms and leveraging funds for projects and structuringprojects on PPP will be necessary.

What are the needs of India in terms of urbanisation?

Please share some sectoral details viz. transport, utilities civic amenities etc.?Our urban population grew from 286 million in 2001 to 377million in 2011 and is expected to reach about 600 millionby 2030. India's economicg row t h m o mentum cannot besustained if urbanisation is not actively facilitated by increased investment and a comprehensive capacity-building programme for urban governance.

There is need for creation of quality urban infrastructurewith assured service levels and efficient governance and toprovide a balanced and integrated multi-modal transportation system that gives priority to transit andpedestrians but also contributes to the efficient movementof urban citizens, like Delhi Metro, Ahmedabad BRT, Bangalore Metro.All the important components of sustain-

able urbanization like improved governance, financingplanning, reforms, capacity building, PPP are covered underthe JnNURM Mission. Under JnNURM, projects worth Rs813 bn have been sanctioned with Central Assistance of Rs424 bn. This covers 1367 projects spread across 739 cities. Under UIG component, that covers the mission cities coverage of sectors include - 158 water supply, 106 roads, 112sewerage, 73 drainage, 45 solid waste management,21 MRTS, 45 other amenities.

Talking of Urban Governance, you know, the civic bodies in India, the municipalities, are they capable today, of handling the challenges, how can your ministry play a role here?That is what I see as the biggest challenge. Because as I saidthe biggest challenge again we have is of governance issues so we talk of capacity building, and we are setting up,setting aside huge amounts of money for capacity building- to train those in our smaller municipalities,medium size municipalities and the larger ones. So, capacity building is going to form the core. In fact, we aresaying that to avail any funds from the central government,they’ll have to have a guaranteed level of municipal servicesprovided.

Most of the urban bodies (municipalities/municipalCorporation etc.) are in very weak financial health. Howdoes this impact the delivery of essential services topeople? How can this be overcome to ensure that thecivic bodies can perform their role? Is your ministryinitiating something to strengthen the civic bodies financially?Under the Mission, our aim has been to make the ULBs self-sufficient. JnNURM reforms clearly lay down the stepsto be taken for property tax reform and user charges, themain sources of revenue for ULBs. It is mandated that 100%cost recovery in the case of Water Supply and Solid WasteManagement shall be achieved by the ULBs during the Mission Period. Further, 85% coverage of property tax andcollection efficiency of 90% shall be achieved by the Missioncities.

The ULBs need to be strengthened as local governmentswith own’ sources of revenue, predictable formula-basedtransfers from state governments as part of revenue-sharing arrangements, and other transfers fromthe Government of India and state governments to helpthem discharge the larger responsibilities assigned to themby the Constitution. To enhance the credit worthiness of the


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ULBs and to attract funds from the market to leverage theshare of ULB, the Mission Directorate of JNNURM conducted the credit rating exercise for 69 ULBs (in the 63JNNURM cities). Apart from this, the Ministry has established Pooled Financing Mechanism to leverage funds,but a few states established this. Another effort is to promotePPP model in service delivery. In order to supplement the effort of State Governments/ Urban Local Bodies, the Government of India launched Jawaharlal Nehru NationalUrban Renewal Mission (JNNURM) in 2005 with a view toprovide infrastructure facilities including drinking watersupply, sewerage, storm water drainage and solid waste management etc. for all the cities in the Country with a reform oriented agenda.

Is the government encouraging the participation of theprivate sector and what kind of incentives /models hasyour ministry developed to involve both Indian and foreign companies?

The Ministry has been consistently trying to push private sector involvement in urban sector projects in theform of public private partnerships (PPPs) structuredaround a robust revenue model (including user charges, targeted subsidies, and viability gap funding).

• To streamline the system and strengthen the capacity of the ULBs, the Ministry has been issuing detailedguidelines and sector specific toolkits, especially in the areas of water supply, sanitation and solid waste management, to state governments and ULBs for arming

them with model financing proposals forPPP, model contract documents etc.

• In addition to this, sector-specificmodel concession agreements wouldnow be put in place for sectors such aswater distribution, wastewater manage-ment, solid waste management, and urban transportation.

• Implementation of reforms such asproperty tax collection is being done under the JnNURM to improve the financial health of the cities, whichwould enhance private sector interestand confidence.

• In the days to come, contractual andfinancial arrangements such as build-operate-transfer (BOT), annuity, and viability gap funding (VGF) mechanismwould be more widely used proliferated

in the delivery of urban services. • Hyderabad Metro Rail• Ahmedabad BRTs• The Government would advise state governments to

either amend their Municipal Acts or enact overarching Actsto facilitate PPPs on the lines of states like Gujarat and Karnataka. States who are able to leverage funds throughPPP would be incentivized.

India’s Urbanization levels are still very low comparedwith the most OECD countries. What lessons can welearn from OECD countries’ experience in this? Whatare the pitfalls in rapid urbanization?Most of the OECD countries have policies to implement national development through central programs. The Central governments have a large impact on urban livingconditions through a variety of policies, programmes andprojects that are being implemented by a wide range of national ministerial departments and agencies. In mostOECD countries, the central government plays a role in enhancing local capacities.Unplanned urban growth cancause many problems, such as insufficient infrastructureand public services, and traffic congestion which we are facing in our country. Rapid urbanisation tends to priorities short term land development and economicgrowth over long term strategic spatial planning results invaluable farm lands into urban uses. Hence an efficient landpolicy with a focus on long term sustainable development isrequired, which could be learnt from the various urban land

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related policies followed and legislative measures taken byOECD countries. Efficient urban transport and clean citiesare few more areas where we can take lessons from the development process of the OECD countries.

What role do you see for operation and collaboration of India and the OECD nations in the urbanization of India?Well, I see a huge role and I was at the program in Brussels, where all the Mayors from Europe were present, andfor first time they had somebody fromoutside EU to address them and obviously the scale is different at the OECD.There we talk about large numbers and largerscale. France today is working on water. We havea PPP Project with a French company. Other Frenchcompanies are also active in India. We are holding a semi-nar with French companies on this. Similarly, there are otherGerman companies that are interested, Italian companiesare interested. There is a lot of scope at the OECD to reachout and participate in the huge; Water, waste

disposal, sewage; projects which are on line there.

And how are you communicating this need of India especially overseas?

Yes. It’s moving onwards. I have just come back fromHanover, we had this meeting in Germany, and you

know we are growing this. We are going to have aMOU with France on this, which,when the new government comes in, I’ll come to Paris too. Wehave also had interactions with governmentand private entities in countries like Singapore,Japan, UK, Belgium, etc. The Indian urban

sector provides great opportunities for overseas infrastructure and urban service

delivery firms who are looking to expand their hori-zons. Our in frastructure gap has been

estimated to be around US$ 871 billion for the next 20 years.Clearly, this gap cannot be fulfilled with public resources alone; and would require tapping private sourcesof financing. We would love to explore public private partnerships (PPP) in all areas of urban infrastructure. Theexternal funding agencies /institutions such as JICA, ADB

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The Indian urban sector provides

great opportunities for overseas infrastructure

and urban service delivery firms who

are looking to expand their horizons.

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and World Bank are providing financial support to the Govt.of India for creating urban infrastructure in different citiesin the country.

What place have you accorded to ecological preservation and energy conservation in the variousschemes/initiatives of your ministry. As we are still developing our cities, would it be your effort to ensurethat we get the most energy –efficient, eco –friendly,sustainable and long term solutions?We are looking at this as a priority, because with the pressure of urbanization of a new product, whether it’s intransportation, urban transportation, whether its energy;our focus will be on sustainability to ensure that these urban bodies that we have, are completely in sync, with thebest practices of sustainability. My Ministry has launched‘The National Mission for Sustainable Habitat’ thatwould aim at creating improvements in energy efficiency in buildings, management of solid waste & shiftto public transport. The major focus of the scheme includes:

• Greening of cities: Increasing green cover as part of the

urban and regional planning exercise;• Building byelaws/building regulations focusing on

environmental standards that contribute to sustainabilityand simultaneously address GHG mitigation;

• The National Mission will include a major R&D programme, focusing on bio-chemical conversion, wastewater use, sewage utilization and recycling options, plasmaconversion of waste of biological origin to liquid fuels thatcan substitute for petroleum based fuels wherever possible;

DMRC is registered with the United Nations FrameworkConvention on ClimateChange for Carbon Credit. DMRC isearning carbon credit of the value of Rs. 12 mn per annumfor re-generative braking and secondly due to modal shiftfrom road to rail for which the annual earning expected isof the order of Rs. 340 mn.The Ministry is propagating anumber of viable options under JNNURM for ecologicalpreservation and energy conservation such as developmentof technology for producing power from waste and gas captured from sewerage treatment plants, waste water recycling, rainwater harvesting etc.

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Report card of 2011-2012JnNURM • The Government will be launching the next phase of JnNURM – II with an outlay of 0.25 percentage of GDP,amounting to nearly Rs. 17.5 trillion (USD 38 billion) during the 12th Plan period. JnNURM-II will have an enhanced focus on the small and medium towns.

• Under JnNURM, projects worth Rs 813 bn have beensanctioned with Central Assistance of Rs 424 bn. This covers 1367 projects spread across 739 cities.

• 44 new projects in UIDSSMT at an approved cost of Rs11.79 bn and 26 new projects in UIG at an approved cost ofRs 19.69 bn have been sanctioned last financial year.

• On the reform part of the mission, MoUD has achieved24% of overall reforms achievement in last one year only.

Urban Transportation• Government of India is giving a major thrust to

Urban Transportation including Metros. • Delhi MRTS Phase-I, Phase-II, extensions to

Gurgaon, Noida, Vaishali and Airport Express Link with a total network of 190 km. is in operation with current average ridership of 1.73 mn per day.

• Phase III of Delhi Metro for 103.5 Km has also beenapproved at a total cost of Rs. 353 bn. The Metro extensionto Faridabad has also been sanctioned which is targeted forcompletion by March 2014. Other extensions to the Delhimetro are likely to be cleared this year.

• Also preparatory work has commenced on the following lines - Dwarka Sector 21 to IFFFCO Chowk, ShivVihar to Mukundpur and from Rithala to Bawana.

• Initial work including DPR preparation has commenced for Phase IV (104 km). With the completion ofPh –IV by 2021, Delhi Metro will have a network of about 440km.

• Government has approved Jaipur Metro project stage-1 with 100% financing from State Government and itsagencies.

• In order to further encourage use of public transport, Ministry has launched the brand name, logo anddesign of the Common Mobility Card on 6th December, 2011across all operations of all modes including parking acrossall Indian cities.

• The Government of India had approved the implementation of the Bangalore Metro Rail Project of 42.3km length by Bangalore Metro Rail Corporation Ltd. (BMRCL). The project commenced on 20 January 2007 andis targeted for completion by 31st March 2013. First leg of 7

Km. has been commissioned on 20th October, 2011. • Metro Rail projects commissioned since January

2011include - Sarita Vihar - Badarpur under Delhi MRTSPhase-II 14.01.2011 - Airport Express Link- New DelhiRailway Station to IGI Airport 23.02.2011 - Airport ExpressLink - IGI Airport to Dwarka Sector 21 23.02.2011

- Extension of Delhi Metro to Vaishali, Ghaziabad14.07.2011 - Kirti Nagar – Ashok Park under Delhi MRTSPhase-II 27.08.2011 DPR of Metro Rail projects are underpreparation for the cities of Bhopal, Indore, Nagpur, NaviMumbai ■

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Is it becoming more and more difficult for India IT to dobusiness in Europe due to the Eurozone crisis ?Our business in Europe is continuing to do very well. In the

financial year 2011-12 our combined UK and ContinentalEuropean operations grew by over 26% in dollar terms andnow account for 25.3% of our global revenues of US$ 10.1

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Not enough skilled IT manpower in EU

Interview: Phiroz Vandrevala, Vice Chairman & MD Diligenta, a TCS subsidary

As the Vice Chairman and Managing Director of Diligenta, a subsidiary of TataConsultancy Services (TCS) focused onthe Life & Pensions industry, Phiroz Vandrevala is responsible for driving thebusiness strategy and operations of the organisation and opportunities globally.Phiroz is also a Director on the Board ofTata Consultancy Services, the globalleader in IT services, consulting and business solutions and part of the SeniorLeadership team. With over 25 years ofconsulting and leadership experience withTCS, including as an executive director ofthe company since 2007, Phiroz had beeninvolved with TCS' foray into the life andpensions industry from the outset. In aninterview with Biz@India, he outlines thestrategies for TCS in European marketsand the challenges facing the Indian IT in-dustry.

