I am just back from Asia, where I visited our offices and clients in Singapore, Delhi and Mumbai. Today’s post is focused on India, because so much of what I learned was truly unexpected.
1. Unemployment Concerns — A million Indians reach employable age every month, but there are only about 70,000 jobs being created every quarter, leaving more than three-quarters of the employable segment unattended to. India’s outsourcing industry is dealing with hiring challenges as demand slows in the wake of automation of certain IT tasks via artificial intelligence. IT services companies have traditionally been mass recruiters, but lately recruitment of new graduates is shrinking. The H1B visa issue with the U.S. is another serious concern.
2. Rise of Non-English Speakers — Four of the top five newspapers in India are now in local dialect, not in English. There are more Google searches in local dialect than in English (the lines crossed this year). This is a result of increasing levels of literacy in rural areas and in the lower income segments.
3. Challenge by Local Brands — There is a new superpower in consumer packaged goods: a company founded by a Yoga Guru that is now challenging Unilever and P&G in the stores. Patanjali reportedly has become a $750 million company and offers products based on Ayurveda. His success is born of word-of-mouth, social media, and now TV advertising.
4. Mainstream Media in Trouble — The first three pages of the Times of India were full-page ads. The journalist corps is being pared. The affluent younger consumer is reducing TV consumption in favor of over-the-top options such as Hotstar, Netflix and now Amazon Prime, which provide localized content.
5. Booming Stock Market — The Sensex exceeded 30,000 for the first time on Wednesday, on the back of bullish sentiment about Europe (Emmanuel Macron expected winner in France) and Prime Minister Narendra Modi’s deregulatory fervor.
6. Security Concerns Beyond Pakistan — While I was in Mumbai, the headlines in all of the papers were related to the killing of 25 paramilitary troops by Maoist insurgents. There is increasing concern about these revolutionary cells, now reportedly active in several states in the country. Kashmir continues to be a flash point in India-Pakistan relations.
7. Farmer Subsidies — The agricultural sector accounts for over 60 percent of the population. Farmers are heavily subsidized by the government. There is no income tax on agricultural income of any kind, they pay little or nothing for energy, and they have assured procurement pricing for their crops. But Indian farming is inefficient, with too many small holdings, forcing the country to import food staples such as pulses from Mozambique, Canada, Australia and other countries.
8. Renewable Energy and Energy Efficiency — One of our clients is EESL, a public-sector unit that plans to list at some point soon. EESL has as its primary aim the conversion of Indian businesses and homes to energy efficiency methods, including replacing incandescent bulbs with LEDs. Thus far, 230 million bulbs have been replaced in a period of three years. The procurement price of a LED bulb is now down to 60 cents from $5 due to bulk buying. Tubular lights, ceiling fans and solar panels are the next business opportunities. EESL will shortly open operations in the UK, then soon in other deregulated energy markets.
9. The Modi Phenomenon — Now three years in office, Prime Minister Modi is a force of nature. Recent electoral wins in a major state, showcasing a strong fight to oppose anti-incumbency sentiment, and non-performance of predecessors are testaments to this, as are his unbelievable work ethic, his ability to get things done in the Parliament and his determination to open Indian markets to competition. The Congress Party, in opposition, is a shell of its former self, without charismatic leadership. In contrast, is a compelling effort by Prime Minister Modi to carry his voice to the general masses of the country through the medium of radio. ‘Mann ki Baat’ (Translate: From the heart), which airs on All India Radio once a month is an effort to portray a transparent and dialogue driven government. The program averages 40 million listeners every month.
10. Not ‘Made in India’ — The expected boom in foreign investment in manufacturing has not occurred. There are success stories, such as the large GE plant that can make everything from locomotives to wind turbines. But in several sectors such as airplane parts, the MNCs still prefer to import from China or other manufacturing hubs.
11. Fintech Triumphs — Prompted by de-monetization, the digital payments and fintech story in India is phenomenal. It not only increased the money that banks now hold, but also jumpstarted a change in habits and a move towards a cashless economy.
12. Small Business Gets Smaller — There are 58.5 million enterprises in the country employing 132 million people so an average of 2.25 workers per company. In cities that is an average of 2.68, down from 3.77 per company in 1990. The proportion of companies employing over 10 people has dropped from 37 percent to 21 percent from 1990 to 2014. The productivity of a country tends to be negatively correlated to the degree of self-employment. Economists believe that regulatory policies have made it hard for companies to grow.
I love the colors of India, the stunning blues and oranges, the cacophony, the “tuk tuks,” the optimism and energy of our teams. I cannot wait to return in the fall.
Richard Edelman is president and CEO.