EXAME

Edition of  : 12 April, 2006  

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EXAME goes to India  

Dressed up in a Dhoti, a traditional white-cottoned clothing. Palaniappan Chidambaram, the powerful Indian Minister of Finance warns: “today, no one in the world can ignore us”. Indeed, it is impossible to close the eyes to what is happening with India, a country of millenary culture, population of 1.1 billion inhabitants, emerging middle class of 300 million people and one of the greatest stars of global economy. India is a phenomenon in all points of view. It is a nation that challenges the rationality.  How can a country with an immense amount of miserable people, 18 official languages, conflicting religions, so-poor in infrastructure and with several business sectors in rudimentary  state can be seen by foreign investors as a place of opportunities? How can an economy in those conditions shine more than the Brazilian one? Which are the opportunities does India really offer for the Brazilian businessmen?

To answer questions like these, our editor Roberta Paduan travelled to Delhi, the Indian capital, in the end of March. During 9 days, she interviewed at least 20 important personalities – from Minister Chidambaram to a student of one of the country’s main institutes of sciences. From entrepreneur Nandan Nilekani, founder of Infosys, one of the most growing technology companies in the world, to cab drivers, waiters, traders and young people from middle class, who have fun at pubs of western style. In her trip to India, Roberta visited Delhi, Mumbai and Bangalore, the cradle of the Indian IT sector. “India is a poor country, but in construction”, says Roberta. “Despite all deficiencies, its people believe that, within two or three decades, they will have built a developed economy. For the Indians, this is a real target”.

It is here some part of the answers Roberta brought in her luggage: the Indians really want to join the club of rich nations, they believe that the end of poverty can only be reached if there is economic development and, in addition, they also realised that without an integration with the rest of the world, the giant India will continue trapped in the past. There are precious lessons for a country like Brazil, far superior than India in several aspects. Our present is more beautiful. But the Indians sigh with the future. And, in the words of Minister Chidanbaram, “it cannot be ignored”.

How can Brazil avail opportunities that emerge with the growth of the new star of the global economy  

For the majority of the Brazilians, the idea of India brings in mind a far off country, with its religious temples, musicians playing sitars and a non-measurable poverty of unequal proportions. An exotic, mysterious and thought-provoking country – but light-years away from everything minimally linked to modernity and prosperity. However, the India shown to businessmen and executives of several of the biggest global corporations is the protagonist of one of the biggest economic growth miracles of the recent history. More than this, it is a fertile land of opportunities, the country everyone must pay attention for several good businesses, under the penalty of becoming in the last positions in the XXI Century Development Race. Such so different views about India became evidenced in two recent surveys. In Brazil, a research carried on by the Institute of Studies & Foreign Trade, made with Presidents and CEOs of the country’s biggest corporations, show that 60% of them do not have any kind of interest in deepening commercial relations with the Indian market. It is one more case that the country goes in the opposite way of the world’s trend. As per a report of PricewaterhouseCoopers, 64% of 1400 presidents of companies of all continents point India as a sure destination for their investments in the next three years.

The signals that it is necessary to discover the modern India urgently are eloquent. The country turned itself into the new star of the Asian economy, after it has decided (during the mid 80’s) to open its economy, letting behind three decades of stagnation promoted by the socialist regime. The results of such strong manoeuvre are remarkable. India has been growing in an annual growth rate of 6% for the last 25 years, the double of world’s rate. According to the US Bank Goldman Sachs, the country will have the third biggest global economy in 2035, only behind the US and China. Today, India has an important task in major areas. It is the fourth biggest producer of medicines and the greatest exporter of IT services of the planet. From the US$ 30 billion of the market of software development outsourcing and call-centre services, India has a turnover of US$ 18 billion slice... In other words, more than half of what the world’s outsourcing in these areas.

 The signs of the Indian growth are visible everywhere. Practically all Mumbai streets are crossed by trenches. The streets will be enlarged and will also receive a new structure of water and sewage system. The road linking the capital New Delhi and the city of Gurgaon, a neighbouring city that was transformed into an important business centre in the last 15 years, also shows a good picture of the transformation in course at the country. From the road, it is possible to see the construction of a new highway, able to attend the flow of cars that increased since the arrival of the new industries. Mirrored-skyscrapers can also be seen in a skyline still dominated by small buildings and decent houses. At Gurgaon’s shopping centres, US & European chain stores of Tommy Hilfiger, Benetton and Boss supply the demands of the youngsters, who started changing the Indian traditional clothing to the western ones.