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billion. We have been localizing our operations and investing in our growth in Europe over the past few years,enabling us to be positively placed in the market to take advantage of all growth opportunities.

How do you foresee the performance of the Indian IT in2012. The first results have been rather disappointing?Overall the Indian IT Industry is set for a landmark year in2012 - with the aggregate industry revenues crossing thesymbolic US$ 100 billion mark. The sector added 230,000jobs and now provides employment directly to 2.8 millionprofessionals. As the Industry leader, TCS has seen goodmomentum, and great traction in several businesses; we areconfident about beating the NASSCOM ( Industry associa-tion ) guidance and predict stable pricing in the year ahead.

What are the challenges for TCS in 2012?While our business is expanding well, we are always watchful of the macro-economic situation. The macro economic uncertainty has been going on for 3 to 4 years nowand we are getting used to the fact that it is going to take awhile for the situation to stabilize. Hence companies need to

operate in this new normal and focus on business growthwith technology as an enabler. A key challenge in Europeanmarkets is going to be the shortage of skills in IT. The European Commission announced in March that per estimates there could be a shortfall of 700,000 IT professionals in Europe by 2015 this is both a challenge forTCS as we step up our local hiring but also an opportunityfor our global delivery model to be part of the solution.

Manpower issues – lack of skilled staff and fast turnover– have been hurting Indian IT for many years. Whatsteps are you taking in this domain? What can a leaderlike TCS do to retain talent? To attract and retain the best talent available we have announced a hike in salaries this year (double digits for highperformers). We are recruiting talent from campuses acrossthe globe and adding people both at the trainee level and lateral level. We have been successful in nurturing and retaining the best talent through the best training and incentives programme. These factors go on to prove why ourattrition is at a healthy low of 11%, a leading figure in the industry.

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A lot of multinationals like IBM, HP etc are bagging bigdeals in India. Is it because the Indian companies hadignored the domestic market? What steps are you taking to reinforce your presence in India?TCS has always been committed to the domestic market andbuilding critical infrastructure in the country such as thecore systems for the National Stock Exchange(NSE), Bombay Stock Exchange,(BSE) National Security Depository Limited (NSDL) as well as many other Institutions. Around 10% of TCS revenue comes from the Indian market. Besides building the financial infrastructure of the country we have been involved in government’s most mission critical project such MCA 21and Passport Seva Kendra to help provide world-class public services in the country. The Indian market is expanding fast ( IT services were valued at over INR 589crores last year) and we intend to keep a strong focus on itas it grows.

Where do you see the growth for the company comingfrom? Which geographies and which verticals look mostpromising? Are Indian companies today innovativeenough? Are they able to compete with the best of theworld and in all domains? Or are there verticals/segments where we need to catch up still?We see growth coming in from both mature markets ( US, Europe) and Emerging markets – it will be well distributed.BFSI, we expect to grow well this year. We see Telecom sector picking up as well as a number of other verticals likeRetail, Manufacturing, Hi-Tech, all driving growth. From a

technology point of view, we are investing heavily in Mobility, Big Data, Multi-Channel and Cloud Platforms.

How do you rate the performance of Diligenta? Is it going to remain focused on the insurance BPO businessor are you scouting other opportunities? What are yourplans for the company? Are you looking at other markets than the UK for Diligenta?Our BPO business has done well and has recorded good revenue numbers. The recent deal that Diligenta signed withFriends Life in 2011 is a testimony for the focus on the Insurance BPO sector. In size it represented our secondlargest deal worldwide historically. We are always looking out for the best opportunities in the market.

How is France & Germany shaping up for TCS? Has crisis made more CIOs here open and amenable to looking at Indian IT?Both Germany and France represent focus growth marketsfor us. We have been focusing over the past 2-3 years in significantly strengthening our local models in both countries and have set up strong front office teams ( sales,customer relationship, delivery operations personnel) tocater to the unique language and business considerations ineach country. This puts us on a good path to growth in thesemarkets and we have built up a strong roster of clients fromthe CAC40 and DAX30. Incidentally, recently we won anaward for innovation and investment in France, given by theGreater Paris Investment authority - in recognition of ourmajor expansion in the market. ■

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We are here at the Nasscom Summit again and the

economic forecast for the country has been going awry.

Have you had to relook at your own projections for 2012

and what impact do you see on IT industry for domestic

economic slowdown?

Well I think, in country like India, we are of course integrated

with the global economy and but currently we would

probably grow at 7%,and given the economic environment

around I think7% is a good growth rate but it cannot sustain

the kind of investment that we need to make into social

Interview: Som Mittal, President, Nasscom

Economic environment could improve in Q3-Q4

The year 2012 does seem challenging forthe Indian IT industry as it grapples withpolitical and economic uncertainty aroundthe world and at home. But Som Mittal,President of Nasscom remains confidentthat the year 2012 would end on a betternote for his members than it has started. Inan interview with Biz@India, he outlinesthe challenges and opportunities for Nasscom and the Indian IT.

Somn Mittal_Layout 1 5/15/2012 1:44 PM Page 34

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schemes and hence it is also important that India goes up the

chain. In the last year, almost every economy was one percent

or two percent lower to what wasforecast. Given the fact, we

still grew our exports last year at 16.3% which I think

establishes the fact that fundamentals of the industry is very

strong and the reasons that the customers buy continue to be

very strong.

What are the principal challenges for the Indian IT in

2012, besides revenue and the profitability?

While our fundamentals are strong and our customers are

doing reasonably well, it is shown from their balance sheets,

given so much talk about the uncertainty, there are elections

in the USA; there are elections in France, India, and Russia.

There is change in political leadership in China. Due to the

uncertainty, people tend to hold backtheir investments and

that has a certain impact on the revenues. We have forecast

that in spite of the current environment, our growth will be

between 11%-14%. But, we think in next two quarters many

of these clouds will go away and then we will review our

performance and probably have a new forecast in October. I

hope that this time we will be taking it upwards. But, having

said that we are still going to add net 200,000 people in India

and I think it’s important to understand why we continue to

grow in spite of these uncertainties and I think it is because

of what our customers are doing. With the new developments,


customers are transforming their businesses, they are

adopting mobile platform, and they are getting on to the

cloud. They are also looking at how social media can

beleveraged. They are also looking at how new emerging

markets have to be developed. So I think these are the areas

that are leading to investments in IT.

You outlined factors that could be negative, but these are

external factorsthat could be negative. What about

inherent factors, internal weaknesses that you think

need to be addressed for the IT industry?

Well, there are surely a lot of things that we have got used. We

do spend a lot of effort and money in training and reskilling

people. India infrastructure is improving but you know at

this point of time, I would say, energy crisis in terms of not

enough supply of coals and fuels and due to this we need a

100% back up for everything we do and again we hope that

there are no disruptions that happen because of elections. We

have had severe bottlenecks in the past. We do think that the

government needs to spend some more time in improving

the business environment here, make it easier; there is too

much tax litigation. Laws need to be simplified, direct tax

code and GST, which was a very important input, hasn’t been

passed by the parliament yet and I think these are important

changes in the policies that we would expect.

What are the major issues on NASSCOM’s table for

2012-13 and do you see trends of increased

protectionism in Europe impacting IT industry?

Well, if I look at Europe in particular, Europe is generally a

higher cost economy than the USA is and I think if Europe

has to maintain its competitiveness and markets that are

growing like India, the cost pressure on them are higher. If

you look at Europe, at least in the tech sector there is a huge

shortage of people and technology is only one, which can

make the governments more efficient. While there may be

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BIZ@INDIA OECD May 2012 37

noises around we don’t think protectionism can come. So,

we will have to work harder and one of the big agenda point

for us in 2012 is going tobe to ensure that we have our view

points on the table and no untoward legislation can get

passed which could be detrimental toour industry but also

detrimental to those economies in the long run.

India and EU has been negotiating at the FTA for long

time, now they say, they might close the deal this year.

How will NASSCOM ensure that it gets what it wants in

the deal?

I think there are major issues that are very major and

important for both the EU and India and these are around

mobility and how data protection is seen. Data protection

and data privacy is a major topic right now across the world

and we think if EU comes in with the dramatic restrictions

on this, then I thinkthe cost to EU will be pretty great. So,

these are few issues that are on the table in EU and I think

discussions have gone well and hopefully as you said it will

be the largest FTA that EU and India will sign and I think it

will be good for both.

Given the fact, that France is ready for the elections and

the Eurozone the crisis are not getting any better. Do

you really see a political will that is necessary to sign

the FTA?

We must get this clear that European markets are traditional

markets andEurope companies or French companies are not

the companies whose economy is not growing. So, if growth

is in countries like India then you would look into how the

market gets opened up for you and hence the FTA is very

important. It should be a feather in the cap of the current

political dispensation or anyone else who comes in because

it’s a forward looking thing rather than giving in. So, it’s a

give and take, which actually should be a win-win for both.

How you think cloud will impact the global sourcing

market and will it become challenge for Indian IT?

Every time there has been a technological disruptions and I


go back to people raisingissues when ERP was coming in and

they said now that there is ERP there will be no IT industry

left in the world. Actually, the emergence of SAP, Oracle

Financials and ERP helped grow the overall market. Cloud

we think, there will be something that may be reduced but on

other hand overall market will increase. Because there are

some issues related to the small and medium sized

businesses, which the traditional solutions are unable to

address. They can’t afford it but they need it and the cloud

allows it. So, I think overall market will increase. Also our

initial analysis of large corporations shows that there are

many technologies that were not adopted because they didn’t

think it was worthwhile but if it’s in the cloud, where the risk

is not there, they will probably be adopting it. I think cloud

will be a major game changer and it will overall change the

market seemingly to some time or some places for those

companies who did not ride the cloud wave if it would be

negative. But, the trajectory,that we have seen is most of the

service provider have adopted the cloud strategy.

How is the consumerisation of the IT impacting

NASSCOM members?

If you look at India, our biggest issue right now is

connectivity. 2G has come in and 3G still has to really roll out

and it has to be at an appropriate price point. But the

government has committed that in next two and a half years

they are going to connect 2,50,000 villages on broadband

using fiber optics and the last mile with the Wi-Fi. So , that I

think it is going to be a game changer because that will

connect those villages and the power of Internet will be used

and I think its going to be major and new platforms like UID

emerging which will again provide companies to develop

applications which we have thought of. So, there are many

things that are happening at the stage which would in fact

increase and make people inclusive in this. You heard the

minister speaking this morning about making electronic

service delivery mandatory and it means that over next four

to five years every service that the common citizen gets will

be electronically delivered. If that happens then there is a

whole lot of stuff would have happened between now and

then, which is about proliferation of IT at a consumer level.

Finally, what is the new or final frontier for NASSCOM?

For us, it is to open up new markets. Two of the second and

the third largest global economies combined, China and

Japan, give us less than 3 percent of our revenues. They have

a need and we have to break through their difficult markets.

But, for next few years we need to crack them and closer here

we have a very large opportunity emerging for small-scale

industries in the product space where on the internet and the

mobile platform they will introduce innovative products. We

have at this point almost 3000 companies that need to find

early stage funding, they need to be nurtured and they need

to get a market place and I think that’s going to be a major

focus for us.■

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How you think theEU-India FTA negotiations will finally fall in place?It would have been good, if the FTA could have been signedat the EU-India summit held in India recently. I always believe that the deadlines are the best negotiators becausedeadlines then make sure that one concludes whatever onedesires and the fact that they are not happening now, I reallydon’t know what it means for a new deadline. I would like to

see it happen as fast as possible. From whatever contacts thatwe have had, I believe that there is desire on both sides toconclude these negotiations there is a possibility that during the year the FTA would be signed.

But, for that to happen, one side has to giveinterest,which will show that interest?See, any negotiations are give and take. Ultimately what we

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We need to focuson growth

Interview: R V Kanoria, President,FICCI

R V Kanoria, Chairman and Managing Director of Kanoria Chemicals, is also thePresident of the Federation of IndianChambers of Commerce and Industry(FICCI). In an interview with Ranvir Nayar,he outlines the challenges for the industrytoday, including the inconclusive negotiations for an EU-India Free TradeAgreement and also the role that businessescould play in the current global crisis.

ficci interview_Layout 1 5/15/2012 2:33 PM Page 28


are trying to achieve is benefits for both countries. When weare negotiating, it feels like a lot of pain. So, there are painson both sides and at the end of it I think there will be gainon both the sides.

