India shines as global firms plan more investment

Shailendra Bhatnagar

TOKYO: India's booming technology and telecoms industries will see more investment coming their way from Asian companies such as Flextronics and Kyocera as they tap Asia's third-largest economy for its lower cost structure and growing demand.

Scores of global firms such as General Electric Co. and American Express Co. already employ thousands of English-speaking Indian staff to do high-end financial analytics and back-office work at costs that are 25 to 60 percent cheaper than in Western countries.

Many companies are either increasing their India presence or have plans to do so within a year as the $700 billion economy, forecast to grow about 7 percent this year, offers similar potential for growth as its Asian rival China, several speakers said at the Reuters Asia Technology and Telecoms Summit.

"India on balance is maybe the most attractive market in the world right now for us," Howard Charney, Cisco Systems Inc. senior vice president, said at the summit held in Tokyo.

Charney said Cisco, the largest maker of Internet equipment, was seeing its Indian operations grow at 50-70 percent compounded each year.

Adding to India's growing allure were a Western-style legal system, high numbers of graduate and post-graduate students coming out of colleges each year and many globally recognised research institutes.

"People come to India for cost (savings) and stay for quality," said Girija Pande, Asia Pacific director at Tata Consultancy Services, India's top software services exporter.

India's galloping wireless industry, the world's fastest-growing major mobile market, has also become a magnet for firms such as top handset maker Nokia and Nortel Networks Corp. as they face tepid demand in most Western markets.

SECOND PLANT

Hoping to make telecoms equipment for global customers, Flextronics International Ltd., the world's top contract electronics maker, said it would invest an initial $30 million to $50 million in a second plant in India.

The investment could be scaled up to $300 million to $500 million in 10 or 15 years, Peter Tan, Flextronics' president for Asia and Japan, said at the summit.

"We would like India to be another China."

Mobile calling rates as low as 2 U.S. cents a minute are luring more than 2.7 million new users each month to the sector, which now comprises 63 million people -- more than the population of Italy.

Analysts estimate India needs to spend at least $20 billion over the next five years to renovate its creaking telecoms infrastructure and boost phone ownership, currently at 10 percent.

Carriers such as Bharti Tele-Ventures Ltd. and state-run Bharat Sanchar Nigam Ltd. are already executing multibillion-dollar network expansions.

Kyocera Corp., Japan's phones-to-printers conglomerate, aimed to start shipping PHS and iBurst equipment for high-speed Internet access to India, where just six in 100 people use mobile services compared with 78 in South Korea.

As a part of the restructuring of its mobile business, Kyocera is also shifting mobile phone development resources to India and plans to increase its number of engineers to 600 from 360, Chief Executive Yasuo Nishiguchi said.

Similarly, Flextronics is transporting its accounting and IT resources to India.

However, not all is rosy.

Physical infrastructure in many leading Indian cities has not kept pace with surging growth, and an escalating fight between Indian and overseas companies for qualified staff has sent salary costs shooting up.

Compared with China, India also lacked trained workers to staff factories.

Above all, the world's largest democracy, now headed by a coalition government supported by communist allies, has gone back on its reform agenda of privatising several profit-making state-run companies.

"I do not see a lot of resolve yet in India to change. India is not there yet," Flextronics' Tan said. "I see a lot of political will in China."