End of the good times?

Rather Ominous sounding article on the recent stock market corrections et al.
From Rediff columns dated June 10th '06


The change of mood is dramatic. The stock market seeks lower levels every day, and the same people who thought a month ago that a Sensex level of 12,000 was stretched but not unreasonable, now argue that the market will settle at or near 8,000.

Everyone expects interest rates to go up, in part because of the signals from the United States, and the effect will be to cool bank lending - which means slower growth in both consumption and investment.

Then, there is growing concern over the country's trade and current account deficits, especially since oil prices show no signs of softening from their current levels. This, coupled with the pulling out of money by foreign institutional investors, translates into pressure on the rupee - which has already fallen against a soft dollar and could fall further.

And while inflation is still quite low, it will climb now that petrol and diesel prices have been hiked. In short, whether it is the market for stocks, debt or currency, expectations have changed. Added to that are the macro-economic concerns about oil prices, inflation and the trade deficit.

That's not all. It turns out that more than half the companies saw a drop in profits last year (as reported by this newspaper yesterday), a disconcerting fact that was masked by the superb performance of the corporate giants, so the upbeat corporate story doesn't look quite so generalised any more.

As if to underline that point, some sectors are beginning to play to a new tune. The change of mood has already had knock-on effects in real estate (where prices have flattened, if not fallen), and in the public offer of shares, as some companies are postponing plans.

Sitting oddly on this pile of bad news and worse expectations is the evidence of new global confidence in "the India story". IBM's announcement of $6 billion worth of investment in India over the next three years is the headline of the week, on a scale matched only by the Posco steel project in Orissa.

Equally significant is Nissan's announcement that it will get Maruti to do contract manufacture of small cars, mostly for the export market but also for selling to Indian customers - significant, because it confirms that India is becoming a global hub for the production of small cars. And Motorola's announcement that it will start manufacturing mobile handsets in Tamil Nadu adds one more to the list of handset manufacturers who think the Indian telecom market is big enough to locate manufacturing plants here.

It seems that just as the FIIs begin to re-do their maths on India and other emerging markets, FDI inflow is being planned on a matching scale.

The question is whether this is the end of the good times, or whether the India story is still unfolding. Both, perhaps. All the main markets (stocks, real estate, commodities) had begun to see a lot of froth, so some cooling down and condensation is welcome; in fact, this helps a return to sanity and good judgment - and it must be hoped that real estate prices of Rs 50,000 and more per square foot will not be heard of again.

Incremental bank credit had been running ahead of deposit growth for some time, by definition that pace could not have lasted, and so a slowdown in lending was inevitable. In fact, a slowdown in US demand, prompted by higher interest rates, may not be unwelcome if it helps the US address its twin-deficit problem.

As for the economy, the combination of high oil prices, rising trade deficits, tighter money and pressure on the rupee, does mean an over-all loss of tempo. The issue is: how much will things slow down? If the economy can sustain 7 per cent growth for the next year or two (compared to the more than 8 per cent for the past three years) - and there is no reason why it should not - the new mood of near-panic on the market is unwarranted.
If the sober assessment is that this is more in the nature of a correction for the markets, and a step down in gear for the economy, within the same upbeat India story, there is no need for either companies or individuals to change their medium-term assumptions about the future.

India's Economic Contrasts

BANGALORE, India, March 1, 2006: From the CBS website

With little more than big ideas and a home computer, Suhas founded his IT services company, Globals Inc, when he was just 14 — and became the world's youngest CEO.

CBS News Chief Foreign correspondent Lara Logan reports on one of the world's youngest and most successful entrepreneurs in part two of a special series India: Land of Contrasts.

It's the kind-of treatment usually reserved for India's Bollywood movie stars, not a 20-year old kid. But when Suhas Gopinath goes back to his old grade school, they let him know he's an inspiration. This local boy has made it big, reports CBS News correspondent Lara Logan.

Gopinath is the boss of a global software company that operates in 11 countries, including the United States. It's a remarkable achievement by any standard — but in India, a developing country saddled with the largest number of the world's poor, it's nothing short of a miracle.

Gopinath's inspiration was none other than Microsoft's Bill Gates.

With little more than big ideas and a home computer, Gopinath founded his IT services company, Globals Inc, when he was just 14 — and became the world's youngest CEO. Six years later, he has even bigger plans.