Do you see flexibility on European side on India’s key issues and if you can enumerate what are our key issues?One of the key issues that we have is apparently in the service sector and that is the free movement of our nationals in European Union and that is mode 4 negotiations. I am using ‘mode 4’ in the WTO terminology.It’s not in the context of the India-EU FTA. Negotiations arealways difficult and create an environment more difficult. Ifwe look at the success of world trade negotiations, even atmulti lateral negotiations, most successful period was inmid 90s and entire world was facing an economic boom andthe worst experiences have been in the time of economic crisis. In 2001 when there was a crisis then it was thoughtthat the trade would actually lift the sentiment and in 2001very clearly, the Doha development round was born. Whenall the wisdom in the political circle in the world thought thatthe right thing would be to give a boost to trade and development and as a result of that take the world out of economic problems. We don’t see that sense of urgency any

more and seems that trade has gone onto the back burner. Ifeel that one is the economic problem, secondly out of thefive permanent UN Security Council members; four will undergo changes in government this year. So as long as thereis political agenda there is bound to be more attention to theissues that are more domestic in nature. So, I think atmosphere right now is difficult.

As far as give and take from India and EU point of view,from the EU side the major issue is the automotive industrywhere there is this talk of reduction in tariff from 60% to30% and for small automotives, as far as I understand Indiahas already agreed to reduce from 50% to 40%. We probablysee some kind of hybrid solution coming out in the sensethat there will be reduction in tariffs, there will be a phaseout over a period of time to afurther lower level. We formourTRQ which is “Tariff Rate Quota” where number of automobiles allowed and lesser duty will be limited and thatcould be as country wise and the EU as a whole. As far aswines and spirits are concerned, there seems to be somekind of understandings. I don’t see any serious main pointsother than services. Now, beyond that there is obviously thisconcern, even though trade issues might get resolved, thereare large numbers of non-trade issues and very rightly so India is concerned that some of these non-trade issues are

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becoming more important than the trade issues. Whetherit isthe environmental standards or labor standards and some products of Indian originhave faced lot of problems because of technical barriers to trade. So, I think on thetable the non-trade issues have becomemore critical than the trade issues and Ithink they need to be addressed. I feel thateven in general, even for the multilateralsystems non-trade issues will start dominating because we are kind of bundlingall the tariff issues into a quantitative numberand the fact that the tariffs are no longer theremeans all the issues become negotiable on an independentbasis. So, I think that needs to be kept in mind.

You just expressed your optimism or hope that the FTAwill be settled this year, but there is crisis, which is notgetting better definitely, but getting worse. France haselections, so isn’t that being a bit optimistic for this year?I still think that the threats in this entire FTA are very limited. So, even if we have an economic crisis or even if wehave political compulsions due to elections. I think threatsfor the India-EU FTA are very limited,from a strategic pointof view because it’s good for both nations (if I am allowed touse this terminology, though EU is not a nation in a sense,but it is an economic block which is acting in unison). I

personally believe that it is a durable and definitely achievable objective.

Then why it was not done so far, because thesame issues have been on the table?See, the issue of the free movement is verycontentious right now because this whole issue of domestic jobs being exported thatneeds to be addressed and as I said if I am

going in for election. It’s not an idea which youcan sell. So, when I said during this year, I meant

later this year and by that time all this will be overand all the elections will be finished and the last one

happens to be in USA. So, this entire psychology is likely isunder going a change. At least, I think that so. But, by thattime we will be ready with our elections here.For our election, I don’t think any of the issue dealing with the India-EU FTA is politically sensitive and if you look at theautomotive, it is industrially sensitive topic not a politicallysensitive topic. It’s good for the consumer. So, what is goodfor a consumer is actually politically a better thing to do.Iwould like to see the India-EU getting through. Business isinterested because it is for the benefit of business, in termsof technology transfers and engaging with a set of countriesfrom which there is a lot to gain.

But, if we want free movement of people, then EU keepsaying that we are 27 different countries and we have to

I wish the government revisited

this entire social expenditure and I

wouldn’t like to see moves of fiscal

consolidation resulting in an increase

in either in direct or indirect tax

“

“



check immigration with each country. These issues of security concern will remain. Within the EU you can movefrom one country to another. Thus cause some amount ofconcern at the same time. Let’s take the world at 2030, I believe 2 billion people will be added to which only the 150million will be added in the developed world. So, the demographic profile of the world is going to look very different. There will be many more Indians and Africans. So,this whole demographic profile of this world will change, Ithink the world need to be well prepared for that and bydenying movement of natural persons, they are not reallypreparing for it. It is just not migration, it is also immigration.

Indian economy, where are we? We are seeing fairlymixed signals.I think, this external focus requires a deeper internal focus

and if we are to engageourselves with rest of theworld, we need to be prepared to be able to engage. There is a need totake some bold decisionsto set the economy backon track. Unfortunately asa country our reactivepower has been reducedconsiderably because weare faced with fiscal

problem, current account deficit with high rates of interest,inflation, and not much control on our social spending. Allthese problems have to be addressed. If we talk about inflation, it leaves us little room in our monetary policy toactually reduce interest. But some countries, let’s take Brazilfor example has actually reduced the interest four times inthe last three months at the cost of inflation and fiscal deficiency because they have chosen the path of growth andI think India also needs to look at that aspect as to whetherwe will continue to talk about inflation and restrict growthor whether we can take some bold initiatives to actuallybring growth back on track.So, it’s a choice that has to bemade and I personally from the business community pointof view would like to see the choice in favor of growth.

Any bold moves in the budget?I wish the government revisited this entire social expenditure and I wouldn’t like to see moves of fiscal consolidation resulting in an increase in either in direct or

indirect tax and I would like to see the expenditure side ofthe budget addressed. I do believe there is need of social programmes, but there is also need to ensure that the delivery mechanism are proper and the target for whom thesocial programmes are meant are the only recipients of that.Hence, there have been some issues that we have mentioned.One of which is subsidy in hydrocarbons. I am using theword hydrocarbons because if I say diesel then there is a reaction to it. But I believe hydrocarbons in general havebeen subsidisedin the country. So, is there a need of hydrocarbon subsidy for people who can afford to pay for it?One is obviously the social aspect of it, the other one is environmental part of it. By subsidising hydrocarbon we are

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BIZ@INDIA OECD Forum May - june 2012 31


also creating this issue of climate change. I think this is certainly one area that needs to be relooked at. I also feel thatthe issue of food security needs to be tackled by takingboldstepson the agricultural sector and sometimes it is not understood that the agricultural sector is directly related tothe land holding and the manner in which transactions aretaking place.I feel that agriculture has to be given a hugeboost and for FICCI one of the priority that we haveduringthis year is to build a comprehensive plan for the agriculturalsector,so that we can atleast kind of look at something thathappened during the early 70s during the green revolution.There is a dire need of another green revolution.

Finally, Rio+20is taking place later this year, where is India in this, are we taking backseat on those issues?Again, we get into the debate of growth. We should be conscious about the language change, I just spoke about hydrocarbon therefore we need to put a policy, which doesnot encourage emission. But at the same time I don’t thinkwe could sacrifice our growth to the extent that we stifle it.

No, but my question was, that at the international fora,are we putting our points clearly and well or we sittingmore behind?As far as India’s engagement in the international fora is concerned, from whatever feedback we get is that our negotiators are well prepared and good. They have a point ofview, whichmay be different but then one is always allowedto have a different point of view. It does not mean that we arenot engaging ourselves, they may not engage themselves inthe manner that the rest of them want us to. But, people whoare representing us are doing a good job.

Would FICCI have a special agenda for Rio+20? I will be very frank with you. No matter what agenda we prepare from international point of viewI think we need tohave the domestic agenda for that. The agenda is essentiallydomestic.The international agenda is only the manifestation of the domestic agenda and from the domestic front I can tell you the key issue that the FICCI isworking is whole lot of renewable energy systems. For e.g.we talk about the development of the solar energy industryin India, whether the government has used the method ofreverse billing and subsidies, which I don’t think is the rightway to go about it. There is also a scheme which exists withinthe frame work of the government of the renewable purchaseobligations which is akin to carbon trading. So schemeswhich are more participative in the nature and do not

burden the exchequer are much better schemes as long asthey are properly enforced. So, I think we need to revisit thisentire concept. You go and commit yourself to taiffs that areridiculously low and then it continues to burden the government because they have to keep rolling out money. Sothat’s one area we are certainly working on and hydrocarbons I have already talked about and we have these kindsof paradoxical, oxymoronic type situation in our frameworkof subsidies. So we will give subsidy on kerosene and dieseland then also subsidise the renewable energy. So we need tocarefully study these from a strategic point of viewand comeup with a conscious policy of handling climate change thatalso covers issues of cost to the government and ultimatelycost to the taxpayer. ■

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Mukesh, let us start by looking at 2011 for Steria in India? Did you reach your targets? What were the realchallenges that you faced in this?I think financially, we achieved all our targets, met all ourKPI’s for the year. We also, basically, had a great delivery environment where we renewed every contract which wasabout to be renewed in 2011, all were renewed. Attrition wasdown, our utilization was up and we added few hundred netemployees into the environment. I think our challenges weremore from the perspective of how do we bring transformation into our services line. Because as the model is shifting,

it’s shifting into cloud. It is shifting into shared services. Sowe need to start positioning ourselves to provide better & efficient services to our customers. So I think that’s what thechallenges were. Domestic market was successful for us. Weadded a dozen new customers domestically. They rangefrom telecom companies down to consumer electronicscompanies, our government business, we feel that we’ve builta platform in 2011 to drive in 2012 much more effectively.

Let’s talk a little bit more about the domestic market andyour domestic customers. First of all, how do you place

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Taking Steria to newheights

Interview: Dr Mukesh Aghi Chairman & CEO of Steria India

He likes running marathons and climbing peaks. Clearly not the one tostep back from challenges of any kind.And overcoming them. This is preciselywhat Dr Mukesh Aghi seems to be doingat Steria India, a company that he heads.His ambition is to take Steria India to newheights, not just within the Steria Group,but also as a player in the Indian ITsphere. So far, he seems to be keeping thepace and meeting his targets, as he explained in an interview with RanvirNayar.

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them in terms of the deal size and the margins that youhave in India compared to your French margin?The deal sizes have always been smaller in India as compared to what happens in Europe. I think from marginside, because its domestic market, we are competing muchmore aggressively, head on with the Indian pure plays also,so margins were also lower. But the key thing is that, we aregaining market share. To me, that’s important. And moreimportant is that we are bringing solutions which were builtfor European customers, European markets, into the Indiandomestic market. And that’s our go-to-market strategy here.

So for 2011, what’s the percentage of domestic vs.international customers for you?Still very small.Very small. I think less than 5%. But its growing, you know, exponentially.

What figure will you be happy with? What is the optimum figure for you?Well, you’re never happy! (laughs) with any number! I thinkyou just want to grow growgrow.

What’s a good balance between domestic and overseascustomers?Well I think, in the next few years, we can have 50-50. Thatwill be optimum balance for me.

Oh! That means you need to see a dramatic jump in yourdomestic business?Yea, we need to, we need to.

How will you get there? Well both organically and in-organically. So, we’re seeing


grow th coming in organically. We are looking at opportunities to see if there is something that fits in with ourneeds, from acquisition perspective, we are looking at thatalso.Well, that also puts severe pressure on the margins, because Indian margins can’t be compared with overseasmarkets.No, but see, it also helps in your bench. So what happens is if you create a better bench, you can train thatbench in a domestic market and then use it in internationalmarket for a higher billing also. So it works in your favor.

How important is India for Steria?Oh, very important. If you look at it, today, Indian market is40+ billion dollar market from a services perspective and itis growing at about 18%. So in the next few years, the size ofthe market will be the same as France. So it becomes veryimportant for us to position ourselves. So that’s one.Two,there is a growing business between France and India. Wejust placed an order for, or selected, French fighter planesRaffale for $20 billion and I believe that’s going to drive morebusiness. So I think the trade between India and France willgrow, and from that perspective, it is important that Steriahas a strong position in Indian domestic market.

And, besides looking at the Indian market, as Steria India also caters to overseas customers, where wouldyou place Steria India within Steria Global?

Well, from headcount perspective, we are roughly 30% andwe would like to see this go up to almost 50% in next threeyears. So that’s one aspect. I think Steria India also is a launchpad for us into rest of Asia- Pacific. So with the solutions thatwe have developed, we would like to go into Singapore, intoHong Kong, into Malaysia, into Thailand and into other geographies also.

Ok. And when do you get on that work?We’ve already started that. You know we have a small officewith 70-80 people in Singapore. We are looking at providingsolutions in Malaysia, in Korea, in Vietnam. So, that processstarted last year.