 This consumption potential calls the attention of foreign investors. It is a country of 1.1 bn inhabitants, much of them very poor, indeed. But there is also one of the biggest middle classes of the world, with 300 million people – in other words, almost two entire “Brazils” of middle-class consumers, who started requesting more sophisticated products & services. In order to attend such demand, 100 shopping-centres were built in the country and other 250 shall be inaugurated till 2008. These are impressive numbers that attest the brave speed of the Indian civil construction. The sector grew 8% in 2005, against Brazil’s 1.3%. The telephony is also passing through a remarkable evolution. Between 2000 & 2005, the number of mobile telephones increased 10 times, jumping from 5.6 million to 55 million. In the streets of the big cities, even street cleaners and civil construction peons walk with state-of-the-art telephone sets in hands. The Indian commercial aviation’s 25% p.a. -growth since 2003 put India as the second biggest market of this sector in the world.

 For such reasons, India is considered today as one of the major heavyweight players in geopolitics and at the global economy. The country became one of the stars of the latest edition of the World Economic Forum (WEF) in Davos, Switzerland, in the end of last January. In March, the US President George Bush visited India. He availed the opportunity to deepen commercial links between both countries. US companies like Cisco, HP and Microsoft already have a giant amount of employees there. In March, Michael Dell, the world’s president of Dell Computers, announced he will double the number of employees in India in the next three years to a level of 20,000 workers. The Indian branch of Schindler, the world’s greatest producer of lifts and escalators, is the one that grows the most among the other 100 branches sparked throughout the world. In front of this process of enrichment of the Indian middle class, enterprises of the high-deluxe-sector are betting on the country’s growth. The most recent arrival was the French Christian Dior, who opened its first store in the city of Chennai in February.

 In front of this scenario of economic boom, the reaction of the Brazilian businessmen is still very shy. It is true that the bilateral trade between both countries increased almost three times between 2004 & 2005, reaching a path of US$ 2.3 billion. However, the figure is still insignificant due to the already existing economic potential between both countries (see the box below). A single business, the sale of 10 Embraer aircrafts for the Indian Government and enterprises, totalled more than 10% of the whole bilateral trade. Currently, only 36 Indian companies operate in Brazil. From the Brazilian side, only Santa Catarina State-based Weg, Latin America’s biggest producer of electrical engines, has a branch in India. Weg installed its branch in Bangalore in 2004. “Our target is to stay where growth is, and India is a sure market for this”, says Decio Silva, Weg’s President. In the Indian branch of the company, the mission of the 10-employee-office (just 1 of them is Brazilian) is to sell engines and energy generators for small power plants. In the first year of activities, the branch had a turnover of US$ 10 million. “Besides producing energy to sustain the economic growth, India will have to mechanise great part of its production processes”, says Satyajit Chattopadhyay, Director-General of Weg in India, sat down in his desk full of images of Hindu-Gods behind.

 ALCOHOL – Nine out of the 28 Indian States decreed the 5%-blend of ethanol to the gasoline. Brazil, which already exports US$ 110 million of alcohol per year to India, may increase the amount of business much more.

 INFRASTRUCTURE – It is forecasted that the country’s necessities in infrastructure total an amount of US$ 150 billion. Big Brazilian construction companies already started making feasibility studies for investments in India.

 FOOD – Almost all milk and chicken are consumed in the non-industrialised way in India, and the imports of the products tend to increase, what means a good opportunity for companies like Sadia and Perdigao.

 AVIATION – The number of domestic passengers in India grows at an yearly rate of 25%. The expansion of the regional market is a target for companies like Embraer, who sold 10 aircrafts for the Indian Government and Indian companies last year.

 PETROLEUM – Approximately 35% of the energy consumed by the Indians has the petrol as its source. From this total, 70% is purchased overseas. The Indian Government has already manifested its interest for Petrobras investments in the country.

 STEEL INDUSTRY – The demand for steel in India has been increasing quickly. Brazilian companies may earn money investing in plants made both for the Indian market as for other Asian countries.

 TECHNOLOGY – India became a global reference in IT, but it is still behind in some areas, like banking automation. This opens space for the entry of Brazilian companies in India.     