The new offices for his ever-expanding business in Bangalore are less than a block from the college where he's still studying and the modest house where he still lives with his parents.

Globals employs 600 people — the youngest, a 10-year-old adviser on Web design. Age is no barrier to employment — unless, of course, you're not young enough. The maximum age of his employees is 32.

You wouldn't think that Gopinath's small Indian company could be worth a $100 million to an American firm, but that's exactly how much he says he was offered by a Houston venture capitalist — for just 35 per cent of his business. Gopinath didn't hesitate to turn down the offer.

His story is an astounding example of what's possible in modern-day India's booming economy. However, his story is also the exception. Just 300 miles away, in the slums of India's capital, Delhi, a young man not much older than Gopinath is living a profoundly different existence.

Imagine waking up every morning to comb through mountains of rotting garbage, searching for anything he can sell. It's the only life 24-year-old Bisu Das has ever known.

If he's lucky, he'll make 2,000 rupees a month — that's about $40. Incredibly, that makes him better off than 300 million other Indians — more than the population of the entire United States — who live on less than $1 a day.

No matter what you've heard or read about India's poor, nothing can prepare you for actually seeing it, Logan says. The sight and stench are overwhelming, and there are more flies than you have ever seen in your life. The sheer horror of what poverty really looks like up close is shocking.

Das is one of thousands living in the midst of a massive garbage dump. He told Logan that it's hard not to feel angry. He never thought sifting through garbage would be his life.

So while India rides the economy Gopinath is helping to create, its biggest challenge may be not leaving Das and millions like him behind.

Bush in India

From the pages of "The Economist"

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ON THE 13-hour flight next week from Washington to Delhi, George Bush could do a lot worse than to put aside his briefing books and curl up instead with E.M. Forster's best-known novel. “A Passage to India” is a tale, above all, of misunderstanding: of wrong signals, exaggerated expectations, offence unwittingly caused and taken, and inevitable disappointment. It is a parable of the complications that arise when eager Anglo-Saxons go travelling on the Indian subcontinent.

A degree of wide-eyed enthusiasm on Mr Bush's part is forgivable. India is a rich and exotic prize. Its booming high-tech service sector and tens of millions of affluent consumers have already convinced many of the world's business people that India is on the brink of replicating the astonishing burst of growth that transformed China from poor-house to power-house in little more than two decades. Add in the seductive fact that this “new China” is the world's largest democracy, and the arguments for forging a much closer partnership between India and America seem unassailable.
Rising India

It would not be before time, either. America has neglected India in the past. When Bill Clinton went to Delhi in 2000, his was the first presidential visit for 22 years, and it is surely not a good thing that Mr Bush has waited quite so long to make his own inaugural trip there. India is a nuclear power, home to more Muslims than any country but Indonesia; and it borders China, which many American policymakers see as at best a growing rival and at worst a future enemy. India is seldom regarded in the same way, even though it favoured the Soviet side in the cold war and even though Indian firms offer just as tough competition for parts of America's service sector as Chinese factories do to low-end manufacturing.

Despite all this, there are reasons to urge both sides to tread as carefully as angels before they rush in to an over-enthusiastic partnership. Mr Bush needs to avoid two kinds of mistake. The first, and most serious, would be to shower America's new friend with gifts that the United States can ill afford. Unfortunately, this has already happened. In July, when India's prime minister, Manmohan Singh, visited Washington, he came home with a remarkable present: a promise from Mr Bush that he would aim to share American civilian nuclear technology with India.

That was too generous. Under American and international law, such technology can be given only to countries that have renounced nuclear weapons and joined the Nuclear Non-Proliferation Treaty. India has never joined the treaty, and it tested nuclear weapons in 1998. Mr Bush, in effect, was driving a coach and horses through the treaty in order to suit his own strategic ends, a move that invites the accusation of hypocrisy from other nuclear states and wannabes not so favoured. The idea was that India, in return, should take steps to satisfy the Americans on a long list of nuclear-security concerns, such as not exporting weapons technology and continuing to observe a moratorium on testing. Most important, India was asked to separate its civilian and military nuclear programmes, with the former subject to a rigorous inspection regime.

