“Understanding” India

Jon TerryOctober 26, 2009

Agenda

Modern India

The Other India

Communicating With India

Why Should You Care?

India Matters a Lot Now Western companies do a lot of sourcing with

India now That will continue and grow

India Will Matter a Lot More Later China & India joining US as economic leaders India’s population still growing - fast

You Should Learn as Much as You Can

Demographics Point East

The Opposite is Also True … Today’s talk is focused on business.

Really understanding India includes culture, music, movies, religion, history, geography, etc., etc.

This is only a 90 minute talk. It can only hit the high notes even about business

You will never meet the “average Indian”. Beware of assuming generalizations apply to individuals

Modern India

Epitome of “Flat World” Success Second most populous country(1.1

billion) Most populous democracy by far One of world’s best performing

economies 12th largest by market exchange rates 4th largest by Purchasing Power Parity

(PPP) Middle class quadrupled to 250m since

1990 1% of poor cross poverty line ($1/day)

per year

Consistent High Growth, Even Now

0123456789

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% R

eal G

DP

Gro

wth

Year

India's Real GDP Growth Rate

Joining the US and China at the Top

Indian Exports Surging

Merchandise Exports Doubled from $53bn 2002 to

$103bn 2006

Doubled from $29.6bn 2003 to $60.6bn 2006

Service Exports

Rose from 11.6% 1999 to 20.5% 2005

Goods/ Services Exports as

share of GDP

Foreign Direct Investment Soaring

India Churning Out Tech Grads

1,522 degree-granting engineering colleges Annual student intake of 582,000

Indian Institutes of Technology 28,000 graduates per year

Indian Institutes of Management 3,000 graduates per year

Infosys Training Campus 50,000 graduates per year

Indian Firms Going Global

Information Technology / BPO Infosys, WIPRO, TCS

Telecommunications Reliance

Pharmaceuticals Dr Reddy’s, Ranbaxy

Automobiles Tata

Film Industry Bollywood

World Coming to India for Care 450,000 Medical Tourists came to India

in 2007 Projected value of $2 billion by 2012

Very High Quality at Very Low Prices Heart bypass in US $95,000, in India

$10,000 including airfare, hotel, and treatment

Apollo, Fortis, Max, Wockhardt building US quality hospitals co-branded by Harvard, Johns Hopkins

Narayana Hrudayalaya 1,000 bed heart hospital, 50-60

surgeries/day Telemed links to 54 sites in India, SW Asia,

& Africa

Bangalore is Kind of Like Home

Neon, Neon Everywhere

You See Familiar Faces

Are They Learning About US?

The Other India

Most Indians Still Poor

4th Largest Economy, but 168th GDP per capita

Modern India is an Oasis

Cows Instead of Cars

Forty Years of Missed Opportunity

GDP of India vs. Korea as percent of US GDP

License Raj, “Hindu” Rate of Growth

Labor intensive production restricted to small firms, less than $100,000 in PP&E, in 325 product categories including clothing, shoes, toys, and furniture

Big businesses and MNCs limited to few industries. IBM, Coke, and others forced out

Permission needed for M&A’s, expansion, new products. Projects more than $2.5 million needed cabinet OK

90% of banks nationalized. Reserve requirements reached 53% of deposits. 40% of lending for small firms

Under Indira Gandhi GDP growth averaged 3.2%

Poverty Improving But Still Serious

Insufficient Healthcare Investment

27

Life Expectancy Still Low

71.6

82.5

69.763.7 64.6 63.1 62.6

42.8

55.8

80.979.8

Norway Australia Sri Lanka China Indonesia India Pakistan Bangladesh Nepal Mozambique Niger

According to data from 2005

28

Women Still Dying in Childbirth

45

450

830

320

58

570

China India Nepal Pakistan Sri Lanka Bangladesh South Asia

N.A

Source: United Nations Development Programme (UNDP), Human Development Report 2007-08NA: Not available. Figures shown for India are at variance with the official figures of the office of Registrar General on India (RGI) for Maternal Mortality Rate and Infant Mortality Rate. Data shown in the tables are as per the methodology and adjustments made by UNDP

Maternal mortality Rate (per 100,000) 2005

Infants Also Dying at High Rates

South Korea U.S. China India0

5

10

15

20

25

30

35

Infant Mortality Rate

Country

# d

ea

ths

/1,0

00

bir

ths

Too Many in Agriculture65.42

56.64

52.06

0.66 0.67 0.63

11.27 12.13 12.9

0.34 0.34 0.352.56

4.44 5.576.98

11.2 12.62

2.88 4.06 4.610.78 1.36 2

9.1 9.16 9.24

1983 1999-2000 2004-05

Agriculture Mining Manufacturing

Electricity, Water etc. Construction Trade, Hotels & Resturants

Transport, Shortage & Communication Financial Services Community Services

Source: Various rounds of NSSO survey on employment and unemployment/Planning Commission

A Difficult Place to Do Business

Labor Laws Keep Firms Inefficient

Firms over 100 workers can’t layoff even under bankruptcy

3 weeks written notice to change any working conditions

Laws apply to only 10% of the workforce, yet discourages hiring new workers.

Keeps companies small – of 42m companies only 1.4% employ more than 10 people.

