Thread: Indian Economy

India: Asia's emerging economic superpower--Part 1
By Tatsuo Ikenaga
The Sekai Nippo


15 years of economic liberalization

CHENNAI, India -- 1991 marked a historic turning point for India. In January that year, the Gulf War broke out, and in December the Soviet Union collapsed. The Gulf War triggered sharp hikes in the price of crude oil, depleting India’s foreign currency reserves. The demise of the Soviet Union, one of India’s largest trade partners, left the country on the verge of economic collapse.

India launched an economic liberalization program with the twin pillars of market liberalization and deregulation, separating itself from the socialist policies that had troubled its economy. China was already well into an effort to put aside Communist-style economic management in favor or reform and openness. Since then, India has achieved steady economic growth, and the rate of growth is rising.

Today, 15 years since that turning point, dramatic changes can be seen in the capital New Delhi and in India's commercial center Mumbai (previously known as Bombay), its IT hub Hyderabad, and Chennai (previously known as Madras), the industrial center of southern India. This article is the first of a 12-part series reporting from each of these cities.

[This series was originally published in the Japanese newspaper Sekai Nippo, and was translated into English by World Peace Herald.]

I visited the Apollo Hospital in Chennai, the largest private hospital in India that boasts state-of-the-art facilities. Vice chief director Uma welcomed me into her office equipped with a diagnosis bed. She joined Apollo Hospital as a doctor and was subsequently asked to join the administrative team. “Even now, when I am asked to diagnose a patient, I see the patient here and refer them to a specialist,” she says. This practice of an administrator working in the front line is rather unusual in India’s class-conscious society.

“Academically excellent Indians aim at becoming a medical doctor or a lawyer as the first choice," Dr. Rohit Barman of Mumbai’s Breach Candy Hospital explained.

"Indian students studying overseas tend to be concentrated in medical schools and law schools," Dr. Barman said.

"There are many Indian students in the United States who remain there and work as a medical doctor or a lawyer. In fact, about 20 percent of medical doctors who work at hospitals in the United States are Indians. The percentage reaches 40 percent in Great Britain.”

Indian doctors are successful in highly competitive markets and master rigid academic courses. They naturally excel in the international arena. Many study and obtain their medical licenses in other countries before returning to practice in India.

The quality of medical care in India is high. Hospitals in rural areas have many problems, but urban hospitals are equipped with high-quality medical equipment and devices, and many doctors possess a high degree of professional qualification. Patients come to these hospitals not only from throughout India but also from around the world.

Passage to the central medical hub of the world


“Some 1,400 international patients undergo medical treatments here every month,” says vice chief director Uma of Apollo.

I met Rameshni Wadhwa, a 49-year old patient from Hungary, at Apollo Hospital. In Hungary, he runs a company specializing in exterior building decoration. His hospital room is equipped with a computer connected at all times to the Internet. There is a kitchen where he can prepare simple meals and tea for himself. There is a shower and a fully furnished living room as well. Absent is the smell of disinfectant that is typical of many hospitals.

His room is almost equivalent to a 5-star hotel. Meals include vegetarian and non-vegetarian menus for Indians, as well as for Americans and Europeans.

“You can see refined care in services such as bed-making,” says Wadhwa.

He credits “the high level of medical care and affordable price of Apollo Hospital” as reasons for his decision to travel all the way from Hungary to India for his liver surgery. The cost of surgical operations is about one tenth of that in Europe and the United States.

Two years ago, a Japanese citizen underwent a successful operation in Chennai to cure near-sightedness. In Japan, the hospital has come to be known as “economical and safe.” That has created a tour boom in Japan to visit Chennai for medical care and sightseeing. Yoshimi Ishikawa, a prominent Japanese non-fiction writer published a magazine article about his experiences being treated in India to successfully cure a blood circulation disorder and rheumatism.

In Southeast Asia, competition in medical tourism has just started to attract foreign tourists. Singapore is the current front-runner, followed by Thailand and Malaysia. In South Asia, India is dominant in this field.

The promotion of medical tourism cannot be done by hospitals alone. The government’s support is indispensable.

India’s public health ministry grades the quality of service in medical facilities throughout India and assigns scores. Through the Internet and other public relations efforts, the government is promoting hospitals capable of providing high-quality care to the overseas market.