So far, however, the proposals offered by the Indians actually to do all this are far from adequate. As Mr Bush packs his bags, desperate attempts are being made to bridge the gap. The obvious danger is that in order to portray his summit as a success Mr Bush will be tempted to accept even fewer safeguards from India. That would be a dangerous mistake: nuclear proliferation matters too much to allow excessive wiggle-room or create bad precedents. Fortunately, whatever deal is agreed between Mr Bush and Mr Singh will also require the approval of America's Congress, which has already taken a dim view of Mr Bush's nuclear generosity to India.
Fearful China

Sending the wrong signal on nuclear weapons is not the only potential pitfall in America's romance with India. Mr Bush should also be wary of sending the wrong signal about America's intentions towards China. Too often when Indian-American relations are discussed in Washington, the notion is invoked that India might somehow turn out to be a “counterweight” to China. Yet it is hard to see, in practical terms, what sort of counterweight India could actually be. On the contrary, that sort of talk is liable only to reinforce China's fear that America's grand strategic design is to encircle it and block its rise as a great power. That fear has already been strengthened by America's recent transfer of some of its military might from the Atlantic to the Pacific.

The United States should not base its Asian strategy on that sort of balance-of-power diplomacy. Apart from anything else, India is far too canny, and cares too much about its own China relationship, to be drawn into such a game. Instead of encircling China, Mr Bush should concentrate on putting the American relationship with it on the right footing: deeper engagement, coupled with a determination to make China play by the rules. Yet Mr Bush's approach to this rising superpower has sometimes seemed almost casual: Hu Jintao, China's president, had been made to wait far too long for his state visit to Washington even before Hurricane Katrina forced him to cancel a visit last August. And Mr Bush has not worked hard enough at home to make the free-trade case against the protectionist hawks gunning for China (though, to be fair to him, he has not given them much comfort either).

Mr Bush must also take care to ensure that friendship with India does not damage his close ties to Pakistan, another American ally the president intends to visit on this trip. Pakistan is infinitely more fragile than India, but right now of much greater strategic significance to America. It is central to the fight against the remnants of al-Qaeda and the Taliban in Afghanistan. On top of that, it has an awful record of selling (by unauthorised freelancers, claims its government) nuclear-weapons technology on the open market. Pakistan's president, Pervez Musharraf, has lately shown signs of flexibility towards his country's long and dangerous dispute with India over Kashmir. But both countries need to show flexibility on Kashmir, and Mr Bush must take care not to tilt so far India's way that the Indians feel under no pressure to make concessions of their own. That will merely weaken Mr Musharraf and enfeeble a valuable American ally.

India itself has much to lose if its love-in with America goes wrong. For Mr Singh personally, the stakes are quite high. By backing American efforts to tackle Iran's nuclear ambitions, he has infuriated the left-wing parties on whose support his minority government depends, as well as some of his own party colleagues. If he cannot pull off a decent nuclear deal of his own, he will suffer for it. He is already learning that America's embrace is not the uncomplicated affair he might have hoped for. A visionary Indian project would see gas piped from Iran, via Pakistan. But as relations between America and Iran rapidly deteriorate, America is ever more reluctant to see it go ahead. Meanwhile, India's growing trade with America, whether in textiles or software services, is starting to run into a new generation of Asia-bashers in America. As E.M. Forster knew, no passage to India is ever entirely smooth.

The Battle for Bangalore...

From the Times in UK!!!

Highlights emerging trends in the emerging software industry in India and the fact that India has become a destination for quality software development: not just cost-cutting outsourcing work.
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India is turning into a battleground for the hearts and minds of software developers. On one side are the forces of opensourcing, ranged against them is Bill Gates's Microsoft. It is a battle neither can afford to lose, writes Gervase Markham..


A nasty catfight has been going on in Washington and the American press. The essence of the battle calls into question the patriotism of CEOs who would sell out their countrymen for a quick buck by taking advantage of offshoring - a word guaranteed to cause an American software engineer to choke on his high-caffeine Jolt.

American companies, being squeezed by low-cost, high-work-ethic competition from Asia, are looking to cut overheads by outsourcing their IT jobs. The destination of much of this exodus is the booming tech sector of India, as the world's second most populous country leverages the widespread knowledge of English, a legacy of its colonial past. The nexus of this growth is Bangalore, which boasts more than 200 technology companies and the highest number of engineering colleges of any city in the world.

