India Business and Finance, October 30th
What happened in Indian business and finance during the past week
How many hours should India’s youth work?
The answer is 70 hours a week, according to Nararyana Murthy, founder of Infosys and an iconic figure in India’s business world. His comment, made in a podcast with a former Infosys colleague, provoked widespread discussion. India’s youth have developed “not so desirable habits from the west”, said Mr Murthy, which need to be reversed if India is to address its low productivity. Mr Murthy blamed the country’s productivity woes on corruption and delays in bureaucratic decision-making (comments that generated no comments whatsoever, presumably because they are so widely shared). But for India to justify the new-found respect it is receiving and go on to rise as a nation, it must replicate the steps taken by Japan and Germany during their construction/reconstruction. That requires for the young in India to demonstrate unusual discipline and vocational dedication including the extended work week. “Our culture has to change”, he said, adding that if successful, the change would spread to the government, which is a reflection of the country’s values.
Unsurprising surprise: Indian agriculture
News stories about Indian agriculture tend to focus on unfolding tragedies (eg floods, droughts, spiking prices for consumers, low prices for farmers leading to suicides, and export restraints to protect against famine). But Indian agriculture is actually remarkably resilient. Information just released show a record harvest over the past year, which follows a record harvest from the year before, which follows (yes) a record harvest from the year before.
Indian corporate governance and the world’s reaction
Anant Ambani is a 28-year-old graduate of the Ambani International School in Mumbai, run in a de facto (if not de jure) sense by his mother, and Brown University (following in the footsteps of his 32-year-old brother). Since graduation he has worked in an unclear role for Reliance Industries, which was founded by his grandfather and is now run by his father. An appearance at the Reliance annual meeting a year ago was notable for effusive commentary on his father’s extraordinary capabilities. This was apparently sufficient qualification for his name to be put forward as a nominee to serve on the board, but not sufficient for at least one proxy consultancy (Institutional Investor Advisory Services India) to conclude he deserved the post. Anant’s election was guaranteed because of the support of his family’s majority holding in the company but the vote was looked at as a sign of what outsiders might think. According to Mint, a newspaper, 18% of the votes from institutional investors were opposed, including those from Legal & General of Britain (citing his limited experience) and the British Columbia Investment Management Corporation (citing his lack of independence). Sadly, there was no explanation given by the institutions that voted in favour of Anant. Among those who did were Norway’s sovereign wealth fund, the wealth of which stems from oil production (Reliance is a major global buyer of oil for its vast refining operations) and the California Public Employees Retirement System, which would presumably overlook inexperience in the guidance of a vastly complex and valuable enterprise because…?
Understanding international relations through business
America surpassed China to become India’s biggest bilateral trading partner, with $60bn in trade during the first half of the US’s 2024 fiscal year (concluding at the end of September). From export-focused, mercantilist India’s perspective, the relationship is all the more important because America imported $38bn and exported to India only $21bn. The composition of the $58bn in bilateral trade with second place China was $8bn in exports and $50bn in imports.
Pushing exports
A key component of India’s exports to America and elsewhere is its particularly aggressive approach to handsets. A key component of this is the involvement of Tata group, a sprawling conglomerate that many have long seen as an evolving national industrial champion. In 2020, Tata quietly bought a 500-acre plot of land in Tamil Nadu and began manufacturing the backside of iPhones. In recent days, it has concluded the $125m purchase of the Indian iPhone facility of Wistron, a taiwanese company, transforming itself from a mere component maker to full-fledged assembler. Meanwhile, in September, Corning announced the formation of a joint venture (it will own 70%) in India to make the glass for handsets (for domestic use and exports). The move is part of Corning’s shift away from China and it will apply for incentives provided by the Indian government. While India’s approach to encouraging local manufacturing is not immune to criticism, it is creating an entire new ecosystem at a rate that many had not thought possible.
Unsocial media
A study by The Economic Times newspaper concludes that over the past year, usage of dating apps in India has been declining. Among the problems cited in the story is that the apps have been vastly more successful attracting active male users than females.
Losses/Losers
Some of the most prominent companies in India continue to lose money at a rate that cannot possibly be sustainable. Chief among these is Vodafone, which lost a billion dollars in the most recent quarter, along with 1.6m customers (leaving 220m). Attrition of clients is constant amidfierce competition from the two other primary operators. Then there is the need to invest in 5G and innumerable Gs afterwards. At the moment, there seems to be no viable path forward. Once highly touted OYO Hotels also reported a loss of more than $1bn, but for an entire year, not just one quarter, and it promised to report a profit in the coming quarter. Similarly, Zepto, the most successful fast delivery company, reported a loss of $150m, triple its loss of a year before. However, revenues grew sharply and it says it will be profitable in 10 months.
Hot industry: hotels
Indian Hotels reported a 37% year-on-year improvement in profits, the sixth in a row, reflecting an internal transformation in recent years, an unsurprising recovery from the covid-19 lockdown, and the possibility that travel in India is booming. But while the last point may be true, foreign arrivals remain below pre-covid levels. In an effort to boost India to foreign visitors, the country’s Ministry of Tourism is working on a framework to rate hotels for their hygiene standards.
Hard to know what works in India
Given India’s generally low income level and reliance on motorcycles and scooters, it would seem that car sales would trend toward the mini segment. But even experienced businesses are frequently surprised by the reactions of Indians to a product category. Tata utterly failed in its effort to make a small, inexpensive car appealing and recent sales numbers show that area of the market in particular is suffering declining sales. There could be many reasons for this, with some people (including lots on the political left) concluding that it reflects how the country’s recent growth is missing the poor and benefitting the affluent, a trend that reveals itself in purchasing data. It probably also means that car buyers don’t want to boil in the combination of high heat and gridlocked traffic while sitting in tiny cars (a conclusion reached by lots of people broiling in the Mumbai heat while sitting in gridlocked traffic). Slightly larger SUVs, particularly EVs, have seen sharp gains in market share, possibly because they are far cheaper to run than cars requiring fossil fuels. If that is the critical element, a technological breakthrough could change the market. Maruti Suzuki, the largest company in the Indian market and one that is serious and anything but whimsical, is testing a new propulsion system for its Wagon (tiny, despite the name) that runs on a fuel that seems to be everywhere in India and free: cow dung.