One characteristic that I have observed among most senior executives that we have met with so far is advanced skill in the art of storytelling. At Kotak financial services, the conglomerate Tata, ICICI investment bank, the Bombay Stock Exchange and DDB Mudra Group, India’s business leaders all began our meetings with a story of India’s past and a cup of chai tea. I think this commonality is because it is difficult to fully comprehend the country’s present economic growth challenges without first understanding its rich, tapestried history. R. Gopalakrishnan, Executive Director of Tata Sons, explained it best when he said, “India is like the character Benjamin Button; it is growing up backwards. We are an ancient civilization with a young capitalistic democracy, so many of the contradictions you see here are due to that.” Certainly, it is a current contradiction that before 1991 private wealth accumulation and the display of it was seen as gauche. However, with the threat of bankruptcy imminent, the Government of India made the decision to open up to capital markets and foreign investment. Since then, India’s GDP has increased tremendously and was estimated to be at 6.8% real annual growth in 2011; its ambitious goal going forward is to grow at 8% real annual GDP.
Yet, all segments of the country are not growing at the same pace and this is the conundrum. At Mudra – an international award-winning marketing communications agency – Madhukar Kamath, Group CEO and Managing Director, introduced us to the concept of “Bharat vs. India” as one way to segment the growing consumer market. Among other definitions, bharat is the Sanskrit word for the Indian subcontinent. In simplified terms, the idea is that there is a wide divide between tribal groups still making a living from agriculture and handicrafts as they have for centuries and urban dwellers who are the face of India’s modern growth potential to the Western world (think IT leaders, engineers, entrepreneurs, and those educated abroad). This concept comes into play, for example, when foreign consumer product and service marketers must develop market entry strategies. Questions that arise are: “How can we create mass consumer demand among wheat farmers in Punjab who hold dear the Hindi principle of bachat – or frugality – which is counter to Western-style disposable consumerism? What incentive can we give to members of the growing middle class to open a savings account instead of hoarding money at home?” And while this description only begins to scratch the surface of the complex psychographic factors and emotions* that go into the concept, the one facet that is clear is that there is no consensus on whether the country can afford to let the distinction between Bharat and India (as the West knows it) matter if it is to progress as a capitalistic society.
K. Ramkumar, Executive Director of human resources and customer service & operations at ICICI, delivered an impassioned business case for why India’s educated, upper class cannot allow the by-products of capitalism to leave behind the roughly 25% of the population who are illiterate and 40% to 55% of the population that is unbanked. His rationale is that India’s unique value proposition is her massive amount of potential human capital made up of youth across socioeconomic strata who are discounting caste and caste-like ideas of what they can achieve. Gopalakrishnan referenced this sentiment too; he says that India has the most PhDs for a global workforce – “poor, hungry, driven” people. According to Ramkumar, firms are tapping into this national spirit and it is an ingredient in the secret sauce that has allowed ICICI to run one of the lowest costs, highest quality IT systems of investment banks worldwide. Other factors are that the bank did not have legacy systems to depreciate; it bet on economical Indian software developers that allowed it to co-design; it leveraged its relatively huge consumer-based demand to negotiate competitive contracts with Microsoft; and it cultivated a workforce focused on cost-savings and fluent in technology innovation.
Still, India has not flung its gates completely open to the world yet – which some of us received an applied lesson on after our meeting with Shanti Ekambaram, President, Corporate & Investment Banking for Kotak. She shared with us the growth challenges that the bank has faced since it received one of the first investment banking license from the Reserve Bank of India in 1991 (followed by one for retail banking in 2006). At the time, no firms were lined up to get into commercial banking. Now, many domestic and international finance firms are showing interest, but RBI imposes a high bar to authorization. On a visit to Bank of America to exchange USDs for Rupees, we realized the implications of this after we convinced security to let us into (what we later found out) was B of A’s investment banking office in Mumbai. With a bit of a quizzical look, we were told that the retail bank does not have a license to operate in India, so we were shown to an Indian banking partner where we withdrew cash. Joint ventures in various industries still seem to be the main way foreign companies can enter the market.
~DeShaun Maria Harris, ’14 (Follow my travels:twitter.com/aspiringmaven)
*Note: The views expressed in the linked blog are solely those of the writer. I included the link here to provide one explanation of the “Bharat vs. India” concept.