How badly has Steria been impacted by the Eurozonecrisis and the general slowdown in the world?I think business wise we have not been impacted. But, Ithink, psychologicallyor mentally, we have prepared abudget process, which is quite conservative, for 2012 and soI think I believe that Eurozone crisis is an opportunity forSteria. We feel, that the company will have to become leanerand meaner and more efficient and offshoring is an answerfor it.But are you seeing, I mean, France and Germany havebeen rather reluctant to go for offshoring. Do you see thatchanging now? And percolating beyond the top 30-40 companies in these countries…



No, we are not seeing resistance, I am seeing more interest,I am seeing more visits by French customers, I am seeingmore visits by German customers, looking into India fromoff- shoring perspective. But I think, if you look here from atechnology perspective, the offshoring concept will goaway in next few years; because with the cloud coming in,you’ll have services on a cloud. It just doesn’t matter whereit is coming from. It could be India, it could be Germany, itcould be France, it could be Poland; it doesn’t matter as faras it provides cost- effective services to the customer.

Is that advantage for Steria? And is that a challenge forthe Indian IT players?I think it’s an opportunity for Steria because our customershave been with us for 42 years, so there is an intimacy withthe customer so I see it as an advantagevis a vis the pureplays.

What do you feel about the Indian IT industries growth?Do you think they have finally found a mark in Europeor are they still struggling?I think, in continental Europe, they are still trying to findtheir mark. It’s a complex market, the customer is saying Iwant intelligent solution;it’s not about just cheaper andfaster, it’s more than that. They want local facing professionals, so you got to convince the talent locally towork for them. And that is going to be a challenge for Indianpure plays because, you know, a good talent will want towork for French company orGerman company. And so, wehave that advantage.We also come with the pedigree ofbuilding one of the best solutions for the customers. So thereis a trust, which has been there for the customer from all thetime. Yes, we have our challenges also. We need to respond toour customers in a much more effective manner, in a flexible manner. So, I think, when I look at it, there’ll be challenges for pure plays, there’ll be challenges for Steriaalso, but we do have some advantages, and one of them is ourrelationship with the customers.

The Indian domestic scenario, both political and economic, is it beginning to worry you?Well, I think we have to understand, we, as a nation, have togrow our economy, almost 10% a year, because we addroughly 10 million new entrants every year, so we have tocreate 10 million new jobs every year, so we have to maintain that momentum. I think what is worrying is thatwe have a policy paralysis because of politics in decision-making and that is hurting the momentum. And if

we don’t fix that, I believe, it will be very challenging, verydifficult for the country to kick start the momentum in animmediate fashion.

Do you see that paralys is going on? What would causeit to go on? Obviously, I think, if you have a clear majority of a singleparty in the centre. But if you look at it for catharsis, we arein here for coalition government for long long time. We havestates under different political leaderships andI don’t seethat going away. And I believe that for India to take off, weneed to make bold decisions. So, bold decisions like whenUnited States made a decision to send a man to the moon!We need to think out of the box! Ina coalition government,we can’t do that. So, I see lot of changes in the next 5-10 yearsin the country.

You mentioned that you could look at some acquisitionsto grow in India. What kind of acquisitions? What is thesize of the deal you are looking at? Which vertical?Well, I think it’s not the size of the deal. For us, we are looking at acquisitions that can help us drive growth for usin India. It could be footprint on a customer basis, it couldbe on the Intellectual Property or IP basis, it would be on arecurrent revenue basis. So, size is not the issue. I think thereare multiple issues that make a difference for us.

Were you surprised by the 2G decision of the SupremeCourt and what do you think are the implications ofthat? Though it’s not related to your industry but doesit give you a cause to worry?Well it’s positive and its negative both. One: yes I was

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surprised to cancel 122 licenses. I think it corrected the behavior of the previous telecom minister. So, it sent a message to the current government and future governments: if you misbehave, then you have the SupremeCourt, which will come and step in, and correct you. I thinkit also sent a wrong message to external investors. Whatguarantee they have, when they come into a country, thattheir investment will be protected.

We need to find a solution for companies such as Telenoror Etisalat, so their investments are protected. And we willfind some solution to it. But, more important is, that withinfour months, they will have the auction once again, which Ithink will bring in more transparency, and which is normal.I think, you know, at times you got to boil the environmentto purify the environment; obviously. And currently thatcleansing process is taking place.

And, finally, a little about the OECD countries, and that,what kind of economic situations do you see there, anddoes that represent an opportunity for India?Well, I think, if you look at it, there is a fantastic opportunityfor companies from OECD countries to come into India. Letme tell you one thing. Next 10 years, roughly 400 million Indians will migrate from villages to the cities. We need verysmart transport systems, we need intelligent health care systems, we need to think something different about education system, security. We cannot build enough infrastructure, highways to accommodate all that. So, weneed the technology, we need the renewable energy of theOECD countries to come in as partners. We don’t say help us,we are saying come and make money! Absolutely!

But bring a technology which is going to help us; becausethis migration is not justIndia’s issue; it becomes a global environment issue because today, roughly those 400 millionare almost zero carbon contributors. So, once they have access to electricity, refrigeration, television, cars, scootersetc, they will start contributing carbon dioxide to this environment; and that will not be just India’s problem, it willbe a global problem.So, I think, it’s a partnership that weneed to explore and it has to be a win-win partnership. So, Ithink it’s a fantastic opportunity for the OECD countries tocome in and explore India from that aspect.

You talked of carbon emissions and pollution. Do youthink that the IT industry is playing its due role in controlling or curbing pollution and protecting the environment? It’s tough to say. And I’ll tell you why because the laptops we

produce, the I-pads we produce, you know after 6 months,12 months, they become irrelevant. And they become awaste. The electricity we consume. But I think, at the otherside, we are. If we look at Steria France headquarters, it ispositive generating building. We contribute from that building to he local grid. So, I think, that’s a trend which istaking place, and we, Steria, are very conscious about that.We basically, for example, for every time we take a flight, wecontribute towards plantation of trees. Our mission is thatwe will be a zero carbon contributor. And we have been certified as one of the best green companies in Europe fromthat scenario. But from alone IT perspective, I hope we stillhave lot to do and hopefully other companies will do thatalso.

But do you think that IT could be used in a better way tomake the earth green or, I mean, all the businessprocesses, all the production processes, can be more efficient and less polluting?Oh yea. Absolutely! If you look at it from our connectivities,we are using less paper, cutting fewer trees; so, I think IT isstepping in from that perspective. I think IT is coming withintelligent grids, smart grids.

So you know we are able to reduce the wastage of electricity, we are connecting cities, we are connecting people, we are connecting schools, hospitals, which is generating less CO2 also. So I think from that perspective, Ithink IT is playing a role. It could play a better role, which isalways, you know, we can go in that direction ■

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Curiously India and the EU have suffered a similar history over the last 2000 years. Their kingdoms havebeen ransacked by armies of occupation, even the

Romans captured the north India regions so supportingeasier trading from distant UK through to India; religious

strife was common place in both regions; and while aroundthe coasts in the many ports local people met and mingledwith a myriad of others the people in land hardly saw a foreign person during their lives. The more and more insular village people travelled little, with only a few

EU-India Relations

EU and India share history and historical links and today they also face similar sets ofchallenges. The leaderships in both regions need to take some hard decisions to set theirhouse in order. writes Frank-Jürgen Richter.

Facing similar challenges

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BBIZ@INDIA OECD Forum May - June 2012 47

herding their livestock to a local market bringing back newsof the 'wide world'. It is only in the recent past that the na-tions of Europe and the many regions of India have achievedpeace.

Peace is important to maintain trade, prosperity andgrowth. As noted above, the Roman armies conquered 'theworld' and, having conquered, they imposed a common setof rules and laws sub duing local customs and often mini-wars. The main effect of this control was the openingup of trade. Stability and consistency of rules and knowledge of trading partners and their needs are thebedrock of trade. Modern trade is dependent on standardsapplied through common software packages run by ports,shippers, and by the freight forwarders to ensure door-to-door tracing and tracking both for the physical productand for the payment of dues and taxes on the products withall transcripts being digitised and with the goods' protectionguaranteed by insurance clauses. Trade increases in linewith national wealth, and there is a 'chicken and egg' situation for traders as ports and hinterland services have

to be developed to allow largerships to berth and beloadedin a timely fashion. The services have to be considered,planned and implemented as part of a 'trade agreement'which take some time to beagreed.

Not with standing any private trade arrangements between parties in Europe and India their governments haveheld formal meetings to forge 'relations' from in the mid-1960s. Then in 1994 there was a Cooperation Agreement; in 2004 was the 'Strategic Partners' plan, whichwas upgraded by the 'Acti on Plan' of 2008. Now there isthe EU's Country Strategic Paper for India 2007 - 2013having a focus on mutual aid on education, health, energy,environment and trade assistance as well as on joint anti-terrorism planning. But this succession of accordsdoes not imply good progress. On the contrary, formalagreements have been slow to beagreed as India seemedquite reluctant to acknowledge the 'EU' preferring insteadto forge bi-lateral deals with individual nations rather thana wide FTA (free trade agreement) as desired generally bythe World Trade Organisation, and as hoped for in the Doharound of meetings, but which stalled. During the earlymonths of 2012 the EU and India have failed to agree on theirduty and tax levels - for instance, the Indian tariff on European car imports is about 10 times greater than the reverse EU barrier, and the EU views Indian software housesas potentially overwhelming the software workers of the EU.

Of course it was recognised that this agreement wouldcreate the world's largest FTA with a population over 1.8 billion, more than a quarter of the world's people. Even so,India has kept the EU at arm'slength over some five years of

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negotiation while trade mounts. In 2010 the EU goods exports to India were EUR34.7 billion, in reverse wasEUR33.2 billion; services trade EU to India were EUR9.8 billion, in reverse EUR8.1 billion; and Foreign Direct Investment (FDI) from EU to India was EUR3.0 billion, andin reverse EUR0.6 billion. There are many political agendabehind the accords. In Europe we know that its internalAccord rests on the people's agreement within each of the27 nations, and that many do not like the impression of rulesfrom Brussels over their own national parliaments. Thesituation, in practice, maybe similar in India, as the enforcement of Indian laws set by the parliamentin Delhi is not enjoyed by leaders in the re-gions, nor by the mass of people inthese regions, but there are farmore people in India swayinglocal as well as national opinion.

Progress in Europein comparison to Indiaseems to more effective. Let us consider transportagain (as it is the carrier of trade,growth, and thuswealth). The Euro-pean road and railsystem once was mess- national systems hadgrown incrementallyover many years withindividual nations decid-ing not to provide interlinks tothe next country to protect theirown nation in times of war. Thatidea did not work in practice. The EUgradually formed the opinion that if it wishedto proceed to the 'EU Single Market' (for the free exchange of goods, services and people) it needed to havean integrated road and rail system across the whole Union.It decided by the end of the 1980s on the construction of themulti-modal Trans-European Network for Transport (TEN-T). This plan also encompassed the ports of Europeas they was seen as multi-modal points of exchange to bothshort-sea shipping (so reducing load on the in land freightnetworks) and to oceanic shipping (increasing externaltrade). While TEN-T was beginning in Europe the same

integration concept was being pressed by the EU in CentralAsia, and with the help of the Asian Development Bank theconcept was extended into eastern Asia. The TEN-T development was materially aided by EU structural fundssupporting, in fact, transport, energy and telecoms and bythe European Investment Bank (EIB). There was an integration of national as well as pan-Europe progress whichallowed the Schengen Accord for the free passage of goodsand people across national borders without hindrance andthe inconvenience of halting for passport or other paperchecks. One TEN-T report say the EU 27 comprises 5.0

million km of paved roads which is slightlymore than the of Indian's 4.42 million

km total (which only comprisesabout 250,000 km of highways

and paved roads). TheIndian government was

a slow to redevelopits roads (and

railways), only-pressing ahead inthe late 1990's. Infact the Indiansystem still hastoo many unpaved roadssupporting toomuch heavy

traffic - thus thedensity of paved

roads in India, whileincreasing, may be

some 10 - 15 timeslower than in the EU. The

flow of vehicles on all roadsis hampered by overcrowding,

by too large a mix of users (frombullock carts to huge trucks) with most

engaged in poor road manners like driving contrato the correct flow on dual carriageways that causes manyavoidable deaths of man and beast.

