India Chazen Trip – Epilogue

Prior to the India Chazen Trip 2011, I must admit that I knew very little about India’s economy other than the fact that it is one of the four BRIC countries. What makes it so? From riding auto-rickshaws alongside automobiles to getting lunch delivered through the six-sigma dabbawalla, Indians enjoy their unique way of living. These local consumers, albeit earning only USD$1219[1] on average in nominal income, total over 1 billion in headcount and together they fuel a strong domestic market demand. This demand coupled with the government’s traditionally protectionist policies against free inflows of foreign investments gave rise to the booming of globally competitive Indian-owned enterprises such as the Tata Group. While domestic demand is growing robustly, all the business leaders who had met with us unanimously agreed on a few pressing issues that the nation is facing.

Poor infrastructure

  • Water – No major city in India is known to have a continuous water supply and an estimated 72% of Indians still lack access to improved sanitation facilities[2]. The World Health Organisation estimated that around 700,000 Indians die each year from diarrhea, hurting the India’s very own labour force.
  • Electricity – According Mr. Vikram Limaye, the Executive Director of IDFC (Infrastructure Development Finance Company Limited), only half of the country has access to electricity. Power outages are frequent across the country. Recent coal shortage is further exacerbating the problem by reducing energy supply and residents in Delhi reported power cuts for 4 – 5 hours each day[3]. Mr. Limaye estimated that India needs at least 100K MW more in power supply to adequately meet demand. Given that a 1000-MW power plant typically costs about USD$1B to build, a hundred of these plants, or USD$100B, would deem necessary.
  • Transportation (roads, railways, and ports) – According to Mr. Limaye, most goods are transported by trucks in India. Unfortunately, congestion is severe, hampers reliability of transport, and ultimately increases transportation costs of goods[4]. Capacity constraints of railways and inefficiencies in port operations are other major concerns.

Mr. Limaye noted that investments in infrastructure amount to 8.5% of India’s GDP, of which 40% comes from the private sector. Improvement in infrastructure, while slow, tends to focus on return on investment. As Mr. Adi Godrej, the Chairman of the Godrej Group, had pointed out, India has managed to do well without good infrastructure. Mr. R Gopalakrishnan, the Director of Tata Sons, also kidded about India’s “just-in-time infrastructure”.


Widening inequality gap

The dichotomy between the rich and the poor is a growing concern. However, Commerce Secretary Dr. Rahul Khullar clarified that the gap is widening not because the poor is getting poorer, but because the rich is getting richer at astonishing rates. In fact, he believed that the general living standards for the country are improving rapidly as a positive result of economic growth.

Unfortunately, the number of people living in slums in India has more than doubled in the past two decades and now exceeds the entire population of Britain, the Indian Government has announced[5]. The tour through the Dharavi slum, housing over 1 million residents at the heart of Mumbai, vividly impressed in my mind the agonizing need to fight poverty. To continue the list of pressing issues that Indian government needs to address, lack of affordable housing is no doubt of high priority.




Despite being one of the world’s largest producers of fresh fruits and vegetables, wheat and rice, etc., domestic demand for food is outpacing supply and India is rising as a major food importer[6]. In addition to the demand-pulled inflationary forces, depreciation of the Indian rupees has made import prices more expensive, further fueling inflation. Rising wages and increasing fuel and raw material costs are also hitting the economy hard[7]. India’s central bank has increased interest rates 13 times since March 2010 in an effort to hold down rising prices. The latest inflation rate figure has fallen from double digits to 9%. However, the Indian government is cautioned against increasing rates further because of the weakening economy.

Despite the issues aforementioned, all of the business leaders that we had met are bullish on the Indian economy. In addition to betting on robust domestic demand, they believed that India’s healthy dependency ratio (the proportion of children and elderly to working-age adults) is the secret ingredient to the country’s success: India’s steady supply of the labour force will help it outgrow China, which is suffering from a shrinking working population due to its one-child policy. I further believe that Indians’ entrepreneurial spirit and creative mindset can further differentiate Indian enterprises in the global economy, as evidenced by successful examples such as the world’s cheapest car, priced just under USD$2,000, developed by Tata Motors.

In conclusion, I am grateful to have had the opportunity to go on the India Chazen Trip and meet many influential business leaders. I was not only impressed by the breadth and depth of their insights on the Indian economy, but also the consistency of viewpoints across the guest speakers coming from diverse backgrounds. The consensus is to be bullish on Indian economy and urge the government to accelerate reforms that help address burning issues, such as poor infrastructure, that are holding the economy back.

Dharavi – the Heart of Mumbai

I am deeply humbled by the massive scale of poverty in Mumbai: about one million people live in the 174-year-old Dharavi slum, stretched between the Mahim and Sion stations of the Western and Central railways respectively. This piece of land is heart-shaped and therefore known as “the Heart of Mumbai”.

The slum is loosely divided into industrial and residential. At 5 pm, we entered the slum from the industrial side. From plastic recycling, pottery making, baking local snacks, to re-purposing used tin cans into the very shingles residents used to build their own homes, the slum offers workers many job opportunities. Many of these workers had migrated from North India and left their families behind in order to earn a living here. Residents pay INR 2000 as deposit, and about INR 2000-2500 as monthly rent. Workers earn about INR 100-150 per day. Assuming they work every day for 30 days a month, their disposable income could range from INR 500 to 2500, or about USD 10 to 50, per month. This is significantly more than what these workers would earn back home, which would be about INR 20 per day. Ludicrous earnings come at a great cost: these workers work and live under horrific conditions. Workers solder without any protective gear, handle industrial chemicals without masks, and do heavy lifting without any equipment.

