India: A Services Based Economy

More Kiran Karnik, who as I mentioned in my previous post, was the closing keynote speaker at the Indian Business Conference 2008.

As the former President of Nasscom, Karnik focussed on IT and its benefit to society and also on India’s attempt at shifting from a service based economy toward manufacturing.

India’s GDP: 22% agriculture, 54% services

IT-BPO exports = 40 billion dollars = 5.5% of GDP

Distribution of exports by region: Bangalore 36%, Delhi/Noida/Gurgaon 17%, Mumbai/Pune 15%
How is IT benefiting the Indian society?
* Gender Equality: Young women earning at par with male counterparts.
* Good work ethic: Long working hours in a professional work environment.
* Application towards public service and social causes: NGO emergency services, online payment of bills, online rail reservation, etc.
Total organized labor force in India = 15M; IT accounts for nearly 2M direct jobs, and 7-8M indirect jobs (support/household services).

As a services-based economy, India is losing out on its two competitive advantages:
* Rupee getting stronger against the dollar.
* Wage inflation – salaries rising 15-20% every year.

Problems with the education system in India:
* Individualized – no group projects or class discussions; the only team work is when students decide to collaborate during exams (cheat)!
* Poor talent pool – Only 25% grads are suitable for direct employment, the remaining 75% varying degrees of training.

Photo courtesy: NYTimes.com from a recent article about debt collection services moving to India.

Insurance Against Ticketless Travel In Mumbai Trains

Kiran Karnik, former President of Nasscom, was the closing keynote speaker at the Indian Business Conference 2008. Karnik said, Innovation will the key to India’s future. And good innovation doesn’t just mean product innovation (new products coming out of India), but could also include process innovation. For e.g.

For anyone that has traveled in a crowded (understatement) local train in Mumbai, where there’s hardly any breathing space, what are the chances that a TC (ticket checker) walking into the train and checking for tickets. Not to mention, the serpentine queues at the ticket window in case you’re not a regular monthly pass holder. So an Indian entrepreneur came up with the ingenious idea of providing insurance for getting caught traveling without ticket. You pay 500 rupees to get insurance, and if you do get caught traveling without a ticket, you pay the 250 rupees fine to the TC and then turn in your receipt for a full refund.

You can run the numbers to figure out the value proposition for the traveler and whether this is a profitable venture. But on the surface it sounds like an unethical business practice – the venture is encouraging people to travel without ticket. Well, here’s the twist – if you’ve ever been caught by a TC, you probably also know that there’s a pretty good chance you can bribe your way out of it without having to pay the full penalty. Hence, the Indian Railways doesn’t see a dime. However, this venture insists you pay the fine in order to get a receipt. Therefore, it discourages you from bribing the TC. Less corruption!

This story was originally published on this blog and was later even picked by Freakonomics.

Photo courtesy: WSJ.com. View the complete slideshow here.

Five Differences Between India and China

Rajiv Lall, Managing Director and Chief Executive Officer, Infrastructure Development Finance Company (IDFC), was the opening keynote speaker at the India Business Conference 2008. The India-China economy comparison is inevitable in any business conference. As the head of IDFC, Lall talked about India’s infrastructure issues by comparing it to China’s.

Note: I haven’t had the time to figure out how to insert a table within Wordpress, therefore I created an img. Please click thru the img to see full table text.

Indian government finances 50% of its infrastructure projects. Therefore, India is not as highly levered as China where the govt only invests 16% from the budget and 54% is funded by debt from banks and private sector. However, India has very high subsidies and inefficient distribution system and hence loss-making operations. For e.g. 45% of the total power distributed is lost due to theft (illegal tapping of power lines).

In India, only 44% villages have power. Farmers enjoy subsidies, and power is delivered for free to villages. On the other hand, 99% of China’s villages are powered. Rural taxes are often higher than those in urban areas.

Said Lall, India’s biggest challenge – Leadership. Enough said!

What causes Indians to sunburn outside of their motherland?

There is a common misconception that dark skinned people don’t get sunburnt. Especially people that have immigrated from warm weather countries, and grew up not using any protection from the sun. But when living outside their motherland – other than sheer irresponsibility and failure to apply Banana Boat, what is really going on that causes Indians to sunburn?

According to health research from Rutger’s University the causes of sunburn include the following:

• Ultraviolet light is the culprit in sunburn. It is invisible and cannot be felt, yet seventy or eighty percent penetrates water and clouds, and can be reflected off water, sand and snow. As the atmosphere thins at high altitudes, more rays filter through. For these reasons hikers, skiers, swimmers, and beach-goers need to protect themselves from overexposure to sun, and especially from the rays of ultraviolet light.

• Certain substances can make the skin more susceptible to burning: drugs, such as certain antibiotics and birth control pills, or antibacterial agents in medicated soaps and creams. In addition, many drugs and chemicals are sun-sensitive and may cause allergic-type rash on parts of the body exposed to the sun.

So, question – are Indians just becoming “soft” by adopting new skin regimens that increase the likelihood of sunburn? My cousin did claim he has become more “sensitive” since he moved here. Perhaps the American obsession with beauty and grooming has finally taken its toll. Now that I think about it, I have noticed that his toiletry case, once meager, is now swollen beyond capacity with grooming products. Maybe our mothers were right, perhaps one bar of Chandrika ayurvedic soap for daily cleansing, and Parachute coconut oil treatments on the weekends was enough? Maybe it’s the multitude of products he has now become accustomed to (face wash, face moisturizer, skin toner, body washes, body lotion, shampoo, conditioner and deodorant) that are causing his skin to be so sensitive.

But that doesn’t explain why as a “foreign return” to India, he burns everywhere else but home. So perhaps it’s the poor air quality and smog that serves as protection? What’s India’s air pollution in comparison to the U.S.?

According to Wikipedia, below are the most polluted world cities by Particulate Matter:

Particulate matter ?g/m³ (2004), City
169, Cairo, Egypt
150, Delhi, India
128, Kolkata, India (Calcutta)
125, Tianjin, China
123, Chongqing, China
109, Kanpur, India
109, Lucknow, India
104, Jakarta, Indonesia
101, Shenyang

If you have any theories on this subject, feel free to share.

Sahana Jayaraman grew up in Mt. Laurel, NJ and currently lives in Tempe, AZ. And yes, she uses sunscreen everyday!