Indeed, the experts bet that mechanisation shall be India’s unavoidable step in its route to the modernity. Meanwhile, the so-cheap workmanship puts men and women in the place of the machines practically in all fields of the Indian economy. The technological delay in civil construction, for example, is obvious. Even in the most sophisticated buildings, it is common to see dozens of women – responsible for the heavy duties – breaking stones with hammers and carrying buckles of concrete in their heads. When carrying concrete to the upper floors, the workers put themselves in a long queue in the bamboo scaffolds, passing the buckles from hand to hand. “We have to spark several leaps of productivity, and such leaps will need engines”, says Chattopadhyay.

 This necessity of modernisation makes the infrastructure field as one of the most attracting ones for the Brazilian enterprises. Forecasts say that immediate necessities for the field total US$ 150 bn. That’s why the subject turned itself into one of the national priorities. In this moment, there are 48 new highway systems under construction at the country, and the investments will totalise US$ 12 bn. The Government forecasts they need other US$ 24 bn to reform, upgrade and enlarge the already existing highways. India is also investing US$ 22 bn in the modernisation programme of 12 federal ports in the country. Currently, four airports are under reforms and shall be privatised in 2006. Due to this scenario, the Brazilian construction companies Odebrecht and Camargo Correa are considering the idea of entering into the Indian market.

 The fever called Indian economic growth brought the discussion on how it will be possible to sustain it in the coming decades. The Government considers strategic the assurance of energy sources for the people to move and the machinery to work. Consequently, one of the most promising fields is the fuel, especially alcohol. Brazil and India are the major producers of sugarcane. The most enthusiastic ones already talk about the formation of kind of a “OPEC of alcohol”, formed through the partnerships and exchanges between both countries. “We want to reduce our petrol dependence, which means 70% of our consumption”, said Mr Anand Sharma, the Indian Minister of State for External Affairs. Today, India is already a major consumer of the Brazilian ethanol. And the volume of business may increase. Nine out of the twenty eight Indian States impose a 5%-blend of alcohol in the gasoline. The Indian Government has also been “wooing” Petrobras, interested in its technology for the petrol exploration in deep waters. “We would love to have Petrobras in our country”, says Minister Sharma. The company does not have operations in India, but considers the country as a priority target of new investments outside Brazil.

 Processed food is an area practically non-explored in India.  Approximately 85% of the milk is consumed in natural form, without any industrialisation process. The same happens with chicken, since the majority of them is sold alive. These habits of consumption have been changing with the growth of the middle class. The new Indian consumers are seduced by most sophisticated food. Due to this change of behaviour, the Government is eager to receive foreign companies. “Sadia, for example, would be highly welcome in our country”, says Hardeep Puri, the Indian Ambassador in Brazil.

 The opportunities for the Brazilian companies exist even in areas that the Indians have self-bright, such as technology. In this case, the idea is: if we cannot beat them, let’s join them. That’s what did Sao Paulo based company Impactools, specialised in systems for security companies. Since 2001, Impactools sells its softwares to the Indian market through an association with PGS/ TCS from Tata Group, one of the biggest industrial conglomerates of India. “We export approximately R$ 1 million per year to them”, says Aurimar Cerqueira, founder of Impactools. Despite the selling volume is relatively low, Cerqueira says he is optimistic with it because he sees India as a big gateway for other countries of the Asian market. “In a near future, this factor shall multiply our earnings in that market”, says.

 The process of economic opening was sparked in the beginning of the 1980’s, when the then Prime Minister Rajiv Gandhi reduced the import rates on machinery & equipments, cut taxes on profits and exports and reduced the number of sectors that needed the licence to operate granted by Federal Government. In the beginning of the 1990’s, the reforms were accelerated. Private companies received authorisation to work in sectors like banking, software and telecommunications and, finally, FDI was authorised to enter the country. “India was obliged to make the reforms because it was already losing its breathe, due to the State asphyxiation”, says Ranjit Pandit, president of the Indian office of McKinsey Consulting. “The country also needed to reduce the gap with China, what is also considered a matter of national security”, says.

 The comparisons between the two emerging mammoths are unavoidable. The Chinese are ahead in several aspects, like GDP and commercial exchange with the world. On the other side, the Indian process of economic liberalisation is much more recent and there are several indicators showing that its growth may be more sustainable than the Asian rival. One of the most important reports to endorse such idea is the thesis of Goldman Sach’s Investment Bank. The study compares the future possibilities of the four BRICs – Brazil, Russia, India and China. In the competition of performance with other emerging countries, India would be the only one that could sustain the GDP growth capacity higher than 5% p.a. till the year 2050.