Surely this hampers its economy? A 2009 report by Goldman Sachs suggests that India will need to investUS$1.7 trillion on its infrastructure projects by 2020 to meetits economic needs. This is a lot of cash in a country that hasjust suffered a downgrade by Standard & Poor's to BBB- (negative outlook) that also implies a 1 in 3 chance ofa further downgrade. However other rating agencies


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maintain their BBB- (stable) rating - but this is only onegrade above junk bond rating (ie not advisable as an investment). While Europe carries grave concerns about itsfinancial cohesion it still maintains a high rating overall.However S&P look gravely upon Europe saying it carries toomany stresses and it is not moving fast enough to removethese difficulties - legislating for austerity is not a route togrowth - but the banks and governments face many andconflicting demands. For instance, banks need to increasetheir lending to stimulate growth, but they are told also toincrease their margin of cover by new Banking rules: it is aglobal problem affecting India as well.

Recent agitation in several countries does not reduce thestresses according to the ratings agencies, though they maymake the people happier in the short term by their votingaway of reformist policies. But the people conflate their woeswith the effects of globalization as well as the need for freermovement of goods, services and people - they fight against'everything' while also wishing to benefit from the socialwelfare that has reached quite high levels over the pastdecades. One can't enjoy 'free' gifts without working and returning taxes to the governments.

In India, over the first 50 years of its independence littledrastic has occurred except perhaps for its explosion of population due to reducing mortality without a decrease inthe birth rate. It chose early to be an independent nation so

did not benefit from much inwards investment after the lastworld war as the big economic blocs sought economic colonialism. Therefore India funded its own growth fromsavings rejecting inwards investors. It invested well, but forgot to police its fund flows. As a result too little cash flowsto the project targets - as little as 17 percent of funds according to some government spokespersons. And whilelocal investors deplore its high and steady corruption thereis a lack of government will to pursue anti-graft laws. Therefore inwards investment has been restricted by policyinactions-the desire to be independent and letting corruption run rife to the highest levels of government: itsgovernance needs to become clear and transparent. If itcould introduce these social reforms it would free cash andby enabling structural support for investors would increase growth through breaking its government paralysis.As it is, many point disparagingly to recent policy setbacks, such as a failed plan to open the retail market toforeign investment, as well reneging on proposed changes toIndia's tax laws and to cleaning-up corruption scandals. Inthis globalized world we must be pluralistic and open tocompetition, but Indian negotiators fail to address these issues - as noted by the EU in its pursuit of wide accords and FTAs with India.

In Europe one cannot fail to notice the very differentstances of member states - there is a strong north/south divide that affects social, public and management life andthere is an east/west divide as each adjusts their historicalnorms to the needs of the whole: always the management ofthe EU looms over us. Yet the EU must also learn - it is latein coming to a firm stance on foreign policy for instance thatIndia knew from its early days was to be one, not of isolation, but of independence. India has the benefit of being a single democratic country - yet it often behaves asthough its regional governors were in fact independent presidents not beholden to the national government, and thelatter seem unwilling at times to exert due control. Soon theEU, India and other nations must relinquish their soft idealsof "see the world in all its magnificent variation" and insteadaccept the hard facts of finance, that "... money does notgrow on trees". Each of us must nurture our specialties,growing our 'trees and seeds' for our mutual benefits - thatmeans with good governance, transparency and ecologi-cally correct.

Dr Frank-Jürgen Richter is founder and chairman andHorasis, a global business community. Horasis hosts the annual Global India Business Meeting, the 2012 edition willhe held in Antwerp, Belgium, 24-25 June. ■


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Rapid urbanisation of IndiaA recent study by Morgan Stanley hasfound that India continues to urbanize at a strong pace, driven by acombination of increasing consump-tion, robust job creation and growingfinancial penetration.The studyshowed that India's urban populationhas grown by 2.8pct annually over thelast decade. Urbanization is driven byjob offerings and infrastructure creation that lead to populationgrowth. With this growth, it creates income, savings and consumption."The findings will form the basis formedium-long term sector trends,"says Ridham Desai, Head of India Research at Morgan Stanley. "Thesegrowth drivers will play a key role informing investment views at the sector and stock levels."The researchnotes that at the aggregate level, theMorgan Stanley's proprietary Alpha-Wise City Vibrancy Index reportedgrowth of 5 percentage points. Withinthe top 50 cities, consumer serviceslike retail book stores, restaurants (including fast-food chains) and multiplexes have seen the fastestgrowth during the past six-month period within the consumption component of the vibrancy index. Tous, this reaffirms the underlyinggrowth in discretionary consump-tion.Among other key findings of the

report, all three vibrancy indexcomponents (consumption, job opportunities, and financial penetra-tion) reported sequential accelerationpointing that urbanization trends arestill intact in India. Also, the pace ofgrowth of each of the components hasbeen 8%, 4% and 3%, respectively. Ofthe three components, job opportuni-ties index has grown the fastest. Thereport reveals that Bangalore, Chandigarh, Hyderabad, Pune andChennai are the top 5 vibrant cities.The relative vibrancy score for citieslike Ludhiana and Meerut is inchingclose to scores of cities like Mumbaiand Delhi respectively.

India launches farm satelliteIndia's first indigenous all-weatherRadar Imaging Satellite (Risat-1) waslaunched successfully on board thePolar Satellite Launch Vehicle (PSLV)-C19 from Sriharikota inAndhra Pradesh, on April 26. Its images will facilitate agriculture anddisaster management.In a textbooklaunch, the 1,858 kg spacecraft, thecountry's first microwave remotesensing satellite was injected into orbit from Satish Dhawan Space Centre, Sriharikota, around 90 kmfrom Chennai.RISAT-1, a result of 10years of effort by the Indian Space Research Organisation (ISRO), has thecapability to take images of the earthduring day and night as well as incloudy conditions. The heaviest satellite ever lifted, RISAT-1 throughits microwave image sensing technology would assist in crop prediction."I am extremely happy toannounce that the PSLV C-19 missionis a grand success…It injected precisely India's first radar imagingsatellite into the desired orbit," as perK Radhakrishnan, Chairman, ISRO.

India’s largest processedfood plant

Himalaya Industries Ltd has launchedIndia's biggest food processing plantset up at an investment of Rs 1700 mnat Vadnagar, the home town of ChiefMinister Narendra Modi.Branded as‘Himalaya Fresh' the products will bemanufactured at the company's plantat Sultanpur near Vadnagar. This is thefirst industrial project in this unindustrialised area, Modi saidwhile inaugurating the facility set upby the Himachal Pradesh-based Himalaya International. The plant willprocess eatables such as mushroom,yoghurt, milk cheese and potato chips,French Fries etc.

High-speed rail for Karnataka?

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Karnataka is exploring high speed railconnectivity between Bangalore —Belgaum, and Gulbarga.Addressing apress conference to announce theGlobal Investors Meet (GIM) to beheld during June 7-8 in Bangalore,Murgesh R. Nirani, Karnataka's Minister for Large and Medium Industries, said:“During our investment road show in Japan, we invited the Japanese to invest, espe-cially in high speed rail connectivity,and welcomed Japanese expertise inconsultancy and execution of rail androad projects.”“The high speed railprojects on public-private partner-ship (PPP) mode is being explored toconnect Bangalore – Belgaum alongthe existing National Highway 4 thereby linking Tumkur, Chitradurga, Davanagere, Hubli-Dharwad and Belgaum and another rail project linking Bangalore and Gulbarga,” headded.During the road show, the delegation met Dr Diazo Nozawa, whois associated with the first Bullet Trainin Japan (since 1964) and Japan International Consultants for Trans-portation which provides technicalconsultancy for projects.“There is apossibility of high speed connectivitybetween Bangalore-Belgaum, Banga-lore-Gulbarga in future and this wouldreduce the travel time to the state capital significantly from these Tier IIcities,” Nirani said.For better connectivity to Mangalore port fromBangalore, Hassan and Mysore, JapanInternational Consultants has beenapproached to construct a tunnel fromSakleshpur to Mangalore to avoid going up the Western Ghats.Niranisaid the tunnel can reduce the traveltime sharply and cut down the distance by 30 kilometres.

MRF sets up new plantTyre-maker MRF has started

production at its new plant at Tiruchiin Tamil Nadu. The company has invested around Rs 9 bn on the 200-acre plant, which will manufac-ture a full range of tyres, includingtruck tyres and radials. It will cater toboth domestic and export require-ments.The plant has just begunrolling out tyres, for both commercialand non-commercial vehicles. This facility has been developed as the existing six manufacturing units wereoperating at full capacity.MRF's othermanufacturing units are in

Arakonam, Tiruvottiyur (TamilNadu),Medak (Andhra Pradesh), Goa, Kot-tayam (Kerala) and Puducherry.Thecompany has posted a 25 per cent increase (year-on-year) in net sales atRs 32.64 bn. Net profit rose 68 per centto Rs 1500 mn. Company says that thedriver of growth this quarter has beenthe replacement market. According toan analyst, the after-market sales givepricing power to companies, enablingthem to post high margins.

Daimler to consolidate Indian truck operationsGerman auto maker Daimler AG hasdecided to consolidate its truck manufacturing operations in India. Aspart of the plan, it will shift the production of Actros from Pune to Oragadam in Tamil Nadu.The company launched the facility in

Oragadam on Wednesday. It will manufacture the BharatBenz trucksand all commercial vehicles there. TheRs 44 bn facility will have an initial capacity of 36,000 units, including24,000 units for heavy duty trucks and12,000 for light duty trucks under theBharatBenz brand.The capacity couldbe raised to 70,000 units per annum,said Dieter Zetsche, chairman of theboard of management of Daimler AGand head of Mercedes-Benz cars. Thefacility is spread over 400acres.Zetsche said India was not justemerging, but thriving. The exceptional role of the economy was amatter of fact — not next decade, notnext year, but today. “If India’s economy were in Mercedes, it wouldhave to be an SLS AMG super sportscar.“If you don’t make it here, youwon’t make it at all. Because a strongposition in the global market requiresa strong position in India and at Daimler, we always go for the leading position in our industry. That’swhy India will play an increasingly important role in our business”.TheOragadam facility can roll out oneheavy duty vehicle every 11 minutesand one light duty vehicle every 22minutes. The new plant will make lightand heavy duty trucks in the 7-49-tonne range and is meant forboth domestic and international markets, including Asean and Africa.

Biz Brief


India to be Nissan exporthub

Japanese auto major Nissan Motorwants to become the largest car exporter from India. The secondlargest carmaker in Japan is also planning to make India the launch padfor its entry level low-cost brand Datsun.Nissan is the fastest growingexporter of cars from India, in a country where South Korean HyundaiMotor and Maruti Suzuki India arenow the leading car exporters. Nissanexports have doubled to 1,00,909 carsin the last fiscal driven by strong demand for compact cars from Europeand Latin American markets.Nissanbegan to export cars in 2010 fromChennai and currently ships 85% ofits production to overseas markets. Itswholly-owned Indian subsidiary, Nissan Motor India (NMIPL), has nowstarted shipping its sedan model Nissan Sunny after the huge success ofits 'made in India' Micra hatchback,which is now sold in over 100 countries.It exports fully-built carssuch as Micra from Chennai, its strategic production hub for Africa,Europe and other Western markets.The company has now started exporting completely knocked downkits of its sedan, Sunny, to Egypt.These kits from India would be assembled by the local Nissan

subsidiary abroad. NMIPL ManagingDirector Takayuki Ishida told mediarecently, "We have ambitious plans forIndia. Exports from India have been ahuge success so far, and we want to increase it with new models, as trans-continental markets post stronger demand for smaller cars. We plan toincrease our production to over fourlakh cars, most of which would bemeant for exports."Currently, thecompany produces three lakh unitsunder the Renault-Nissan global alliance joint plant in Chennai. About85% of the production is meant to beexported to markets in Europe, Asiaand Africa. It eventually aims to pipSouth Korean carmaker Hyundai asthe largest exporter from India, whichhas shipped 2.37 lakh last fiscal.Analysts say that many car companiesin India have great potential to tapoverseas markets. "India enjoystremendous advantages of cost competitiveness due to cheaperlabour. The added advantage of hugevolumes enjoyed by Hyundai andMaruti Suzuki allow them to exportmore and take competitive advantagein overseas market. Likewise, Nissanalso has a huge product portfolio andeventually would become a majorplayer in exports market," said aMumbai-based auto analyst with abrokerage firm.

