Wharton India Trip

It has been a few days since I got back from a trip to India with my classmates at Wharton West. The purpose of the trip was to get a sense if the current economic boom in India (annual GDP growth in the last year was about 7-8%) is for real. Although, I must say, hardly anything on a one week trip to India seems real. Our group met with both government officials (Dr. Abdul Kalam, the President of India and Mr. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission) and CEOs at large Indian companies and Western multinationals. The companies we visited included McKinsey India, Tata Group, Reliance Infocomm, Pfizer, Sony Entertainment, IBM-Daksh, DSP Merrill Lynch, Birla Group, Hindustan Lever and a few others.

The net-net of the trip was that you can make a lot of money in India by investing cautiously -- and little at a time -- while knowing how to create profit from a small market. This sounded counter-intuitive in a country of a billion people but the reality is that still few people can afford to buy more than the absolute daily necessities. The infrastructure problems in India are still staggering, and the lacking education and basic hygiene for the masses -- quite severe.

A couple of conclusions stood out from the trip:

1. While many people hope that India is where China was 25 years ago -- with equivalent prospects -- an important difference exists between how the two countries are governed. Economic decisions in China, including the massive investment in infrastructure which was critical for the country's development in the past two decades, are made by an autocratic elite. India's democratic method of government, which is further complicated by a federation of quite autonomous states, has actually turned out to be an impediment in pushing through major economic reforms. As the Deputy Chairman of the Planning Commission told our group, "There is not lack of understanding of the economic priorities in this country: but to be even in a position to work on such reforms, one must take into account a very difficult political process." So, for basic infrastructure, China in fact benefitted from central planning and a forced reform. Not the case in India.

2. IT has been touted as India's miracle. It is true that the sector has grown very rapidly. Visiting companies like Datsch and Reliance Infocom felt like being in the familiar surroundings of Silicon Valley (Reliance actually felt futuristic even by U.S. standards -- or maybe this was just a marketing ploy). Yet, the whole IT sector is a tiny fraction of the Indian economy. Biotech and pharma, in fact, seemed much more likely to significantly impact to the continued growth of the Indian economy than high-tech.

3. The entrepreneurial drive is there. But not many expatriats are going back to India at this time. People are cautious and want to see how capable the government is in pushing through privatization. Nevertheless, recruiters are busy. We probably met more of them at our Wharton mixers than company executives. A good sign with a caveat: it's still a small market and a handful of companies in each industry who are hiring (and can afford) foreign-trained management.

4. You can only make money in the Indian market if you have deep understanding of it; if you are doggedly persistent and very patient. VCs are not investing in expatriats -- only local entrepreneurs. And they invest small amounts cautiously.

The memories from the trip are starting to fade but the overall impression is of a country that is both fascinating in its potential and sad in the extent of its poverty. It would be interesting to see where India is ten years from now. We had hoped to see many construction sites in Mumbai and Delhi but there weren't many of them yet... The Taj Mahal, however, is magnificent.