Luckily, there seems to be no signs of child labour. When I asked the tour guide what happens when these fall sick, he shook his head and smiled bitterly, “they go see the natives.” I presumed that meant seeking homeopathic care, because these workers simply cannot afford staying in hospitals and filling their prescriptions. Because of the horrific working conditions, many of these workers would only stay for 6 to 9 months, and then send their savings back home. Unfortunately, getting out of the poverty is never too easy, and many ended up returning to the slums. The vicious cycle continues.

As we transition into the residential area, we ran into a group of children who had just returned from school. They were excited to see visitors and waved at us with fervour. We returned with hand waves as the mind boggling scene began to settle in our minds: these children were playing on a mountain of garbage. The government spares resources to supply the Dharavi slum with electricity, water, and public toilet. However, such minimal infrastructure is simply not enough to support livable conditions. It puzzles me that the government has the ability to support the infrastructure at Dharavi but chooses not to moves these one million lives out of the slum.

The slum is so crowded that even Ganesh, Jesus, Buddha, and other gods co-exist under the same roof in the community shrine. Among the many pressing issues that the India as a country is facing, I believe a few are particularly pertinent to the increasing population in slums: the lack of affordable housing, low adult literacy rate, and shortage of job opportunities for low-skilled workers. As eluded to by various guest speakers on this trip, government reforms in agriculture and manufacturing are in dire need. We hope that through this trip, we further raise awareness of poverty issues in India, and join forces to tackle these burning issues as soon as possible.

Photo source: National Geographic

Day 1: Delhi — Highlights

From top to bottom:

  • Left column: Group picture with Mr. Analjit Singh, visiting IREO’s Grand Arch site
  • Center column: Dinner at Bukhara, Mr. Analjit Singh speaking, Kebabs at Bukhara
  • Right column: Mr. Analjit Singh’s house, generous lunch offered by Mr. Analjit Singh, shoe cover machine at IREO, generous lunch offered by Mr. Analjit Singh

The Elephant and the Dragon

As I count down toward the India Chazen Trip starting on 27th December 2011, I wonder how this trip will change my view about India. Business school students are generally more culturally seasoned, and probably know that Indians don’t keep elephants as pets, not all Indians are vegetarians, and they don’t speak “Indian”. However, with limited knowledge of this country, I have mixed feelings toward this trip. On one hand, I am excited about exploring the Indian culture because I practice Yoga and love the food. I am also curious about what makes India one of BRIC. On the other hand, I can’t help but be wary of the poor conditions in India, especially after watching Slumdog Millionaire and hearing how my colleagues had gotten sick from drinking water…

While China has been under the market’s spotlight because of its tremendous growth, envious export surpluses, powerful central government, etc., I learned not to overlook India after reading India’s surprising economic miracle and A bumpier but freer road from the Economist provided in the Reading Packet for the trip. A few interesting facts:

  • India’s GDP was expected to grow at 8.5% in 2010; India would overtake China in terms of growth by 2013. However, China’s economy is still 4 times larger than India’s and it would take the Indian economy a long time to surpass the Chinese in term of size.
  • India’s dependency ratio – the proportion of children and elderly to working-age adults – currently stands at 56%. It is one of the best in the world and will remain so for a generation. China’s dependency ratio is currently 40% but is deteriorating rapidly because of its one-child policy.
  • While China’s growth has been largely state-directed, India’s is driven by 45 million entrepreneurs. Successful enterprises are now competing on a global scale. E.g. Tata Motors, best known for making two-thousand-dollar cars, also owns Jaguar and Land Rover. (We are going to meet with executives from Tata on this trip!)
  • India’s adult literacy rate is only 66%; China’s is 93%. Nearly half of children under five are malnourished in India.
  • 200 of India’s 588 districts are affected by a Maoist insurgency called the Naxalite Movement.

In short, despite the poor infrastructure, private Indian businesses are fueling economic growth at an astonishing rate. On this trip, let’s learn more about this elephant and see if can overtake the dragon soon…

Now I should start packing. Stay tuned for more! First stop: New Delhi.

Stephanie Cheung’12

Picture sources:,,

Day 1: Delhi — Chaos is the norm

Despite getting an upset stomach by the end of the very first day, the first day’s meetings on this India Chazen trip were to say the least enlightening. From meeting with Dr. Khullar, Chief Secretary of the Ministry of Commerce, to having lunch with Mr. Analjit Singh, Chairman of Max India, at his home, I had learned from these respected leaders a few key lessons about India:

  • The widening in inequality gap does not necessarily mean that the rich is getting richer at the expense of the poor; in fact, all three speakers today all believed unanimously that general living standards are improving even for the poor, and it’s just that the rich is getting richer at a much faster rate.
  • We are in a way lucky to be living and, in some cases, doing businesses in an economy as homogeneous as the U.S. India is on the other extreme end of the spectrum. While Mr. Singh described India as “heterogeneous”, I think many foreigners would accept “chaotic” as a closer way to describe this country. In the context of doing businesses, there is simply no one-size-fits-all solution, and product differentiation and market segmentation are ever more important here in India. Mr. Singh believes that, however, no matter how you slice and dice the market, there is enough population in each segment for local businesses to prosper. (Naturally, I asked myself, “How do conglomerates, such as Tata, emerge?” We’ll find out soon later this week!)
  • Poor infrastructure is holding the economy back. For example, it took us FIVE hours to commute 125 miles. That is an average speed of 25 miles per hour! The unreliable sources of drinking water and power are also concerning.

To fuel this elephant, political reforms are necessary. Unfortunately, as Dr. Khullar mentioned, political reforms take place very slowly in this country. Let’s hear more on this from other speakers on this trip. Next stop: Taj Mahal!

Stephanie Cheung’12