 Several elements justify this long-lasting growth forecast, despite its poverty indexes and other problems faced by the country nowadays (See the chart below). India has a favourable demography for the economic expansion. Half of the Indian population is below 25 years old, what means that this people will continue working, paying their taxes and consuming for many years. The second reason that the economists support themselves to justify their forecasts is the continuity of the economic policies. “Sometimes, things go slower in the Government but, in general terms, the economy goes in a coherent route”, says the Indian economist Arvind Panagariya, professor at Columbia University, US.

*Poor people are those ones that do not earn an amount enough to consume 2100 calories a day. 

Source: Government of India & World Bank

The political system also helps to keep the country’s growth route. While China has a closed regime, India is the biggest democracy of the world. The good functioning of its Parliament, which currently sustains the Prime Minister Manmohan Singh, represents an authentic miracle due to the giant existing cultural disparities between its population. India is a kind of Babel Tower, where 80% of the Hindus co-exist with the second biggest Muslim population of the planet, and where 18 official languages are spoken and almost 1000 dialects. In the university level area, the country not only beats China very comfortably, but also turned itself into a global reference. India is an authentic incubator of scientists and engineers in the world – 300,000 per year, while China graduates 200,000 and the US 60,000. The Indian brains are not only quantity, but also quality. To be enrolled in a first class Indian university, the candidates pass through a very tight selection process. “The pressure in the period of entrance examination is so high and the expectation of the relatives are enormous as well. They know that if we succeed, our career is guaranteed”, says 21-yr-old Anuarag Kumar, student of Mechanic Engineering in Delhi Institute of Technology, one of the seven excellence centres in the field of exact sciences in the country. “It is common to see students who fail in these examinations to be depressed or even to commit suicide”, says.

 The comparison between China and India may also be useful to guide the decision-taking process of the Brazilian businessmen. The Chinese race was started in the 1970’s and got consistence in the coming decades. In this period, the priority for the Brazilian enterprises was simply to survive – due to the existing wild environment of economic instability in Brazil. The fact is that, while the Brazilian governments were trying to control the inflation and to keep a minimum amount of order, capitalists of several origins were establishing in the Chinese territory, now in ways to transform itself in the world’s biggest market. “For the late decision-takers, only that slice that did not raise the interest of the pioneers”, says Ragvinder Rekhi, Vice-President of the US Dua Consulting Company, specialised in advisory for transnationals who want to enter the Indian market. “If Brazilians do not avail the opportunities in India quickly, they shall not have a similar situation ahead”. Even with all hurdles, cultural differences and extreme poverty, things are happening very fast in India. To ignore it would be charging a high price in the future.

Lawyer from Harvard University, Palaniappan Chidambaram has been one of the main characters of the revolution India is passing during these recent years. In 1992, when the reforms were accelerated, Chidambaram was the Minister of Commerce & Industry. In 1997, he spent two years in the position and reassumed it in 2003. Dressed with a dothi – a totally white clothing composed by a shirt and a kind of a kilt till the ankle, a traditional cloth of Southern India – Chidambaram received EXAME for an interview in his cabinet. “No foreign investor can face the cost of ignoring India”, said the Minister regarding commercial partnerships.

 WHICH MESSAGE WOULD YOU FORWARD TO THE BRAZILIANS REGARDING THE BUSINESS OPPORTUNITIES IN INDIA?

The message is simple: India is the second most growing economy of the world. We want to sustain such growth and we are confident we can do it in the long-run. This means that no foreign investor can face the cost of ignoring India. The connection between India and Brazil is still very poor. The distances are prohibitive, because there are neither merchant routs nor non-stop air connections. But, in the same way we are doing good businesses with the US, we can do it with Brazil in the near future.

 IN WHICH AREAS THERE ARE OPPORTUNITIES FOR THE BRAZILIAN BUSINESSMEN?

There are opportunities in the petrol sector, as Brazil has a very advanced technology in petrol’s exploration. There is also space in the aviation, an area that Brazil, with Embraer, has several comparative advantages. Brazil also has an advanced technology in ethanol and sugar. These are sectors that you could invest here in India, both in capital as in technology.