$30 bn for airport development in IndiaBuoyed by the success of implemen-tation of PPP model in airport development, the Government of India plans to invest US$ 30 billion innext 10 years with more existing airports being opened up for modernisation, according to a top official.“In 10th and 11th five—yearplans, the government has invested$10 billion. The airports developed

under the public—private—partner-ship model are presently handling 60per cent of the passenger traffic in thecountry. The Government has plannedto invest $30 billion in next 10 years,”S N A Zaidi, Secretary, Civil Aviation,said while addressing the third International Aviation EconomicsConference in New Delhi.Stressing onthe need for more airports in India, MrZaidi said the number of passengerswas likely to go upto 260 million andcargo by five million tonnes (MT) by2020.“Some new airports may comeand if needed, a second airport wouldalso come up in those cities wherethere is a need,” he added.

Easier foreign borrowingfor airlinesAfter clearing the implementation ofre l a xe d e x t e r n a l c o m m e rc i a lborrowing (ECB) norms to meet capital requirements in the power androad sectors yesterday, the financeministry today paved the way for i m p l e m e nt i n g t h e m e a s u re s announced in the Budget for the airline sector.Keeping in mind the immediate financing concerns of thecivil aviation sector, Finance MinisterPranab Mukherjee, in his Budgetspeech, had announced companies inthe aviation sector would be allowedto avail of ECBs for one year for working capital and refinancing of


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working capital rupee loans.ECBs under this provision would have a ceiling of $1 billion for the entire civilaviation sector. The cap for individualairline companies has been fixed at$300 million. This may be availed either in a lump sum or in tranches,depending upon the utilisation of thelimit during a particular financialyear.Saying the Reserve Bank of India(RBI) would come out with the relevant circulars and notification forimplementing these measures withina week, Joint Secretary, (capital markets), Thomas Mathew, said theproposals of individual companieswould be considered by RBI under theapproval route, based on parameterssuch as cash flows and the capacity ofindividual companies to repay theseloans from their foreign exchangeearnings.To increase access to ECBs,RBI would consider relaxation in theaverage maturity period for ECBsabove $20 million from five to threeyears, he said, adding the central bankwould also keep a tab on the utilisationof the funds.“Working capital loansare short-term and attract higher interest rates. Raising these throughECBs would reduce costs by 200 basispoints,” said an Air India official, oncondition of anonymity.On the possibility of raising the $1-billionlimit, Mathew said, “We will answerthis issue when we reach such a situa-

tion.” The civil aviation ministry hasalready demanded this limit be raisedto $2 billion.

Diamonds go youngerA bunch of jewellery makers in Indiaare targetting the youth for diamondjewellery, turning some long-held notions on their head.With a pricepoint at under a thousand rupees –cheaper than a pair of denims – thesecompanies are attempting to find the‘rock’ newer resting places. They areeyeing a new class of patrons thatprefers to dress in denims, offeringthem diamonds for as little as Rs499.Realising that college students are

not too keen on wearing traditionalgold, the Tata Group-owned jewellerychain Tanishq has rolled out FQ diamond for teens.Rival GitanjaliGroup too launched Amore-brandedrings starting at Rs 2,500 at a collegefestival in Mumbai last month.DeBeers, the world’s largest diamondgroup, has forecast India, China andthe Middle-East becoming as important as the US, the world’slargest diamond jewellery market, inthree years. Jewellery demand in Indiagrew 13% to Rs 13.4 trillion in 2011,the World Gold Council said in a reportlast month.Gitanjali, the world’slargest branded jewellery retailer,

expects its ‘young adult’ range to add7-8% to its revenues in two years. Itplans to extend its Gili and Asmi rangeto this age bracket. ‘Teenagers andyoung adults are moving from costume and junk jewellery to lightgold, silver and diamonds since it addsvalue to their lifestyle and fashion,’says Mehul Choksi, Gitanjali’s chair-man and managing director.

Luxury jewellery for menIndia has overtaken the US to becomethe third-largest men's luxury jewellery market in the world this year,according to researcher EuromonitorInternational. The researcher estimated the country's men's jewellery market at $194.4 million insales and it is projected to grow 36.4%next year.The figure may look insignificant in the more than Rs 12trillion Indian jewellery market dominated by women buyers, butmore and more jewellers are payingattention to this growing set of consumers."Although it's a nichemarket, it is growing. Nobody can ignore it now," says GR Radhakr-ishnan, MD of GRT Jewellers, whichpegs the share of men's jewellery in its total sales at 20-25%.Itplans to launch a new line of men'sjewellery in collaboration with designers from Italy and Bangkok.■


Biz Brief



A tale of three firms The results announced by the threelargest Indian IT companies could nothave been more diverse. While thebiggest player, Tata Consultancy Services (TCS), beat all expectationsand churned out a solid increase inprofits and turnover, its two rivals, In-fosys and Wipro ended up disappointing the market. First thegood news. TCS became the first ITservices company in the country tocross the $10-billion mark in revenuesfor the year ended March 31 and alsohad a 22.6 per cent increase in its netprofit for the last quarter of the year.The firm also gave an upbeat outlookand reiterated it was better placed tomanage growth compared to its peers,especially Infosys.The better than expected numbers also put to restsome of the concerns over the demandenvironment for IT services.“We havegood momentum. We have a goodpipeline and the traction in business ispositive. We do see a good year aheadand we are sure growth for the nextfiscal will be even across quarters,”said CEO & MD N Chandrasekaran. Incontrast,India’s No 2 Infosysslippedon several performance parameters.There was a reduction in volumes(person-months billed), weaker

pricing, lower employee utilisationand to top it off, lower revenues fromthe key US geography as well as theBanking and Financial Services(BFSI) vertical.Infosys now expects togrow at a lower rate than the industry'sgrowth of 11-13 per cent projected byNasscom for software and servicescompanies in FY13. And the thirdplaced Wipro also belied the marketexpectations of beating the upper endof its forecast and delivering growthabove its peers. CEO T.K. Kurien attributed the underperformance todelays in deal closures during thequarter, and a decline in business provided by one of its largest customers.

Publicis acquires Indianfirm

Global communications giant Publicis Groupe has acquired IndigoC o n s u l t i n g , a l e a d i n g d i g i t a l marketing and web development firmin India.While Indigo will operate as aunit within the Leo Burnett Group inIndia and will retain its name, itsfounder, Vikas Tandon, will remain asMD and would report to ArvindSharma, chairman of Leo Burnett forthe Indian Subcontinent, according toPublicis. "All the 150-plus people (size

of Indigo) are happy and rich, is all Ican say," said Sharma.An alumnus ofthe Indian Institute of Management,Ahmedabad, Tandond founded Indigoin 2000 and has clients like ThomasCook, HDFC Bank, Tata AIG GeneralInsurance, Asian Paints and DSPBlackrock Mutual Funds. JarekZiebinski, President of Leo BurnettAsia Pacific said in the press release,"Our growth strategy for Leo Burnettin India and Asia Pacific is based ontwo core pillars: digital and shopper-marketing" We want to makesure Leo Burnett has the right infrastructure in place to meet theneeds of tomorrow. I also see IndigoConsulting developing beyond India,to become an important player withinour network in Asia Pacific and globally."Publicis is the third biggestadvertising network in India and hasbeen aggressively trying to take thesecond spot, in fierce competitionwith its global rival, Omnicom, whichrecently increased its stake in Mudrafrom 10 per cent to 51 per cent. Publicis has been restructuring operations at group agency Saatchi &Saatchi in a bid to grow the latter’sbusiness in India.Besides Saatchi &Saatchi, Publicis Groupe is represented by flagship Publicis Capital, Publicis Ambience and LeoBurnett. Together with interests inother verticals such as public relations, healthcare, digital and media, the group is estimated to havea total turnover of Rs 5 bn in India.

Mobile banking norms forIndian telcosIndia has over 900 million mobile subcribers, but less than one third ofthem have individual bank ac-counts.In view of an increasing number of banks offering mobilebanking solutions in India, the

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Telecom Regulatory Authority of India has laid rules for telecom companies offering mobile bankingservices. Under the new rules, mobilecompanies have to enable banks tocomplete a transaction within ten seconds. The telcos will have to givebanks and customers the option totransact using either SMS, InteractiveVoice Response, or Unstructured Supplementary Service Data (USSD).All the operators are already usingthese platforms and hence do not haveto make additional investments.Theregulations are aimed at ensuring thatmobile operators offer good servicesto banks that launch mobile bankingservices. “Mobile banking consists ofbanking transactions and the use ofmobile networks for communicatingthrough mobile phones by the customer for such transactions. Theentire transaction depends on the capability of the mobile network to deliver a fast, reliable and cost-effective method of communica-tion,” TRAI said.

A push for electronic goodsmanufacturingIn order to encourage manufacturingof electronic goods, the Indian government is preparing a special

incentive package. The package includes reimbursement of indirecttaxes and a subsidy of 20 per cent oncapital expenditure made by high-tech manufacturers in SEZ units.Investments made in non-SEZ unitscould get a subsidy of 25 per cent. TheMinistry of Finance has agreed to theproposal with a ceiling of Rs 100 bnduring the 12th Plan.The subsidy maybe linked to the project outcome in abid to ensure that companies invest incutting edge technologies that's marketable.For example, in the case ofsemiconductor wafer fab, 75 per cent

of the overall subsidy could be linkedto production milestones.In order toraise the initial corpus for the project,the DEITy has proposed to levy a cesson all electronic products sold in thecountry. The revenue earned from thecess will be put into the National Electronics Mission fund. Accordingto estimates made by DEITy, the Government will end up being a netrevenue earner by 2020.The department has presented three scenarios with different productiontargets. If the production reaches $400billion by 2020, then the Governmentsubsidy will amount to $32.85 billionwhile the revenue accruals will be

$58.52 billion according to the projections made by DEITy.

Health in the cloud With vast amounts of medical datagenerated each year, many small andmedium-sized healthcare enterprisesare opting for cloud technology tostore, access and share data, to reduceoperational costs and increase efficiency.Unlike large super-special-ity hospitals that have in-house technology for managing data, SMEsin the healthcare space – mainly 25-50-bed hospitals – are opting forcloud technology.Hyderabad-basedRazi Healthcare, which has 50 primarycare hospitals across India, hasadopted iON – a branded on-demandcloud computing offering from TataConsultancy Services – to digitise patient-care profiles with electronicmedical records (EMRs) for easy access and more accurate treatment.“Hospitals are using technology and cloud service formaintaining patient medical records,monitoring of patients, billing andpayroll, to maximise resource utilisation at low cost and to improvedoctor-patient understandingthrough electronic health records(EHRs), electronic medical records

IT Brief


(EMRs), healthcare management andinformation systems (HMIS), picturearchiving and communications systems (PACS), and point of care systems,” said Suresh, chief information officer, SevenHills’s e-health.e-health is a part of Visakhapatnam-based SevenHillsHealthcare Pvt Ltd, a web-enabledhospital management solution (HMS)that provides end-to-end solutions tomedical players, where doctors andstaff can access the stored data fromanywhere through the web.e-health isthe country’s first paperless hospitalmodel, where every patient is allotteda unique health identification card(UHID) at the time of registration.UHID provides complete details of thepatient’s medical history as recordedin SevenHills’s e-health suite.“Currently, there are only five or sixfull-fledged paperless hospitals in India, and seeing the high storage cost,more hospitals are looking to go paperless (which saves Rs 3 lakh storage cost for a 150-bed hospital),”Suresh said.The Indian healthcare industry was estimated at $40 billionin 2010, and is expected to reach $280billion by 2020. According to Frost &Sullivan reports, spending on IT by Indian healthcare players was estimated at $244 million in 2010 andis expected to grow at 22 per cent a

year over the next 10 years.

Global CIOs depend moreon IndiaThe percentage of global CIOs (chiefinformation officers) preferring Indian IT vendors for new contractshas moved up to 18% now, from 14%in August 2011, a Barclays CIO surveysays.The report attributes this increase to Indian IT's wellroundedknowledge in multiple domains, widedelivery capabilities across onsite,near-shore and offshore locations,quick understanding of client require-ments and effective communication(English) skills."These attributeswork as an open invitation to Indianproviders, to compete on a globalscale," said K Raman, practice head atTata Strategic Management Group.Clients, he said, are increasingly finding comfort with Indianproviders."These are the fruits of thehard work and learning that desiproviders have put in. Going forward,the global customer confidence willonly increase,' ' he said.AnkitaVashistha, director for strategy &growth at offshoring advisoryTholons, said that in the last 20 years,Indian providers have worked withmore than 90% of the Fortune 500companies, gaining a huge amount ofdomain exposure.The Barclays surveyfinds that the cost-cutting nature ofoutsourcing projects will continue todrive the strength in the sector amidsttough macro conditions. Responsesindicate that overall IT budgets haveshown little change over the past 3months, with 86% falling in the flat to+/-5 % deviation range.

eClerx buys US firmeClerx Services Ltd has acquired US-based Agilyst Inc, a knowledgeprocess outsourcing company

through its overseas subsidiary eClerxInvestments Ltd.Agilyst Inc will operate as a fully-owned subsidiary ofeClerx. Amarchand Mangaldas, whichacted as the Indian legal advisor toeClerx Services, said in a statement.The transaction will be funded fromeClerx's internal resources and there isno intention to raise any incrementalcapital. The deal value is confidential.Founded in 2007, Agilystis a back-office operational and analytics company focused on theNorth American media industry.