And now a different fight has begun in earnest. In terms of the global IT landscape, it is perhaps more significant. It is the battle for the hearts and minds of those tens of thousands of Indian software developers.

On one side is Microsoft, hoping to tempt them with visions of a smoothly-integrated development system from a single vendor. On the other side is the free software movement, talking about the importance of liberty, unrestrictive licensing and control of your own computing environment. At stake is the ability to harness the brainpower of an entire subcontinent of hackers.

In the most recent exchange of fire, Microsoft's shot made the loudest bang. Buoyed by a no doubt sincere but also profile-raising series of visits by Bill Gates to Delhi slums and AIDS counselling centres, there was extensive international coverage of Microsoft's "Ready Launch 2005" event at the Bangalore Palace. There, Gates announced a $1.7 billion investment in India over the next four years, split between "donations" of software to schools, job creation and building, and developer evangelism.

However, reading the reports, one can't help but see a slightly patronising tone in their approach. One announcement which typified this was "Code4Bill" - a recruiting exercise dressed up as a competition, involving a series of online tests and real-world interviews. These whittle down the entrants to a final 20 who win internships at Microsoft India, and maybe even (gasp!) a job. The lucky grand prize winner gets to work in the "Bill Gates Technical Assistants Team" in Redmond for a year.

By contrast, the FOSS.IN (FOSS stands for "free and open source software; .IN is the country code for India) conference, a week beforehand in the very same venue, received comparatively little publicity. There were 2,700 attendees gathered to hear big names in the Linux world such as Alan Cox, the impressively-bearded Welsh kernel hacker, who gave "brutally technical" programming talks. The event's sponsor list reads like a roll call in the ABM ("Anyone But Microsoft") army - Intel, Google, Sun, HP.

At first glance, despite the Microsoft marketing muscle and donated dollars, free software should be a shoo-in. In a country which wants to encourage entrepreneurship and expand its economy, why pay more for less control? However, the free software community has its own, rather unexpected hurdle to overcome - a cultural one. Despite India being "the world's largest consumer of free software", not much code is making its way back to the major projects. It seems that Indian developers often have a difficult time engaging with the community.

There have been several reasons suggested for this. One is that the Indian university system is more oriented to creating large numbers of employable graduates who pass tests, assembly-line style, than encouraging creativity and risk-taking. In a country where an engineering degree is the ticket to a reasonably comfortable life, no one wants to rock the boat. Another factor is that Indian developers are often most comfortable with a structured work plan and clearly-defined boundaries. This style of working is not a good fit for the self-motivated, somewhat chaotic style of the free software bazaar.

So at the moment, the scales are evenly balanced. India is there for the taking. In five years' time, will India be Coding 4 Bill, or Coding 2 Share?

Gervase Markham works for the Mozilla Foundation, a non-profit organisation dedicated to promoting choice and innovation on the internet. His blog is Hacking for Christ

SAP finds Indian techies too costly.

From the Times of India

SAP, the world’s third-biggest software company, is cutting its recruitment of Indian experts because they are too expensive and is instead looking towards China, its CEO Henning Kagermann said in an interview.

With Indians pricing themselves out of the market, SAP preferred to recruit in China and low-cost eastern European nations. “India is getting too dear,” said SAP CEO Henning Kagermann in the interview with the Financial Times published on Monday.

“We’ve decided to only recruit a certain number more from there, and then to start looking around in other locations,” he added.

The Indian software industry, particularly companies based in Bangalore and other high-tech centres, has attracted huge interest over the past decade from international investors seeking sophisticated skills at low salaries.
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Addendum : Its to be noted that an entry level software programmer in India still commands just around $5000, compared to the $50000 for an American programmer.
However this rate is growing at an estimated 11-15% a year.Perhaps its higher.

Further, SAP itself is still hiring in India, albeit at a claimed "slower" rate.

Microsoft plans to double capacity at its Hyderabad center
Google has just set up shop in Bangalore
Cisco plans to inaugurate its swanky new campus in Bangalore.
IBM, CSC and other giants also have grand plas for their Indian operations.

However our real threat remain other low cost offshoring locations like China, Thailand, Malaysia etc