88% of labor force informal sector: produces only 44% of GDP

Trade Too Difficult

Exporters need 258 signatures and 118 copies of required paperwork. 22 hours to do data entry for required information.

Port / Airport Facilities and Procedures Shipping: Mumbai, exporting 3-5 days

compared to 18 hour international norm

Air freight: New Delhi, exporting 2.5 days / importing 15 days compared to 12 hour international norm

Infrastructure Constrains Growth

Electricity unreliable, 35% stolen Rural road building limited to $1m

contracts.

Literacy Rate Lags

Conflict Troubles Much of Country

Political Violence Claims Thousands

2007 Civilians Security Force Personnel

Terrorists Total

Jammu & Kashmir 164 121 492 777

Andhra Pradesh 55 0 0 55

Arunachal Pradesh 0 0 12 12

Assam 269 19 149 437

Manipur 150 40 218 408

Meghalaya 4 1 13 18

Nagaland 20 0 88 108

Punjab 7 0 0 7

Rajasthan 2 0 0 2

Tripura 10 5 21 36

Left-wing Extremism 240 218 192 650

Haryana 68 0 0 68

Tamil Nadu 5 0 0 5

Uttar Pradesh 15 0 0 15

Total 1009 404 1185 2598

What does this mean?

India is the modern country described in the first section of this presentation with a bright present and even brighter future

But it is still the other, older India with a lot of serious problems to solve.

Respect Indians for what they have accomplished in a very short time

Understand they may see things very differently because they come from a different background

Communicating with India

Who are we talking about?

Indians living in the US do adapt - to a degree

Indians visiting the US may not Eating Pizza Hut doesn’t make you

American They go home to India Once again, be careful of

generalizations

Measuring Cultural DifferencesThe GLOBE survey Scientifically-designed, controlled

survey 10 years 17,000 managers

Asked to describe their company culture 62 societal cultures

Including India and the US

Comparing US & Indian Culture

Institutional Collectivism

Group Collectivism

Gender Egalitarianism

Assertiveness

Power DistancePerformance Orientation

Future Orientation

Uncertainty Avoidance

Humane Orientation

0

5

10

US India

Key GLOBE Metrics

Group Collectivism +28% The degree to which individuals express

(and should express) pride, loyalty, and cohesiveness in their organizations or families.

Assertiveness -14% The degree to which individuals are

(and should be) assertive, confrontational, and aggressive in their relationships with others.

Key GLOBE Metrics

Power Distance +10% The degree to which members of a

collective expect (and should expect) power to be distributed equally.

Gender Egalitarianism -7% The degree to which a collective

minimizes (and should minimize) gender inequality.

To Save Face, You Can’t

Openly disagree with a superior Publically correct a superior Criticize someone or their idea directly Directly challenge another’s statement Say that something requested is not

possible Admit lack of understanding Admit failure Ask for help

The Indian Yes

“Yes” by itself just means “Uh huh, I hear you”

Beware head movements True agreement will always be more

than “Yes” Indians want to agree so, when they do

it is enthusiastic and whole hearted

Not “No”, Just Not “Yes”

Absence of Yes No-response Changing the Subject Postponing an Answer Repeating the Question Asking what YOU want A qualified response

Suggesting Bad News

You won’t hear “We are going to miss the date”. You may hear “This is an aggressive schedule”

You won’t hear “That’s not possible”. You may hear “That might be possible”

You won’t hear “I need help”. You may hear “This task is taking longer than I expected.”

You won’t hear “That’s a bad idea”. You may hear “That’s interesting. I like X part of the idea”

This Is Not Evasive

Indians are not avoiding conflict, just direct conflict

Indians are not trying to mislead They are being direct - in their way that

another Indian will clearly understand.

What Can You Do?

Be sure you REALLY got agreement Listen for subtle implications of

difficulty Find ways to ask for feedback privately Consider suggesting your own concerns

or questions to elicit theirs Keep learning to increase understanding

Continued Learning

The World is Flat, Thomas Friedman The Post-American World, Fareed

Zakaria India: The Emerging Giany, Arvind

Panagariya Speaking of India, Craig Storti In Spite of the Gods, Edward Luce Economist.com, search India’s Economy

“Understanding” India

PM ForumJon Terry & Michael Garbus

October 26, 2009

Appendix

GLOBE Metrics

Future Orientation The extent to which individuals engage

(and should engage) in future-oriented behaviors such as delaying gratification, planning, and investing in the future.

Humane Orientation The degree to which a collective

encourages and rewards ( and should encourage and reward) individuals for being fair, altruistic, generous, caring, and kind to others.

GLOBE Metrics

Institutional Collectivism The degree to which organizational and

societal institutional practices encourage and reward (and should encourage and reward) collective distribution of resources and collective action.

Performance Orientation The degree to which a collective

encourages and rewards (and should encourage and reward) group members for performance improvement and excellence.

GLOBE Metrics

Uncertainty Avoidance The extent to which a society,

organization, or group relies (and should rely) on social norms, rules, and procedures to alleviate unpredictability of future events. The greater the desire to avoid uncertainty, the more people seek orderliness, consistency, structure, formal procedures and laws to cover situations in their daily lives.