 NOT ONLY THE COMMERCIAL TIES BETWEEN BRAZIL AND INDIA THAT SEEM TO BE POOR. IN GENERAL ASPECTS, INDIA STILL RECEIVES A LOW AMOUNT OF FDI. WHAT IS THE STRATEGY OF YOUR GOVERNMENT TO SORT OUT THIS PROBLEM?

We are reducing these still existing restrictions for the entry of FDI. Where several approvals were needed, we replaced them for a single approval. The ambiguities in the rules for the entry of such kind of investment were solved. New areas are being opened to foreign investors, such as civil construction. There is also a work being made by this Ministry and for the whole Government, which is to sell the Indian economy for the foreign investor.

 INDIA, AS WELL AS BRAZIL, HAS TREMENDOUS SOCIAL DEMANDS. HOW TO DEAL WITH SUCH DEMANDS AND HOW TO KEEP THESE FINANCES BALANCED?

Today, there is a so-high expectation to develop our physical infrastructure – which includes ports, highways, energy generation and water treatment – for example. We also have to solve our social infrastructure – which means to solve educational gaps, health & nutrition systems, among others. But, in order to answer all these necessities, we need huge quantities of money. The problem is that we can only obtain such resources if there is growth. Firstly, our mission here is to create conditions for the economic growth and then, to correctly allocate these resources that, I repeat, may only be created by development.

 SEVERAL CRITICS SAY THAT INDIA COULD BE EVEN BETTER IF IT WERE MORE AGILE IN THE REFORMS AND IN THE PROCESS OF ECONOMIC OPENING. DO YOU AGREE WITH IT?

We are not doing reforms to please anyone. We only do a reform when we have a strong belief it is safe and necessary. The changes happen in the speed that the political system and the Indian Parliament permit. In India, we are masters of our destiny.

 The Ranking of biggest billionaires of the US Magazine Forbes is the best picture of the multiplication phenomenon of India’s greatest fortunes in the last years. In 1995, only one Indian was in the list – the businessman Lakshmi Mittal, owner of a steel company that carries his surname. That time, his richness totalled US$ 1.5 bn, which ranked him in the last positions of the list. Mittal continues in such list, but now in a more highlighted situation, what makes his history a personalisation of the skyrocketing Indian growth of the latest years. In the most recent list, published in 2006, he appears as the 5^th wealthiest man of the world, with an estimated fortune of US$ 20 bn. His company is now the biggest steel industry of the globe – and he has been trying to buy the vice-leader Arcelor for months, for the anger and desperation of European leaders like the French President Jacques Chirac. Mittal also got the company of 23 other countrymen at Forbes list. Currently, there are more billionaire Indians than French & Englishmen. In the top-30 wealthiest men in the world, for example, Azim Premji is among them. Owner of Wipro Technologies, the country’s biggest conglomerate of technology sector. Premji is considered India’s Bill Gates. Despite the country’s development in IT field, other markets produced their own magnates, such as the Ambani brothers (Reliance Group), leaders in chemical & textile sectors, and Kumar Birla, the greatest producer of copper and aluminium of the country.

Good part of this harvest of billionaires prospered with the recent economic development of the country. “As only a few people do, they knew how to take advantage of a pro-business environment”, said the executive Gurcharan Das, former president of the Indian branch of Procter & Gamble and author of the book India Unbound – From Independence to the Global Information Age. Not by coincidence, the businessmen who earned money the most in the latest years came from the sectors that proved this liberal revolution – pharmaceuticals, biotechnology, telecommunications & informatics. In the latest years, the Indian Government cut taxes and reduced the red-tape for entrepreneurs willing to invest in these areas – today, the most promising ones in the country.

Despite being protagonists of impressive stories of success, the big majority of Indian billionaires inherited the businesses they control nowadays. The system of castes, which still dominates the society, makes arise of any self-made-man much more difficult. The social mobility index among the Hindu population, the biggest one of the country, is one of the world’s lowest. The billionaire Shiv Nadar is one of the rare cases of entrepreneurs who started from the ground zero, literally. His ancestors, Hindus, belonged to one of the lowest social castes. It is unknown how his family left the situation of poverty and how things became easier to him. Even not having a fortune in hands, Nadar invested an amount of money. He had only 24 years old when, together with 5 friends, he decided to inaugurate the Hindustan Computers Ltd in 1975. The idea was to assemble cheap computers in a market dominated by IBM. As he was not member of any important dynasty that had relations with the Indian Government, the licence to open the company was denied. In its place, Nadar got a permission to open a factory of calculators. That’s what he did. One year afterwards, he obtained a permission to assemble computers – period when IBM was closing his activities at the country. The success was immediate. During the first month of operations, Nadar received more than 3000 requests. In 1980, Hindustan established its first overseas branch in Singapore, and never stopped growing. Re-baptised as HCL Technologies in 1994, the company is among India’s Top-15 producers of PCs, with branches spread in more than 15 countries.