Branding of Indian drugsmarket


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Despite a low share in the Indian pharmaceutical market, foreignmultinational drug companies haveinched past their domestic counter-parts in terms of brand sales. Of the 25top medicine brands by sales last year,13 were from the stables ofglobal drugmajors such as GSK, Pfizer, Novartisand Ranbaxy a subsidiary of Japan’sDaiichi Sanky). This is more significant because multinationalcompanies (MNCs) account for justover 20 per cent share of the Rs 650 bnIndian drug market.A recent marketresearch reportreveals that the brand-building exercise is fast be-coming more evident in a predominantly generic Indian medicine market.“MNCs’ efforts inbrand building clearly stand out incomparison to those of Indian companies,” Hari Natarajan, head,Pharmatrac said.The top-threebrands by sales in the domestic pharmaceutical market in 2011 wereantibiotic Augmentin (GSK), coughsyrup Corex (Pfizer) and anti-diabeticHuman Mixtard (Novo Nordisk).TheIndian Pharmaceutical Alliance (IPA),the association of 18 leading domesticplayers, however, felt the brand dominance did not mean increasing

MNC share in the domestic drug business. Ranbaxy, which has beenlisted among MNCs, continues to bean IPA member, despite Daiichi holding a majority stake in it.“In thelast five years, foreign multinationaldrug companies had been trying tobuild their business through the limited number of brands they have,while domestic drug makers were focusing on introducing new genericsinto the market. Since the focus wasdifferent, Indian companies might nothave had too many brands in the toplist; but on the basis of product introductions, they were much aheadof MNCs,” IPA Secretary General D GShah said.Experts differ on the viewthat the Indian drug industry is moving towards a brand-dominatedmarket. “As the Indian market has intense competition, with many similar products selling, as well asmany different tactics being exploredto procure prescriptions from prescribers, a good brand-buildingenvironment based on proven branding principles becomes a challenging task,” Interlink Consultancy Managing Director R BSmarta said.

Piramal focus on R&DThe cash-rich Piramal Group has begun making serious investments inpharmaceutical research and de-velopment (R&D). Piramal HealthcareLtd (PHL) recently acquired theworldwide rights to the molecular imaging research and developmentportfolio of Bayer Pharma AG. Financial details of the acquisitionwere not disclosed, but the move issignificant, as the company would getrights to florbetaben that may help detect signs of Alzheimer’s disease.Since the Rs 170 bn sellout of its domestic formulation business to US

drug maker Abbott in September2010, Piramal Healthcare has been onan investment spree across verticals—financial services, defence,

telecom, and now, pharma R&D.Earlier this year, Piramal Healthcarepicked up an additional 5.5 per cent in telecom service provider Vodafone India for $618 million, raising its totalstake in the telco to 11 per cent. Lastyear, it had also set up a financial services subsidiary, Piramal Finance,for the purpose of housing two non-banking financial companies(NBFCs) with a combined corpus ofRs 10 bn as well as a private equityventure. Again in 2011, the groupfloated a new company, Piramal Systems and Technologies (PST), tomake a foray into the defence securityspace. More recently, earlier thismonth, the group's real estate arm, Piramal Realty, bought a property inMumbai from Hindustan Unilever forRs 4.53 bn.Ajay Piramal, the PiramalGroup chairman, said, “We plan tobuild a promising portfolio in thepharma space, including our newly acquired molecular imaging assets,which will help us create a globalbranded pharma business.”■


IT Brief


In a society still riddled with disparities, wide economicgaps, stereotypes, caste system and rituals we need continuous intervention of a force that is non-political,

non-judgmental, non-denominational and rational to empower people. Technology is that force which can be

effectively canalized to achieve this. Technology is a great social leveller and an enabler. It brings access to moderntools and methods to increase productivity and efficiencyat reduced costs. It is an entry point to distribute the effectof economic growth to the rural hinterland, create an


IT industry showsthe wayThere is a rapid adoption of CSR in India's burgeoning IT industry. Managers and CEOssee that CSR is not only helping Indian society but their businesses too. By giving members of the community training, skills, techniques and tools to create social and economic opportunities, CSR programs can transform communities and allow businessto grow as Roopinder Oberoi writes.

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Corporate Social Responsibility

csr rajendra shinde_Layout 1 5/15/2012 2:52 PM Page 50

inclusive growth model.Poised to become a US$ 225 billionindustry by 2020, the Indian information technology (IT)industry has played a key role in putting India on the globalmap. The IT-BPO sector has become one of the most significant growth catalysts for the Indian economy. In addition to fuelling India’s economy, this industry is alsopositively influencing the lives of its people through a dynamic direct and indirect contribution to various socio-economic parameters such as employment, standardof living and diversity. The industry has played a major rolein transforming India’s image from a slow moving bureaucratic economy to a land of innovative entrepreneursand a global player in providing world-class technologysolutions and business services, according to National

Association of Software and Service Companies (NASSCOM).

India is a preferred destination for companies looking tooffshore their IT and back-office functions. It also retains itslow-cost advantage and is a financially attractive locationwhen viewed in combination with the business environment it offers and the availability of skilled people.For FY2012, the software and services growth is expected to

grow at 16-18% and aggregate revenues of $68-70 billion.The domestic market is estimated to grow by 15-17% withrevenues of about INR 920 billion. Apart from existinggrowth areas, a vibrant start-up ecosystem, cloud, SAAS, analytics, mobile and products for India will additionaldrivers. The prediction is that the domestic BPO marketwould reach US$ 1.69 billion in 2012 and increase to US$2.47 billion by 2014. With the first quarter of the new fiscalyear offering positive business outlook, hiring sentimentsfor sectors like IT, ITeS and telecom have risen by over 20 percent, says a study by TeamLease Services Pvt. Ltd. The Employment Outlook Report for the period April-June 2011says that the hiring intent from IT and ITeS was the highestin cities like New Delhi, Mumbai, Hyderabad and Pune.

Telecom Regulatory Authority of India (TRAI) istargeting a 10-fold increase in broadband subscribers to 100million by 2014. The country has 10.29 million subscribersnow. "We will have 100 million broadband subscribers by2014," J.S. Sarma, Chairman, TRAI said at the fifth India Digital Summit 2010 organised by the Internet and MobileAssociation of India.


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The penetration of the internet in rural areas saw an all timehigh in 2011. In a survey conducted by IMRB for the Internet and Mobile Association of India (IAMAI), the totalnumber of active internet users in rural area rose by 98 percent to touch 24 million by the end of 2011 from 12.1 million in December 2010.

Initiatives by IndustryThe business community is being challenged to be more innovative and competitive, more productive and profitable,and more responsible and sustainable. There are pressuresto deliver more value for shareholders, more security andopportunity for employees, and more collaboration andtransparency with stakeholders on the solutions for issuessuch as those relating to corporate governance, environmental protection, corruption, human rights, human resource management practices, consumer protection, supplier relations, health and safety, and others.Businesses have in many instances recognized the

challenges and opportunities that are being placed uponthem and have embraced a variety of related approaches forresponse. Corporate social responsibility and related concepts such as corporate accountability, corporate sustainability, and corporate citizenship are being used tomore effectively integrate the economic, environmental andsocial objectives of society into corporate structures andprocesses, more creatively innovate and bring value-addedgoods and services to solve societal demands, and moremeaningfully collaborate and engage key stakeholders toimprove public credibility and confidence.

In today's scenario, the companies are adopting CSR asa strategy; the involvement and approaches show how ITcompanies' concerns with waste management and supplychain have transformed the Indian IT industry and the environment in which they operate. IT plays an importantfunction in improving the companies environment credentials. Right 'people' and right 'Infrastructure' drivesthe IT sector. Thus, IT sector is an upright consumer of

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Infosys training centre


utmost vital resources; human and capital.It was observedthat education as a CSR initiative has become very popularwith many of the IT giants. Waste management as an activity is gaining momentum under the blanket of responsibility towards the entire globe with respect to thealarming global warming crisis. IT companies like TCS andWipro have developed software to help teachers and childrenin schools across India to further the cause of education. Theadult literacy software has been a significant factor in reducing illiteracy in remote communities. According to another study, the Indian corporate sector spent Rs300 bnon social expenditure during the 2010-2011 financial year,up from Rs175 bn in the previous year.On studying the topIT companies we observe that IT companies are very serious about their CSR activities, their ratings, their area offocus on CSR activities and their disclosures about theirbudget allocation towards CSR and disclosure on websitesand annual report. Several foundations run by corporatehouses plan to devise a common strategy to ensure transparency in their social and community developmentoperations, such as tracking spending in and progress ofsuch projects in their annual reports.

The transparency in disclosure of the CSR budgets is thehighest in the IT companies, which make this informationpublic both on their websites and on annual reports. All thetop five companies talk at length about their CSR on boththeir websites as well as the annual reports. The informationdisclosed is not only explicit but effective in communicationas the use of pictures, videos and audios is also done. Further, three of the five companies have a separate CSR-sustainability report as well.The IT sector distinctlyemerges as a champion in not only adopting CSR but also ineffectively managing it. It stands out and ranks among thetop in all the four parameters selected for judging the CSRperformance of the various sectors. This clearly depicts thatCSR is well integrated as a part of the business strategy ofthe IT sector because of which it enjoys the reputation of being a CSR champion. Several institutionalized attempts bybodies like NASSCOM have helped to promote CSR activities and encourage young corporate houses in adopting it. It acts as a facilitator in furthering CSR withinthe sector and ensures effective communication as well.

Recommendations for Implementing CSRNASSCOM Foundation recently initiated a study on Corporate Social Responsibility and its importance formember companies. According to the findings, CSR manifests itself in a variety of ways. For some companies in

the study it was synonymous with corporate philanthropy.For others it meant an alignment of business operationswith social values. Yet for others CSR was about operating ina manner that had positive impact on stakeholders.

In order to make CSR a more meaningful activity for itsmember companies, NASSCOM suggests:

• CSR initiatives need to become more strategic andaligned with the core business interests of organizations.

• Companies need to review all activities that could beclassified under CSR to identify the stakeholders they addressed, how strategic they were and the impact theywould have.

• Companies need to have a greater awareness aboutsome of the broad global CSR standards and guidelines thathelp develop policies, toolkits, systems and processes toboost the CSR cause.

• Companies need to set up a support infrastructurewithin their domains or work with external intermediariesto lead the process and play the role of CSR mentors.

In its final analysis, the study indicated that by and largemember companies give serious thought to CSR and implement strategies that lift up society through its impacton the financially and physically challenged citizens of thenation.■

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TCS employee in CSR activities




While TCS leads the league with its $10bn revenue, becoming the first Indian IT company to cross themagic mark, Infosys and Wipro lag behind with

big margin. Wipro however managed to deliver financialgrowth higher than Infosys, but lower than that of TCS. Anuncertain global economy and rising US rhetoric against

The irrepressible performance of TCS in the March quarter and the robust order momentum for FY12 tends to highlight the gap in the growth strategy of their close peerInfosys and Wipro, which has shown relatively slow growth in the past few quarters. Rajeev Suman, Senior Analyst, APAC at Pierre Audoin Consultants, a leading EuropeanIT consultancy firm, presents a comparative study of the top three players in the IndianIT industry.