The government offers a one-year medical service visa as an incentive to international patients who come to India for medical care. The Indian government and private sector are collaborating to promote “internationally competitive” doctors and make India the medical service center for the world.

India: Asia's emerging economic superpower--Part 2
By Tatsuo Ikenaga

India's expanding skyway


I flew to Hyderabad, the IT hub of southern India, by Air Deccan, the pioneer in India’s discount air-carrier market. Tickets are issued electronically, and Air Deccan’s bare-bones discount service provides no magazines, newspapers or food onboard -- not even a piece of candy.

Beverages are served in-flight, although for a fee. A can of Coke is 50 Indian rupees (about $1.00). This is about 2.5 times the market price. Some India states still prohibit alcohol, and beer or wine are not served.

With the expansion of a new middle-class, the tourism market is rapidly growing in India. Discount air travel especially, has witnessed a dramatic expansion. Deregulation of the airline industry opened the way for the emergence of many discount air carriers. Discount fares in turn stimulated an increase in the number of air travelers, which is growing by more than 20 percent a year.

The most notable is Jet Airways, India’s leading airline. The company was founded in 1991 when India’s economic reforms were initiated. It took off amid the country’s drastic shift from a socialist to a free market system, and is the fruit of India’s economic liberalization. It started operating domestic flights in 1993, and currently operates more than 280 flights on 48 routes. The number of passengers reaches more than 10 million per year. Its domestic share is 44 percent and surpasses Air India, the country’s flag carrier.

The company introduced various measures to improve customer service, including the establishment of 24-hour help desks, and succeeded in gaining new customers and expanding its market. Jet Airways’ success stimulated the improvement and streamlining of national carriers such as Air India, which had become complacent within a market monopoly. Its role of contributing to an increase in the international competitiveness of India’s airline industry as the whole is highly regarded.

Discount air carriers mushrooming in India


In the beginning of August, IndiGo Airlines started operation as India’s eighth private airline. The airline connects New Delhi with Bangalore and Karnataka state, among others. The think tank, Center for Asia Pacific Aviation, forecasts an increase in India’s air travelers from 23 million last year to more than 50 million a year by 2010.

There are challenges. One is that the airports in large metropolitan areas serving international traffic are already at full capacity. For these airports to increase slots, airport infrastructure renovation is necessary.

Discount air carriers are turning their attention to international routes as well. Jet Airways launched its Southeast Asia service last year, establishing Mumbai-Singapore and Chennai-Kuala Lumpur routes. The company wants to further expand its operations into Thailand and Japan. Air Sahara, the second-largest private carrier in India, is planning to launch Singapore and Malaysia routes.

South East Asia airlines has expanded its operations into China and is growing dramatically. It is now eager to expand its air routes to India, which are maintaining steady economic growth and experiencing increased air traffic demand.

In the forefront of the group looking at flights to India is Singapore. It is followed by Thailand and Malaysia, a pattern similar to the one in the medical service tourism boom.

Neighboring Sri Lanka is experiencing a rapidly growing air carrier market of its own, and is also putting efforts into India routes. Sri Lanka Airlines’ route connecting Colombo with Goa is the tenth Indian city in its route map.

“The Colombo-Chennai route is bringing in a lot of money, but passengers flying from Colombo to other Indian cities are also rapidly increasing.” Kimio Kanasugi, deputy director of Sri Lanka Airlines Tokyo office, said.

"The volume is expected to increase by 50 percent this year compared to last year,” he said.

The Indian equity market has recovered. If you take the Indian component of the MSCI world index, year to date performance in USD terms is 20.4%

Thats pretty good considering funds like JF and PICTET tend to beat the MSCI benchmark

India: Asia's emerging economic superpower—Part 3
By Tatsuo Ikenaga | Published Sep/2/2006


Distribution corridor made of iron

By Tatsuo Ikenaga
The Sekai Nippo

NEW DELHI -- This time, I traversed 2,000 kilometers from Chennai to Delhi and 1,350 kilometers from Delhi to Mumbai by train. India’s tourist season starts in November. It was already monsoon season in India, and although it was off-season, first class and second-class seats were sold out. The third class cars without air conditioning were filled with passengers, with the overflow filling the aisles and the areas in front of the rest rooms. Unless you make a reservation at least 10 days in advance, it is difficult to get seats. The railways are apparently drawing passengers away from airlines.

