The India Story - Part 1

The other day, I had an opportunity to listen to a talk on entrepreneurship. The India story is being touted all over the place. Everyone perceives the West - US and Europe included as aging tigers with the BRIC nations, particularly India and China as the two young raging tigers poised to pull the world out of the mess created by the sharks of capitalism. This two part post is a calculated look into the plausibility of that claim.

Now, before anyone begins to assume a socialistic or communist tone to this post, my belief system is rooted in meritocracy and capitalism. So no worries on that count. But whether the Indian story really deserves such mention is something one needs to sit up and think about. For starters, just to put things in perspective, California's economy alone is worth $ 1.8 trillion, which is much larger than Russia's economy! India's GDP in relative PPP terms stands at $ 3.53 trillion, hardly twice that of California! So is it really such a big deal?

The Indian and Chinese story are intense to say the least! And one thing we must remember is that a growth story like the Indian or the Chinese story perhaps has no precedent. A growth of such scale and magnitude - unforeseen. If pulled off, like George Mallory's feat in the book 'Paths of Glory', the kudos would be tremendous. And if we flounder, the results would be disastrous.

For starters, let's talk advantages.

Government : The first and biggest point is Democracy. No matter how dysfunctional it may be, the world respects democracy, almost in an anti - Socrates way! Somehow a population of a billion being led by a democratically elected government is an achievement. The country looks dependable. And the developed world that follows a democracy identifies with the concept. And somehow a sense of stability is associated with the nation. Classic democracy implies that if a government does not deliver on promises it can and will be replaced. And that adds come credence to the country.

Population: India has a huge population. Billion mouths to feed, billion aspirations, a billion people learning about the wondrous ways of the West. Huge opportunity indeed. The Indian population would be young too, with an average age well below 40! So, huge, earning, productive population. Fourth, we have a lineage. A history of being achievers. Right from the Tatas and Narayana Murthy to Lakshmi Mittal to the Ambanis. From Dipak Jain and Nitin Nohria to Raghuram Rajan, we have an imprint in industry, academia and thought leadership per se.

Labor : One implication of population and a model we've mastered so far is making our labor efficient. At least in terms of cost. So our service sector is well developed - almost to the extent of providing us a competitive advantage. In addition, our urban population is competent in English and so, we have yet another competitive advantage! Also, our education system, for the larger part is strong. So the number of A class engineers, doctors and managers India churns out, provides a strong, capable population that can carry India's progress on its young shoulders.

Location: India is situated neatly in the middle of the world. So, our proximity to the Far East and Europe at least in terms of time zones is an advantage!

But if the achievements are intense, the issues are even more glaring. Next up, we look at the issues.

Ikea pulls out of plans to set up shop in India - Retail, the big picture

Retail in India, I feel is a totally different story, as compared to retail in any other country. It is more of a cultural aspect than anything else, according to me. We as Indians are wired differently and for us, a shopping experience is not more about finding everything under one roof, as it is about going from shop to shop. Tell me, do we, and I speak of the ardent shoppers, feel happy and content after making a bulk purchase at one single shop? I, for one, don't. I feel like I have let go of some opportunity, in picking up all my bargains at one single shop. For this reason, I feel that retail in India is an all new ballgame, with the players needing to concentrate on how to break into the Indian psyche, and make a point.

Take for instance shopping malls in India. A typical mall in a foreign country has a whole host of shops that sell anything and everything from clothes to coffee to sweets to jewellery. And in India, that concept somehow doesn't seem possible, since for many jewellery shopping doesn't begin and end at People's, but rather begins at Zaveri Bazaar, goes all the way through Tanishq and ends perhaps at the place suggested by so and so's grandmother, since that shop is very conscious of quality.

How do we go shopping for clothes? We segregate our purchases into good clothes and replaceable clothes. So, the good clothes are bought at an upmarket place, while the use and throw variety is generally picked up anywhere. Likewise, furniture. The whole concept of assemble-it-yourself furniture is unknown to us. We need a cabinet made, we call Pandu the carpenter, who brings along another helper and wham! a cabinet is ready in 3 days, and the cabinet fits snugly into the 2 feet by 3.75 feet nook we pointed out to Pandu. So, that Ikea pulled out of its plans to enter India, is not very surprising to me.

Malls have mushroomed in India, more so in Mumbai over the past few years. But the funniest part is that some of these malls have sprung up in the heart of the 'flea market' shopping districts. I speak specifically of a couple of malls in Dadar in Mumbai. I, for one, could not understand why someone would set up shop while in direct competition with the road side shops who care two hoots about long term sustainability and margins. All they need is to turn in a profit for that day, so they can eat that night! Tomorrow is a new story that can be tackled separately.

What poses a question to me, rather is what the nature of retail in India, really is? Will malls continue to be looked upon as places to hang out in and nothing else? Will Mumbai see the closing down of many more of the mushroomed malls, like it happened with Crossroads? Will the Indian consumer get out of the traditional mindset and look beyond the shop around the corner? And also, what is the scope of organized retail in India, say retail through the internet, and what can incentivize the Indian consumer and hence the retailer to pursue the same goals?