India’s Tech Economy Shows Promise as It Opens Up to U.S.
While arguments rage over trade relations with China, U.S. business and government are paying increased attention to another huge country and potential market: India.
President Clinton’s visit to India later this month will be followed in May by a Commerce Department tour that will bring U.S. manufacturers into contact with Indian business opportunities.
India has never been prominent on the U.S. radar screen--not nearly as big and constant an issue as China. But India is opening its economy to the world and making a global mark in high-tech industry, even as it demonstrates nuclear weapons capabilities and continues a simmering 50-year state of hostility with neighboring Pakistan.
In India, today it’s possible to see the enormous potential of the new, global information economy and also the troubling imponderables of a heavily armed Asia. There are implications for world peace and prosperity in the Indian subcontinent. Americans could gain by getting to know it better.
In one sense, India is a large, mostly poor country with 1 billion people, 700 million of whom live in more than 550,000 small villages. The economy’s annual output is $450 billion, which works out to only $450 per person.
India needs to build up infrastructure, in telecommunications, pollution control, medicine, air transportation and many other fields. So the Indian government in recent years has been reaching out to foreign business investment, removing limits on ownership and stressing India’s legal system, which generally protects property rights.
And foreign business is interested because India also contains a large and vibrant middle-class economy among the 250 million of its people whose incomes are equivalent to $10,000 to $25,000 a year. That’s quite a prize--a middle-class population nearly as large as that of the entire United States with potential purchasing power of $2 trillion to $5 trillion.
That Indian middle class is growing as India’s vibrant computer software and Internet sector attains worldwide notice. Indian software engineers are in demand by U.S. companies, to immigrate and relieve labor shortages in Silicon Valley or to work for U.S. firms in India, doing highly skilled work at one-third the wage rate of U.S. high-tech staff.
“Other countries sell cheap labor. India sells cheap intellect,” says Subrata Chakravarty, an Indian-born, U.S.-educated management expert at Boston Consulting Group in New York.
Also, Indian immigrants have achieved notable success in U.S. business in the last decade. So today, Indian entrepreneurs, along with immigrant businesspeople from Pakistan and Bangladesh, form a club of more than 1,000 members doing business between the U.S. and the subcontinent.
Their investments generate new companies in their home countries and in the U.S. Their example and counsel foster pro-business attitudes back home and encourage U.S. policies friendly to South Asia.
Safi Qureshey, a highly successful immigrant from Pakistan--he co-founded AST Research in Irvine, sold it and now is backing AudioRamp.com, a Tustin-based Internet start-up--is a case in point. Qureshey counsels the Pakistani government on making the country attractive to foreign investment and quietly advises the U.S. government on relations with Pakistan. He says that Clinton should visit Pakistan on his forthcoming trip to India and Bangladesh.
Suhas Patil, who came from India to the Massachusetts Institute of Technology in 1967, co-founded Silicon Valley electronics firm Cirrus Logic in 1984. Now chairman emeritus of Cirrus, Patil encourages contacts with India--notably by backing Navin.com, a Saratoga, Calif., start-up that sets up Internet phone calls between India and the U.S., Canada and Australia.
Sabeer Bhatia, who came from Bangalore in 1988 to study at California Institute of Technology and Stanford University, co-founded Hotmail, the Web-based e-mail service, in 1996 and sold it in 1998 to Microsoft for $400 million. He is now an investor in Homeland Networks, a new Silicon Valley firm that works with companies in India to put radio and television programs on the Internet for roughly 15 million overseas Indians--2 million of whom reside in the U.S.
Bhatia also has started a company, Arzoo.com, in Fremont, Calif., that is developing programs to make online shopping easier for consumers.
Those entrepreneurial efforts are important, because they create an encouraging environment for U.S.-Indian relations in many fields. Economic relations don’t really amount to much today. The U.S. buys less than $6 billion a year of tea, garments and other goods from India, while selling it only about $3 billion worth of chemicals and electronic goods. U.S. business investment in India totals only about $5 billion, compared with 10 times that in China.
Yet India is on the march as an emerging power for the 21st century. In 1998, India and Pakistan exploded nuclear devices, demonstrating emphatically that Asia’s big countries have agendas of their own. The U.S. initially imposed economic sanctions, but later relaxed them when it became clear that sanctions would not deter India and Pakistan from pursuing nuclear capability and expanded arms programs.
The truth is, India, Pakistan, China and other Asian countries are going to develop militarily while they attempt to build up their economies, argues Paul Bracken, Yale professor and author of “Fire in the East: The Rise of Asian Military Power.” The one thing they will not do is accept dictation from foreign powers, the U.S. or any other.
That doesn’t mean they will be unfriendly, Bracken says, just that Washington policy will have to be subtle in working with the Asian countries.
Clinton’s visit, encouraging closer relations and even offering to help negotiate disputes between India and Pakistan, could mark new U.S. approaches to Asia--and give a further boost to economic progress in these mostly poor countries.
The opportunities are worth going after. Enron, for example, a Houston-based energy company, has opened one phase and is proceeding with another on a $2.9-billion power plant project near Mumbai (the city formerly called Bombay). Years of political setbacks from local government in India threatened that project. But Enron persevered, so India will get much-needed power and Enron will benefit from further projects as the country develops.
The profile of Indian business is sure to rise as India’s companies sell their shares on U.S. markets. Already Infosys, a Bangalore-based software producer, and Satyam Infoway, an Internet service provider from Chennai (formerly Madras) have become hot issues on Nasdaq. More than 20 other companies are slated to follow. India, a major entrant in the new economy, is knocking at the door.
*
James Flanigan can be reached at jim.flanigan@latimes.com.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
India at a Glance
* Population: 1 billion
* Currency: Rupee ($1=43.5 rupees)
* Gross domestic product: $450 billion. Agriculture accounts for $130.5 billion, or 29%. High-tech industry accounts for $4 billion, or 0.9%
* Labor force: 314 million
* Agricultural workers: 191.3 million, or 61% of labor force
* High-tech workers: 300,000
* Indian population in the United States: 2 million
Sources: World Bank, U.S. State Department, Homeland Networks