I purchased a train timetable for 80 rupees at the Delhi station. A large picture of Japan’s bullet train (Shinkansen) is featured on the front cover. There was a time when India was trying to deploy the bullet train system with assistance from Japan. The bullet train photo appears to be left over from that unfulfilled plan. There are currently no plans to operate Japan’s bullet train on the Deccan Plateau.

I saw a photo of Japan’s bullet train in a rather unexpected place. This was on the business card of an Internet Service Provider company. The company apparently uses a picture of the high-speed train to create the image of a “high-speed” Internet connection. Although the actual trains never arrived in India, they apparently have made a place in the popular consciousness.


Asia’s first high-speed cargo railway taking shape


India’s railway system, Asia’s first, was built in1853 and today spans 63,000 kilometers. The Indian government intends to use what is today the world’s second longest railway system to improve its distribution infrastructure.

In the first phase, India plans to construct a high-speed cargo rail system with economic and technological assistance from Japan. Asia’s first high-speed cargo rail system is to be constructed on a 1,350-kilometer line connecting the Delhi metropolitan area and the commercial center of Mumbai. A second line, 1,450 kilometers long, will connect Delhi with Kolkata (Calcutta), the center of eastern India’s Bengal economic zone.

The total construction cost of the high-speed cargo railway, with a span of 2,800 kilometers, will be $5 billion. In order to deal with the vast volume of cargo the system will be computer-controlled. Construction is to be completed by 2011.

The railway lines will be double tracked and electronically-operated. Specially designed electric engines and cargo cars will be used to achieve speeds higher than 100 kilometers (63 miles) per hour.

Benefiting from 8 percent annual economic growth, the volume of cargo transported between Delhi and Mumbai is increasing at an annual rate of 40 percent or more. The current cargo transport system cannot handle the increased volume, so the construction of a high-speed cargo railway has emerged as a fundamental solution. With this railway, the transport time connecting the three major cities will be cut in half, and the distribution pipeline will be greatly expanded.

Sajiwe Trehaan is the CEO for the Maharaja Train, a luxury railway once used by Indian royalty. “Existing railway routes alone cannot cope with the congested train schedule, and the creation of new cargo railway is welcome,” said Trehaan.

“India’s Maharaja Train is equivalent to Europe’s Orient Express. The number of passengers using the train is on the rise, helped by the travel boom and stimulated by a healthy Indian economy. Both the establishment of a train operation schedule and the increase of the number of trains becomes possible with this,” says Trehaan whose nickname is called “Mr. Travel.”

In the city of Delhi, construction of an urban high-speed subway, the Delhi Metro, is in progress. Subway line No.2, which runs longitudinally between the north and south of the downtown area, opened last year. The subway line passes through the long-distance bus terminal and the business district, and connects to India Railway’s New Delhi station. It has become popular as the local citizens’ transit system and mitigates traffic congestion.

The Japanese government provided about $1.5 billion in loans for the construction of the Delhi Metro, about 60 percent of the total construction cost. The IT centers of Bangalore, Hyderabad, and Mumbai are planning to build their own subway

India: Asia's emerging economic superpower—Part 4
By Tatsuo Ikenaga


‘Golden Quadrangle’ arterial highways

By Tatsuo Ikenaga
The Segye Nippo

NEW DELHI -- Since the launch of its economic liberalization program in 1991, India has maintained an average 6.2 percent economic growth, with a peak rate at 8 percent.

Prior to economic liberalization, India’s agriculture sector—engaging 60 percent of the total labor force—dragged down the country’s GDP whenever bad weather caused poor harvests.

“India overcame an agriculture-led economy and achieved structural changes after 1991,” said Yutaka Miyahara, former director of the Mumbai Office of the Japan External Trade Organization (JETRO).

For India to sustain a high growth rate, it faces urgent needs basic infrastructure improvement, including roads, railway, electric power and water resources.

Indian Prime Minister Manmohan Singh emphasized, “As long as the infrastructure is improved, it is possible to sustain an annual rate economic growth of about 8 percent.” His remarks came at the beginning of this year during the congress of the ruling National Congress Party. Singh announced policies to bolster the infrastructure, including roads, ports, harbors and electric power generation, all aimed at a second phase of economic growth.

