Slow and steady path for the world's fastest growing economy
Next year, India is expected to seize China's crown as the world's fastest growing economy.
what's fueling the continued success story?
Back in June 2008, in a speech to India's top business leaders, Prime Minister Manmohan Singh made a bold claim about the country's future economic competitiveness. "The Indian tortoise will win the race against the many Asian hares," he told the Associated Chambers of Commerce and Industry. "Slow and steady wins the race." Since then, of course, a worldwide recession has radically altered the wider economic backdrop - and yet Prime Minister Singh's 2008 prediction still looks set to come true. According to recent figures published by the World Bank, second-place India will replace China as the world's fastest-growing major economy in 2012. While China will continue to grow at a faster pace than India this year, the World Bank's economists forecast that, next year, India will grow at 8.7%, compared to China's 8.4%. It's a pace that even the most fleet-footed hare might admire. In fact, India has weathered the recession well. After a slowdown in its 2008/9 fiscal year to 6.7%, India's growth rate picked up to 7.4% in 2009/10 and expanded by 8.9% in the first half of the current fiscal year (ending 31 March 2011). The primary reason behind the country's strong performance is that much of its growth is driven by domestic demand, unlike export-oriented China. That success, in turn, is built upon the foundations of economic liberalization laid down from 1991 onwards and, in part, engineered by Singh (an internationally renowned economist) during his time as finance minister under Narasimha Rao's leadership. These reforms included opening up India for international trade and investment, widespread deregulation and a radical re-engineering of the tax system. Today, India has shifted from what was a largely agrarian economy 20 years ago to one where services and industry make a far greater contribution to gross domestic product (GDP). While agriculture remains the predominant occupation, employing around 52% of the workforce, the sector contributes only 14.6% of GDP, compared to 28% from industry and 57% from the services sector.
large, educated labor pool
When it comes to supplying workers for its burgeoning and talent-hungry services sector, meanwhile, India is particularly well-placed. Improvements to India's educational system is often cited as one of the main contributors to its economic rise. And there is a large labor pool: two-thirds of the 1.2 billion Indians are of working age. By contrast, China's workforce will shortly start aging and, thanks to its one-child policy, will likely begin to shrink in a few years' time. Among the jewels in India's services crown are its IT and business process outsourcing (BPO) sectors, thanks to a large pool of low-cost but highly skilled English-speaking workers and increased demand from foreign companies looking to outsource non-core operations to less costly areas of the world. Recently the adaptability and experience of India's outsourcing industry has seen it move up the value chain to perform more critical and value-added functions.
The information and communications technology (ICT) infrastructure in enterprises is also being widely improved, according to Bala Mahadevan, CEO India at Orange Business Services. "Indian companies are rapidly moving away from legacy communications systems and are investing heavily in IP technologies," he says. "There's a great deal of latent, pent-up demand for better communications, so IP telephony is a definite growth area, and so is unified communications and collaboration (UCC), as Indian companies seek to deliver unified voice, data and video to employees who work over vast territories and are constantly on the move."
four key sectors
The biggest investments in communications and systems integration will come from four key sectors, he suggests. The first is e-government, as central, state and local public-sector organizations revamp their data centers, build out their wide-area networks and invest in applications that help a highly distributed population to access vital services in the areas of healthcare, education and employment. The second is manufacturing. "Over the last few years, the number of manufacturing operations setting up in India has grown exponentially, among both homegrown companies and foreign players, and particularly in the automotive, electronics and pharmaceutical sectors," says Mahadevan. The third is the country's $55 billion offshoring industry (both IT and BPO services), and the fourth is the emerging area of knowledge-based services, where workers perform not only skilled administrative jobs but also high-value research for international banks, for example.
The opportunities are not limited to India's key metropolitan areas of Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad and Pune. "India's tier-two and tier-three cities are set for massive growth for cost reasons and for workforce reasons, and other areas of the wider subcontinent - including Sri Lanka and Bhutan - are also entering highly promising growth phases," he says. For example, Orange Business Services is already engaged on a major project with the Ministry of Health in Bhutan.
Orange in India
In recent years, Orange Business Services has significantly increased its presence in India following the acquisition of the managed and enterprise services divisions of GTL in 2007, along with obtaining a National and International Long Distance license and Internet Service Provider license in 2008. Orange Business Services also has its Major Service Center for customer support in India, which houses over 1,500 people. The India business, including the managed and enterprise services business, has over 750 people across Bangalore, Mumbai, Delhi, Gurgaon, Chennai, Hyderabad, Kolkata and Pune. In India, Orange Business Services works with leading equipment vendors including Avaya, Nortel and Cisco, to meet the needs of India-based firms for systems integration, unified communications and collaboration, network services, infrastructure management and telepresence. The company's 450-strong roll call of enterprise customers includes computer giant Hewlett-Packard, shipping and logistics company Neptune Orient Lines and transportation/energy conglomerate AP Moller Maersk Group. The Orange Center of Excellence (CoE) in India provides global enterprise customers with cost-effective, high-quality, non-standard services, such as remote management of telephony systems and infrastructure, CRM solutions and management of network components and servers. Looking forward, Bala Mahadevan, who was appointed CEO of India in April 2010, sees his role as building Orange Business Services brand recognition and the Indian sales force. Much, he admits, will rely on the company's ability to attract the "brightest and best" among the nation's university leaders - an effort that will see the company strengthen its presence on university campuses this year and work to build a career advancement path for candidates who particularly impress its management team.