In the Indian society, the biggest amount of managerial elite is made by Muslims and Persians, minority groups in the country. Some Persian families, such as Tata, Birla and Godrej are the owners of the most traditional conglomerates of India in the fields of textiles, chemicals, steel industry and consumption goods. The second wealthiest Indian of the world is the Muslim Azim Premji, from Wipro Technologies. He started his career in the small company of vegetal oils of his family in India’s country lands. During the 1970’s, when IBM left the country for not accepting being a partner of the then Socialist Government in force, Premji started developing PCs to fill up the gap left in the market. Afterwards, the softwares came and, lately, the call centres and IT services.  Nowadays, Wipro is one of the biggest companies of the country. “India’s economic transformation became highly concentrated in the hands of few families”, says Gurcharan.

Billions of dollar plus in the inheritance of the Indian managerial elite did not change the routine of them. Just a few of them are seen with bodyguards or living in fancy houses. Azim Premji, the Indian wealthiest one who lives in the country (Despite having a bigger fortune, Mittal lives in UK for decades), did not even change his car since he became a millionaire. He continues driving the same Honda Civic of the times he used to control the small factory of vegetal oils. To avoid wasting of resources, Premji himself checks the amount of hygienic paper spent by his company daily. In the end of the day, when leaving the company to go home, he himself switch the lights off of the corridors and offices. Other big difference between the Indian billionaires and their Western counterparts is in the salaries. As the President of Wipro Technologies, Premji earns an annual salary of US$ 360 thousand – an amount much smaller than the salary of his US counterparts. His fortune comes from dividends of an 82%-slice of the conglomerate. “Offering wonderful salaries to the executives is not in the priority list of our great companies”, says Mr. Shangvi of Sun Pharmaceuticals. “In the moment, our biggest concern is in the “professionalisation” of our business, in order to enable our companies to continue being globally competitive”.

Infosys is one of the most fascinating chapters of the recent history of “entrepreneurism” in India – and turned itself into one of the facets of an arising economy that started haunting the world. The company was inaugurated in 1981 with a capital of US$ 250, collected among seven Jr. Engineers in the city of Pune. In the beginning, they had meetings in the house of the older one of the group, Narayana Murthy, to assemble the computer programs requested by the first costumers. Inaugurated in the standards of California tech companies, in the back porch of the houses, Infosys turned itself into a power. It is currently the second biggest one of India and one of the world’s most growing companies in the technology market. In the last seven years, its annual turnover jumped from US$ 100 million to cross the barrier of US$ 2 bn.

The company has branches in 18 countries and employs more than 50,000 people. Listed in Nasdaq since 1999, its market value is around US$ 20 bn. The group of founders continue in the head of the company. Murthy became the first president of the company, being in the position till the year 2002. He was replaced by other of the seven pioneers, Nandan Nilekani. “We became a power because the soil was embanked”, said Nilekani to EXAME, repeating the way of thinking of the US journalist Thomas Friedman, writer of the best seller “The World is Plain”. The idea of the book started with a visit of the author to Infosys. The company prospered as the technological advance could permit that good part of the operations could be done in a remote manner. “We knew we could only grow keeping the focus in the external markets”, says Nilekani.

Obvioulsy, the way was not easy at all. During the 1980’s, the setbacks imposed by the socialist regime, which used to suffocate all India’s private sector, made very difficult the launching of Infosys. A simple importing operation of a US$ 1500-PC lasted 2 years to be concluded. In the beginning, the founders used to spend long periods overseas, rendering services in foreign companies. Only after gaining the confidence of the clients that they could transfer their operations to the headquarters in India. The final leap happened thanks to the Millennium Bug, when companies throughout the world had to re-programme their PCs. That time, as other Indian companies in this area, Infosys had thousands of engineers to do this heavy-duty job and the reputation of having good programmers, with the advantage of speaking the English language.

