An emerging global power

India has always been a country of radical thinkers and innovators. As the shackles of the country’s history have been thrown off and India starts to take advantage of its wealth of resources, population growth and entrepreneurism, it will increasingly be able to take a leading position in the global economy.

In recent years the growth in the Indian economy has outstripped most of the ‘developed countries’. Admittedly, we have a lot to catch up, but the figures are impressive and there’s a lot to be proud of: India’s economy grew 6% a year from 1980 to 2002 and 7.5% a year from 2002 to 2006, making it one of the world’s best performing economies for a quarter of a century. In the last 20 years, India’s middle class has quadrupled (to almost 250 million people), and 1% of its poor have crossed the poverty line every year. India is now the world’s fourth largest economy and is expected to overtake Japan as number three.

Government policy, particularly the series of reforms instigated in 1991 by Prime Minister Manmohan Singh, when he was Finance Minister, has been a key catalyst. Singh devalued the rupee, reduced business red tape, and encouraged foreign investment. Furthermore, India has a strong capital markets infrastructure and a modern stock market, western legal institutions, and a strong private sector, which generated a 16.7% return on capital for the average private company in 2004.

A measure of the strength of the Indian economy has been the confidence with which Indian companies have gone on the acquisition trail. Indian companies are storming ahead, with the number of cross- border mergers and acquisitions noticeably increasing in recent years. According to Deallogic, the data provider, in the first three quarters of 2006, Indian companies announced a record 112 foreign acquisitions, with a combined value of $7.2 billion. This compares with a value of $4.5 billion for 2005’s deals, which was three times the figure for 2004.

This expansion is a trend that will continue and in the future there will be an increasing number of multinational ‘superpower’ companies based in the now emerging nations. Indian companies have a way to go before they rival the likes of global giants such as Walmart and General Motors, but the large Indian conglomerates are building up speed and establishing themselves as multinationals. If these companies continue to grow at their current rate, there will certainly be an Indian company in the Fortune top 10 global corporations within the next ten years.

This prediction is in line with forecasts that India’s economy is likely to become the third largest in the world by 2030 after the US and China. Even now, India is the UK’s second largest foreign investor, after the US, pushing Japan into third place, according to the Ernst & Young investment monitor. India is now a major player in the world economy, hosting an annual global economic summit in its own right, under the auspices of the World Economic Forum, to showcase the Indian economic triumph, address the challenges to economic prosperity and also to encourage inward investment and partnership.

In line with the growth in the economy, India’s outsourcing industry has been a success story and is a major contributor to the country’s economic success. The outsourcing industry is just one aspect of India’s ‘ Knowledge Revolution’ which started in the early 1990’s and builds on the expansion of the IT and other service industries in India.

Those of us who operate in the services sector are familiar with the rise and rise of the outsourcing industry in India and the corporate rationales behind the trend to outsource non-core aspects of an organisation’s activities, to enable focus on core competences.

As organisations, both private and public sector, become more sophisticated in their sourcing strategies, two key trends emerge: Firstly, the location of the outsourced services becomes a more complex decision and secondly, the actual services that are outsourced are increasingly reduced to a basic process, enabling greater standardisation of service. These two trends are related. As business processes are increasingly standardised, it becomes easier to select the most appropriate location for each particular process.

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