The Indian government launched a policy of large-scale infrastructure improvement, including the construction of giant electric power generation facilities with the participation of private capital. Under this policy, the government will invest 1.7 trillion rupees ($36.6 billion) for the expansion of arterial highways and one trillion rupees ($25.5 billion) for improvement of ports and harbors for the next seven years.

Especially lagging in India are improvements in traffic systems and driving behavior. A Japanese businessman in Chennai says, “until some years ago, all roads were full of potholes. Highway dividers and white lines were added only recently. Even today, some cars run in the opposite direction of a lane without hesitation. These cars so openly violate the rules that those of us who follow them wonder if it’s we who are going in the wrong direction.”

Connecting internationally competitive Indian cities


Professor S. Panditt of the Punne University gives high marks for the future potential of the Indian market. Says Panditt: “In India, ring roads [beltways] going around the cities are not well organized. Even in arterial highways, the average cruising speed is about 40 kilometers (25 miles) per hour, which is less than half of that in the advanced countries. Many more roads in rural areas are in extremely poor condition. Risk management of damage to products transported along these roads becomes necessary, and this makes company management difficult.”

The plan to improve India’s arterial highways, which has long lagged behind, is finally beginning to pick up the pace. With the improving fiscal situation, construction work has been accelerating since last summer.

The most important highway network, the “Golden Quadrangle (GQ),” connects the capital Delhi, with the largest commercial center Mumbai, the southern industrial center of Chennai and Kolkata (Calcutta), the center of eastern India’s Bengal economic zone. By July of this year, more than 90 percent of the 5,846-kilometer (3,897-mile) long route was expanded into 4 lanes. This will reach 97 percent completion by next spring.

The north-south corridor, connecting Srinagar in northern Kashmir and Kanyakumari on the southern cape of Camorin, and the east-west corridor connecting Porbandar in the western Gujarat state with Silchar near Myanmar, are both under construction. The total length of the north-south and east-west corridors is 7,300 kilometers (4375 miles). Only 10 percent of the corridors will be completed by the next spring. However, 90 percent of other arterial highways, with total length of 4,000 kilometers, are expected to be completed by then.

The Indian government recently announced its plan to construct 1,000-kilometer automobile-only highways. The highways will be constructed in 6 routes including ones connecting Delhi and Jaipur, and Bangalore and Chennai. Total construction cost is estimated to be 150 billion rupees, and the private sector is going to provide about half of cost to mitigate fiscal pressure on the government.

In India, powerful economic centers that are internationally competitive are emerging. These include Mumbai, India’s largest commercial center and financial hub, the increasingly viable IT hubs of Bangalore and Hyderabad, and Chennai, central hub of southern India, which is attracting world-class automobile factories, cell phone and other manufacturers. Transportation infrastructure is established to connect these economic centers and facilitate human exchange and distribution of goods, which will inevitably elevate India’s international competitiveness into high gear.

CII study optimistic about India's 8 pc GDP growth

CII study optimistic about India's 8 pc GDP growth
New Delhi, Sept 4. (PTI): India Inc has contributed significantly in the first quarter for the GDP to maintain an 8 per cent growth rate for the current year, according to a CII report.

The CII State of the Economy report analysed the performance of the economy, compared India's economic growth with other global economies and studied the manufacturing, services and agriculture sectors. It also examined money and inflation, interest rates and liquidity while keeping a watch on corporate performance.

In the corporate sector, profit after tax (PAT) of 2,252 firms have gone up by 38.8 per cent in April-June 2006-07 over the corresponding quarter in 2005-06. Sales rose by 28 per cent in the first quarter this fiscal compared to the year-ago period, the report said.

Manufacturing sector recorded a whopping 54.5 per cent growth in PAT, whereas it had recorded just 18.1 per cent in the same period a year ago. The impressive growth in PAT was the result of increase in net sales from 19 per cent to 29 per cent relative to non-operative expenses, the report shows.

Mining and electricity sectors dragged down the Index of Industrial Production (IIP) because their growth rate took a beating from 10.4 per cent to 10.1 per cent. The IIP could move just over 10 per cent because the manufacturing sector recorded a growth of 11.2 per cent, it said.