Currently, 98% of the turnover of Infosys is from the exportation of services. Besides developing softwares under request, the company manages operations of companies that work with a huge amount data, even rendering strategic consulting for them. Names like Boeing, Chrysler and ABN Amro are among the portfolio of clients. Infosys headquarters is located 25 km away Bangalore’s downtown, the Indian Silicon Valley. It is an oasis amidst a poverty sea. Just one quarter away from there, there are streets without pavement, garbage in the streets and chaotic traffic. When simply passing the main gate of Infosys, the visitor is immediately transported from this scenario of a shanty town to an environment of a US university campus. In a 320,000 km²-area, which the visitors walk in golf cars, we see dozens of modern buildings, perfectly cut lawn and well-paved & cleaned streets.

Infosys is among the companies most desired by the young professionals that leave from the Indian universities.  Yesteryear, it has received 1.3 million CVs – what makes one position there much more difficult than a seat in Harvard, for example. Only 1% of the candidates who try a position there is approved – at Harvard, the approval level is of 6%. “Since the very beginning, people are the hearts of our business”, says Nilekani. Despite the modern facilities of Infosys, the businessman works in a small office, whose main object of decoration is a wine-coloured sofa that seems to be bought from a special-prize catalogue of Brazil’s retailer Casas Bahia.  With 50 years old, he has already collected a patrimony of US$ 700 million. He is married, two sons and very discrete in his private life. Outside the company, Nilekani likes to be involved with other affairs of the Indian business world. Belongs to him a good part of the strong marketing campaign to show India’s economic potential in the latest edition of the World Economic Forum in Switzerland. “I have a dream”, says Nilekani. “Within 20 years, I want to see India transformed into a developed country”.

Almost one third of India’s population live in poverty, the biggest amount of poor people on the planet. Approximately 40% of the Indians are illiterate. The country’s infrastructure is falling in pieces. The water treatment system is poor. Delhi and Mumbai are among the most polluted cities of the world. It is common to witness several energy short-cuts during the day and they also feel the absence of highways to link the various regions of the country. Trapped in India’s administrative system, there are also traces of the worst things of the bureaucracy of the former socialist nations. As it is not enough, India also has to manage the existing rivalries between its religious groups – Hindus and Muslims – and the real bad relations with its neighbour Pakistan. In front of such scenario, Brazil’s big bottlenecks seem to be much smaller. The Brazilian per capita income is five times greater than India’s one. Our social mobility is also much bigger. Despite our political scandals, as per NGO International Transparency, our corruption indexes are also smaller than in India. Due to such facts, it is difficult for us to understand how India is ahead of us when talking about the most promising emerging economies.

The answers are found in the routes each country decided to choose in the latest years. In 2004, during the official visit of President Lula to India, together with Ministers like Luiz Fernando Furlan (Development, Industry & External Commerce), the Brazilian delegation could see the functioning of the Indian model very close. For more than two decades, the country has been doint its “homework”, not deviating an inch from the essential growth principles, such as courageous reforms in its economy, commercial opening and reduction of red-tape. Perseverance is the name of the game. Government after government, the country has been following a non-stop process of liberalisation. “India’s rhythm is a little slower than China’s one, but the development is on more solid basis”, says Tarun Khanna, Administration Professor of Harvard Business School. That’s why several people compare India’s rhythm to the steps taken by an elephant – a little slow but not deviating from a straight line. While the elephant of the Asian economy goes on, Brazil is still doubtful about some basic questions. Should the economic opening be kept or aborted? Should the country welcome globalisation without any fear or to keep a high defence system? Should the country increase or decrease its participation in the economy? The ones who follow such answers given by our latest Presidents – from Collor to Lula – will check that there is no consensus about such subjects, as well as other vital ones. Result: in the last 10 years, the Brazilian economy grew at an average yearly rate of 2.2%, while the Indian one grows at 6%.

It is exactly such persistence that has been working as an irresistible attractive for foreign investors. The current picture of India shows a country much below Brazil’s picture.  When we see the future, it is difficult not to include that Asian country. Even for a question of scale. With a 1.1-bn-population, a medium class of 300 million people and a GDP that does not stop growing, India has all the tools to become one of the three biggest economies of the globe within some decades. “Although Brazil is more modern, the fact is that the country did not take-off yet”, says Khanna, from Harvard Business School. “In the other hand, year after year, India has been showing an economic vigour smaller than China only”.

