President Obama’s visit to India last week took the relationship between the world’s two largest democracies into the next higher orbit. The excellent personal chemistry between Prime Minister Modi and President Obama has certainly contributed to the improvement but so have practical strategic compulsions. Both countries recognize that they need each other to grow their economies as well as to counter China’s growing assertiveness. While much of the focus of the visit was strengthening military cooperation and diplomatic relations, bilateral trade and investment will benefit as well. Leaders on both sides recognize that a durable strategic partnership must encompass trade not just diplomatic and military cooperation; it was trade that generated mutual interest in the first place. Bilateral trade between India and the US has gradually swelled to $100billion but this is modest compared to the nearly $600 billion of trade between the US and China. Prime Minister Modi is highly aware that to revive the economy, India must be far more welcoming of foreign companies and become a much easier place to do business. Knowing that his legacy will be judged substantially by his economic reforms, Modi has vowed to convert India’s famous bureaucratic red-tape into a red-carpet.
However, while welcoming Modi’s decisive leadership and reassuring rhetoric and the improvement in India’s diplomatic relations with the world’s major economies, too many of the world’s CEOs are still in a wait and watch mode. India has disappointed her fans and investors too many times in the past and only sustained performance will create believers out of these skeptics. Already there is mounting frustration in their minds at the slow pace of economic reforms not withstanding the progress on tough issues such as land and labour reforms and abatement of harassment by India’s infamous tax authorities. As a result Modi’s wooing has yet to result in substantial investments.
However some companies aren’t waiting; they are making a leap of faith and betting early on India’s potential and Modi’s leadership. These companies, which include the likes of Facebook, IKEA, JCB, Boeing, GE and Amazon , see three reasons why they shouldn’t wait.
First, India is a two trillion dollar economy that is growing at 6% and accelerating. It is “an oasis of growth in an otherwise barren global economic landscape” to quote a WEF delegate. There are a billion India Indians eager to join the world’s middle class and at least a trillion dollars of infrastructure that needs to be built. To CEOs who have developed a visceral understanding of the country, “India is the next China”- the last giant economy that is finally beginning to take off.
Second, they see that India is world class at frugal innovation and engineering. Few countries are as capable of such resource efficiency be it putting an orbiter around Mars at a tenth of the cost of any previous mission, enabling cell phone calls at 1cent a minute or performing cataract or heart surgeries at a tiny fraction of what it costs in the west. Competing in India helps companies build this muscle and become more competitive globally. Moreover India is becoming very good at combining technology, innovation and entrepreneurship to deliver goods and services affordably to the next billion people. Leveraging low cost smartphones, pervasive connectivity, abundant venture capital, and new platforms for identity and payment, thousands of young Indians are turning to entrepreneurship instead of jobs to build businesses that serve the needs of the country’s burgeoning middle class as well as poor. Their models point the way for other countries that are dealing with the problems of slowing economies, inequality and job creation. Smart business leaders are therefore seeing India as an innovation lab for their companies.
Finally there is the inevitable comparison with China. As the Chinese economy slows, as costs there rise and as China becomes a less hospitable place for Japanese and western companies, India offers a potential hedge for companies concerned about their China risk. For American technology companies this is already the case; they have given up on China and are doubling down on India.
The leaders of these companies rightly see transformation as a process rather than an event. They recognize that if they wait till all the signs of India’s economic reform are evident, they will cede leadership to more hungry competitors in one of the world’s largest future markets. As a result, they are engaging personally right now to build their business in india. They are committing some of their brightest future leaders to win in India. They are adapting their offerings and model to suit India and investing ahead of the curve to build distribution reach, a local brand and a local supply chain. When the tide comes in, as it inevitably will, these companies will be ready and will ride the wave.
Leadership means having a vision for the future and making courageous choices in pursuit of this vision. This is what President Obama has demonstrated. He has overcome skeptics in his camp and boldly aligned America with India betting as much on the natural alignment of interests as Prime Minister Modi’s leadership. Prime Minister Modi has equally boldly shed India’s socialist and non-aligned past and reciprocated unequivocally. Both leaders have few illusions that they will have to overcome many challenges to make the partnership work but share a visceral belief that it is important for their countries and the world.
In these turbulent times, companies too need such bold leadership not the cautious followership we’ve come to expect.