Wallowing unaware!

Recently in a survey a group of people representing various countries of the world were asked, How many liked Japanese people? A few hands rose up. Then how many people liked Chinese people? Slightly higher number of hands went up and finally the crowd was asked, How many liked Indian people? Almost all hands went up. The same crowd was asked, How many liked Indian products? A few hands went up and, How many liked Chinese products, A sizeable number of hands went up and, How many liked Japanese products, Almost all the hands went up.

Yes, I am going to talk about this populist and pluralistic Indian population which has taken the world by surprise. But don’t mistake my tone, to be optimistic or pessimistic. It’s a mix of both :)

India has been a developing economy since 2-3 decades but the true sense of development and its percolation has been felt only recently. Growth by far, for any country is measured in terms of its GDP. And 9-10% growth is not something unseen in the developing economies around the world. But the path by which India has achieved and to some extent maintained the growth is unique. It’s through Services. And the reason I started writing this article was to analyse and assimilate whether a growth that relies heavily on services would be sustainable.

I myself represent the Information Technology sector, a sector that has given huge growth potential and generated employment for a sizeable chunk of individuals. After having worked for more than 2 years, Infact I believe, we were forced to rely on services since we lacked Infrastructure and the expertise to manufacture. And by the time we realised we have to focus on Manufacturing, the Japanese and Chinese became masters, and it was tough competing with them.

I have a very simple parallelism. If somebody wanted to start a textile manufacturing facility in coimbatore or Erode he knows well that he would fail. The focus is heavily on Tirupur and it’s very tough to shift that focus. Tirupur has distinct advantages which are difficult to be offset. Similar it is to shift the focus away from China!

And now I have a statement to make :)

“GDP growth has been directly and indirectly driven by the liquidity, that comes from the FDI that the, services sector has magnetized towards India”

But I have a firm belief that we cannot be wallowing in this boom forever. Because Services don’t have guaranteed returns. If you outsourced a manufacturing contract the chances of you being replaced by someone else is remote, unless you deliver very low quality goods. This is due to the Investment made in Infrastructure and SCM.

But in case of services the only investment is Human brain and it will take hours to cut down a contract. The contract that came to X from Y can as well go to Z. And Z can be a small company in any part of the world other than India. The only motivation would be the cost. If they can create a belief that they can deliver on time, that’s all it takes to do Services business.

I would leave it here and I will continue this article sometime later with few instances which hold a sign of caution for this country and its citizens, who have been wallowing unaware of the fast changing world and the fast changing economics around the world!

Until then Happy learning!!