 The greatest challenge of the Indians is to sustain such growth and, simultaneously, to solve urgently their list of internal problems. Despite it is an island of excellence in sectors like IT, India has an infrastructure that is much more problematic and delayed than the Brazilian one. Several Indian highways are in poor situation and the traffic conditions in the cities are near to the chaos. A 2-km-ride may last from 10 minutes to 1 hour, depending on the traffic. Energy system is other big problem of the highly-populated urban areas. “It is common to see energy cuts in Mumbai ten times a day”, says the Brazilian Mauro de Curtis, President of Schindler’s Branch of India, producer of escalators and lifts since 2003. “We had to make special protections in the lifts and to put energy generators in all buildings we have lifts and escalators to avoid damages in our equipments”. Yesteryear, the Indian Government invested US$ 10 bn in energy, railways and highways, but there are forecasts that the country needs to invest other US$ 150 bn to solve this infrastructure gap.

The up gradation of highway conditions, modernisation of ports and reform of the biggest airports, despite being monumental jobs, are more feasible to be done in the short-run than overcoming the country’s poverty. Side by side to the brilliant PC-engineer, the scenes of beggars waddling around the streets are the most known of the current reality of India. In the last 3 decades, the country achieved some progress in this area, reducing the amount of miserable people in almost half (see chart). However, the panorama is still catastrophic. The Indian miserable people total more than 300 million. The Indian per capita income is only of US$ 620.

The high illiteracy rate is one of the reasons that contribute to this problem. Historically, education investments in India were specially made in higher studies. Basic teaching was almost put in the corner and, as a result, almost half part of the population is illiterate – especially women. Such distortion is starting being combated only nowadays. The poverty was also fed by the rigid system of castes, which sticks social mobility, and by the constant low technology in agriculture. The agricultural production system of India dates from the Middle Age. Result: almost 70% of the Indians live away from urban areas, but the agriculture has only a 20%-slice of the GDP.

 State Governments & companies started searching some solutions, such as the technology transferring with Brazil to increase the production of some agricultural goods. However, the solution of such problem may spark another big one. The increase in rural productivity should release a big population mass that lives in the fields, an approximate amount of 700 million people. The exodus of such population may cause a social chaos. “In order to absorb such workmanship, India will have to invest in industries”, says Sunil Tankha, economist of Holland’s Institute of Social Studies. Since the first liberalising reforms, during the 1980’s, India grew its industrial production at yearly rates of 8%. Several setbacks against for the production, strongly ruled by the Government years ago, were abolished to give more freedom for private companies to choose their strategies. “However, to grow more, the country should carry on new reforms”, warns Arvind Panagariya, Professor of Economics at Columbia University (NY). Some inheritances of the socialist period, established after the country’s independence in 1947, should still be swept away from the administrative and judicial systems. Labour laws, for example, are extremely rigid. Companies with more than 100 employees may not fire a worker without a previous authorisation granted by the Government. As a consequence, the majority of businesses are informally made. In retail sector, there is a forecast that only 3% of the operations are legalised.

In the last decades, the Government has been diminishing the burden of ruling on enterprises, but there are lots to do regarding breaking the hurdles of day-by-day operations. In Worldbank ranking about the facility to make business, India is in a so-modest 116^th position – only three positions ahead Brazil. Seventy one days are necessary to win over the tremendous bureaucracy to open an enterprise in the country. It is almost half of the time spent to do the same in Brazil (152 days), but years-light behind countries like Australia, where the process lasts only two days to be completed. The Indian bureaucratic burden can be seen even in theoretically  ordinary operations – in order to install a single lift in a building, for example, approximately 30 licences are needed.

Despite being monumental problems of complex solution, it is better not to doubt the capacity and obstinate behaviour of a people, which transformed an undeveloped country into a world phenomenon of economic growth in a short period of time. “The optimism and confidence acquired by the Indians cannot be translated into numbers, but they are important elements of transformation of this society”, says the Frenchman Frederic Lalanne, President of the Indian branch of Alstom, a global producer of energy & transportation equipments. This optimism is expressed by the student, who believes he will have assured position when leaving the university; by the businessman, who believes that the country will join the group of developed countries in the next two decades; by the cab driver, who spends one third of his monthly income in the school fees of his son, betting he will have a well-succeeded career. “Till the end of 1990’s, we had several doubts about the future”, says Natraj Srinivasan, Director-General of the National Confederation of Indian Industries. “For example, we were afraid of the vanishing of our industries caused by the commercial opening. Now, no one has doubts we are in the development route”.