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TCS Cheers the Industry,Crosses $10bn; Infosys, Wipro Disheartening

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World Wide Revenue

(In Milion) 10,171.0 7,017.4 5,914.3

Americas 5,848.3 4,378.9 3,093.2

Europe 2,522.4 1,621.0 1,673.8

APAC

(excl.India)671.3 597.3

MEA 193.2

India935.7 140.3

Worldwide employees 238,583 149,994 135,920

Revenue per WW Employees

(in’000)42.6 46.8 43.5

Operating Profit ( In Million) 2,811.2 2,034.2 1,232.8

OP per WW Employee (in’000) 11.8 13.6 9.1

Operating Margin 27.6% 29.0% 20.8%

Key Metrics for

FY Ended

March 31, 2012

Reporting currency: USD

TCS Infosys Wipro

The numbers represent the company’s IT services business only

Exchange rates 1 INR = 0.02080 USD © PAC April 2012

shipping of jobs to low-cost locations ahead of the November presidential election remain concerns for the sec-tor that gets half its evenue from the world's largest economy.TCS, Infosys, and Wipro are also facing increased competi-tion from bigger global rivals such as IBM and Accenture fora bigger share of the outsourcing business. However, despitethese uncertainties, each of these companies performed

very differently, giving much food for thought.Here’s howeach company has performed on certain key parametersand their respective outlooks:Expectations on revenue: Investors were disappointedwith Infosys’ poor results and even poorer forecast. It missedits own revenue guidance for 2011-2012, even after downgrading it twice. At the same time TCS delighted its

877.2

550.0

1

1


investors with positive results and outlook and became firstIndian IT services provider to cross $10bn revenue. Wiproroughly met expectations and forecast muted revenuegrowth for its key IT services unit due to a fragile globaleconomy. Wipro had just a 0.8 percent increase in volumeson a sequential basis, which was much lower than the 2.3-2.9 percent managed by TCS, but better than Infosys.

Hiring and wage hike plans: TCS plans to hire 50,000 people in FY2012-2013. The company has announced an average hike of wages by 8 percent in India. In contrast, Infosys plans to hire 35,000 people in 2012-2013, has suspended wage hike in the current financial year. At most,it would revisit the idea of hiking salaries every quarter. Thisbrings low level of commitment in the employees and mayhurt Infosys even badly. Wipro's IT Services segment added13,535 people in the last year and has announced an average hike of 6 percent to 8 percent effective June 2012.

Growth rate: There has also been a wide variation in thegrowth rates of the three players. TCS's results reinforce thata large proportion of the weakness in Wipro’s/Infosys's operational performance is company-specific and that restof the sector may be slowing down, but only gradually. Theresults could bring back some confidence on the demandscenario and therefore act as a catalyst for the stock.

The PAC VIEWPAC believes that TCS' prudent investment in SG&A (selling,general & administrative) and human resources is enablingit to post decent growth and earnings and we expect the momentum to continue. Higher investment in SG&A mainly

due to higher employee base explains the lower operatingmargin of TCS as compared to Infosys. The others still havethe time to learn from TCS to increase their growth rate. TCS’increased focus on domestic market has let them reach aconsiderable level of domestic revenue close to $1bn. Infosys and Wipro are far behind and they need to reinventtheir domestic heritages to compete efficiently.

We believe that the offshore model on which the Indian IT companies rely upon for majority of their revenue, has reached a point where incremental growth isgoing to be lower, and there are 8 to 10 established playerscompeting for the same growth opportunities. So playershave to innovate and look for more diversified portfolio ofoffering. TCS’ venture into cloud for SMBs is a welcome stepand worth following for other players in the market.Although TCS lags behind in revenue generated per employee as compared to Infosys and Wipro, but there is ahuge difference in the global employee base figures betweenthe three companies. (Refer to key metrics table), and thisexplains the lower per employee revenue for TCS.

To conclude, despite the differences in performance, PACagrees that they continue to reinvest in the business andthey definitely have a strong competitive position in themarket vis-à-vis the other players. Apart from that, TCS hasfocused on large transformational outsourcing deals overthe past few quarters, which may have resulted in its fastergrowth. ■ Report by Rajeev Suman, Senior Analyst, PAC India

BIZ@INDIA OECD Forum May -June 201260

Q1FY12 Q2FY12 Q3FY12 Q4FY12

TCS 7.4% 4.7% 2.4% 2.4%

Infosys 4.3% 4.5% 3.4% -1.9%

Wipro 0.5% 4.6% 2.2% 2.0%

Companies

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The “Y2K” episode was indeed the tipping point for Indian Information Technology industry. Not longago, practically the entire brainpower of the IT

industry around the world was engaged day and night in trying to stave off the famous Year 2000 issue. Also knownas the “Millennium Bug’, it resulted in the steep rise of revenue for Indian IT Industry. There were indirect benefitsas well, like gaining confidence and acquiring much neededexpertise in working with the global companies. Many call

it as windfall gifted by the closing 19th century. Y2K createdBusiness Processing Operations many of which were outsourced. They became growth catalysts for the Indianeconomy and influenced the lives of its people. It did alterIndia’s speed-image from elephantine walk to tiger leapsand from land of bureaucratic-babus to land of meritocraticbrains. It is estimated that world spent about $1 trillion toaddress the Y2K. However, calling Y2K as the sole factor behind the success of Indian IT sector is certainly a mistake.

And now Y2.1K bug! Is Indian IT ready?

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The Indian IT industry owes its first revolution to Y2K phenomenon, which saw a 100-fold rise in revenues. Since then, the industry has had to settle for more modest, yeta double-digit growth each year. However, now the industry might be facing yet another immense opportunity – the Millennium Development Goals. But as RajendraShende asks is the industry ready for it?

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There were technology and policy pulls and pushes too, thatcontributed to the shining saga. The genesis and enablingfactors of the excellent performance of the IT industry forlast two decades, apart from Y2K are quite evident. Theyounger demographical features, extraordinary engineering talents, English language advantage, growth ofthe private engineering colleges in rural area, opening up ofthe Indian economy, a push by former Prime Minister RajivGandhi the enabling role played by NASSCOM are the major facilitating factors that took the IT sector to newheights of revenues and profits. ‘Rise and rise of the IT industry’ is how we can describe this saga of India Shining.However rising numbers in revenue and profits of this sector do not convey the real story.

It was sheer power of people in Indian IT sector that provided hitherto unknown dimension to India’s economicperformance. It made a difference and was widely recognized by the global community as ‘scholarly brainpower’ and not just a cheap work force from the developingcountries. However, there is no denying that 100 fold increase in the revenue in 1990s to early 2000s to reach USD12.5 billion by 2005 was attributed mainly to direct andindirect benefits of Y2K affair that dominated the scenearound that time.Very few anticipated this ‘ grey revolution’like the ‘green revolution’ of 1970s. The heavy weight andfamily industrialists were busy dodging and tricking the license Raj nearly overlooked these IT Lilliputians crisscrossing the globe it early in the game, some times hood

winking them as ‘ body shoppers’. But then once IT sectorgot cranked, mainly by the new and young entrepreneurs,there was no looking back. Now that IT sector revenues havetouched USD 75 billion, is it ready for Y2.1K challenge? Thereis a hidden and not yet fully visioned potential to take ITthrough another revolution that would see a 100-fold rise.What was probably missed by many of the IT brains in India was that parallel to Y2K, there were similar global efforts to address another “Millennium Challenge”, one thataffected whole of humanity, a challenge brought forth by therapid industrialization that has been on for the last two centuries and which has to be addressed urgently by theUnited Nations and its 193 member States.That exercise resulted in what is now called as the United Nations ‘ Millennium Declaration.” In September 2000, the eightchapters of Millennium Declaration with its eight goals –called as “Millennium Development Goals” (MDGs)with 21 targets, along with a series of measurable indicatorsfor each target. These were time-bound targets, to beachieved by 2015. There were also quantifiable targets related to eradicating extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS,primary education for all, women’s health, environmentalsustainability, and developing a global partnership for development. Formulating the declaration is sort of regularbusiness in United Nations. Many even call it as pass time ofthe diplomats. But this declaration was and has been different. It included goals, targets and indices for the

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monitoring and verification. It was almost like fixing the target for solving the Y2K problem. Today, the world has justover 3 years to achieve the final goals. The progress in meeting the targets is mixed. Many of these goals and targets are getting nearer to their final numbers but lot of efforts are needed. And here is where the skills, experienceand commitment of IT Industry in India would be of paramount importance, at least where relevant to India.

In my Paris office of United Nations Environment Programme I have been host, several times over during last20 years, to my IIT friends who shuttled between India andUSA since 1992 for their IT work. The stopover in Paris wasa sort of welcome break for these geeks heading westwards.I had seen their ‘rise and rise’ of confidence in what they weredoing in IT sector. The simple stories of how they gave powerpoint presentation in the office on 121st floor of the WorldTrade Centre, how the convincing case was made for capability of just-floated company X for BPO start up andhow the to the Board-room discussion on take over of a USAIT company in Silicon Valley was won, I could see the overflowing enthusiasm and limits of the business-possi-bilities of the Indian capabilities. That cannot be capturedin numbers. It was a very contended feeling.My rather disappointing moment would arrive when some time at theend of sojourn of my IIT-geek-friend, I would be asked, ” by

the way, how is environmental protection going on in UnitedNations? Are you able to do anything at all about climatechange? And what about that Ozone layer? ” And before Iwould start responding, the geek would either start gathering his papers or restart his discourse on new SAP, Hybrid -SAP and his Verticals! Those Tech-masters lookedlike a sky-glider who is so detached from the ground realities. I always used to think that these tiny ‘dotcoms’ havesuch a planetary potential to address the most pressing environmental issues of our times, but unfortunately areunaware of the global storms gathering on the horizon thatwould one day prove to be catastrophic.

Back in my village on vacation in Rahimatpur in India,where I had my education, I have experienced IT revolutionreaching in the rural areas in quite a different way. I wouldmeet in the evening my farmer friend returning after a day’swork in the field. Having just returned from California wherehis son was working in IT sector, he proudly said “My soncalls me every week from America and tells me all the goodnews about his family and rise in his salary and even sendsme money in dollars. So, it does not matter if the monsoonthis year is not good and harvest will not be as expected”.That was strange flip side of the India-Shining.The rising income in the servicing sector could emerge as athreat to the food security. Even as the younger generation


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UN MDGs Conference


in the rural population gets attracted to avenues other thanfarming, the productivity improvements that should havecome in the agriculture has so far not been witnessed.Butthe Indian IT Industry is certainly in a position to recognizethese challenges. In fact, it is all set to go beyond them andcontribute to achieving MDGs. Many IT industries are already doing a lot, m-Krishi of TCS, and Choupal of ITC aregood examples. A report by NASSCOM on “Sustainable Tomorrow: Harnessing ICT Potential” aimed at creating acleaner and greener future by identifying opportunities forIT sector to reduce Green House Gases emissions makes agood start.

However, the time has come to commit to the goals andtargets and performance indicators for the tomorrow’s sustainability, the way MDGs have done. For example, canm-Krishi of TCS take a challenge of taking up pilot regionand commit to contribute enhancing the agricultural productivity by a certain amount? Can ITC accept the challenge of leveraging the chaupal to contribute tin reducing farmers suicide? Can they extend their CSR to commit to such goals targets? Can UID take challenge oftime targets for reduction in people leaving below povertyline and reducing number of malnourished children? Yes, weare the third largest economy in the world on the PPP basis.In our ‘rise and rise’ mood that we presume to make us shine,let us not forget that we are 129th as far as GDP per capitaon PPP, 132nd in the world in terms of ease in doing business doing and 134th in terms of the human development index (HDI) of UNDP, which assesses long-term progress in health, education and income indicators. The UN report said that India had the world'slargest number of poor people in the world, more than halfof the population, at 612 million.The Y2K bug started pinching the world very late in the 20th century. Y2.1K bugthat by end of year 2100 or even earlier, will bring the climatechange into the catastrophic zone, threaten the naturalecosystems, put our forest cover to the dangerous level, imperils our energy, water and food security has alreadystarted shaking us very early. Many even predicted that Y2Khas potential to cause catastrophes. Y21.K has even morepotential to cause irreversible and permanent damage to human society there by wakening the IT industry itself.

To address the Y2.1K challenge, IT in India must developa technology road map for new service models for energy efficiency, agricultural productivity, healthcare, educationand public services. Fortunately the young demography ofIndia is an advantage for facing Y2.1K problem. Steep increase in connectivity, social networking, cloud

computing, mobile interface, are all turning to our advantage. And IT sector’s confidence in dealing with globalchallenges through its brainpower house makes it perfectleader. Y2K was a time-targeted obituary of 20th centurywritten by IT Industry. Y2.1K should be the charter for 21stCentury written by Indian IT that is aimed at that shouldprove to be as a game changer that undertakes time targetedinclusive and sustainable growth. With India’s phenomenalGDP-Grey Domestic Power, solving Y2.1K bug would takeIndia to higher green heights. ■

Rajendra Shende, is a former Director United Nations Environment Programme and Chairman, TERRE Policy Centre and lives between Paris & Pune.


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Computer education in rural sectors


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