Cornell University Johnson at Cornell University


High Tech and Hope

India wakes up to a new economic reality

By Janice Endresen, MA'85

Page 3

Tata also prescribed a preventive: businesses that are socially as well as fiscally responsible. "You cannot create great wealth without making an effort to spread that wealth, when you have such a large population of disadvantaged people" as India does, said Tata. "We haven't had labor strife in 40 to 50 years," he said, and new Tata enterprises are welcomed because of the group's reputation as a community builder. "I go home at night thinking, 'We've done the right thing,'" said Tata.

Somaiya's company also has a strong philanthropic bent, and has created a scholarship program for students in the 700 villages they buy sugar cane from – "very good students who will otherwise surely miss out on a good education because they are very poor," says Somaiya. "We have 75 children in the program. Our target is 1,500." One of the program's three graduates, a young woman, is now working for a BPO, earning about $8,000 a year. Her mother's annual income was about $360 a year. "This is what happened just by providing her with $3,000-$4,000," says Samir.

Microfinance is another strategy the Somaiya Group began offering to farmers several years ago so that they can educate their children. "Last year, we provided between $4-5 million of such loans at an interest rate of 10 to 12 percent," says Somaiya. "We've had no defaults. It's a sustainable, win/win program."

As wonderful as these programs are, Sakib Maskati, MBA '93, of Uniland Estates, a real estate development and consultancy firm, points out that they are isolated examples that do not constitute a widespread approach to the problems of poverty and lack of education. Even Tata says that India's government has primary responsibility for helping the 60 percent of India's population who live in poverty – the business community can do no more than support it.

Indian IT Sector: Knowledge Professionals Employed

The task is enormous. An article in the Mumbai newspaper, Daily News & Analysis/DNA India ("India ranks 93 among 116 developing countries in the global hunger index," Oct. 13, 2006) states: "For a country that is exulting over the 8 per cent plus growth of its economy, here's a rude reality check. India, currently dining on the high table of potential economic superpowers, is rubbing shoulders with several least-developed countries among the hunger hotspots of the world, says the Global Hunger Index, developed by the International Food Policy Research Institute (IFPRI). India's score on the index for 2003, the latest year for which data is available, was 25.73, worse than Sudan at 27.20 but better than Burkina Faso (25.80)."

Vaidhyanathan is one of many who are confident that poverty in India will gradually be alleviated as India's economy continues to grow. "The masses haven't been affected by the tip of the iceberg; it will take some time to percolate," she says. "We have five-star hotels and street vendors. Every developed country has gone through this."

Infrastructure Strains to Meet Demands
The biggest impediment to India's continuing growth is its infrastructure – or lack of it. "All this could come to a crashing halt," says Vepa. "Roads, railways and airports still lag far behind. Major cities are well connected with fiber-optic cable, but the interior is not – and it's difficult to lay because often there are no roads to these interior villages."

Major cities, such as Mumbai, are clogged with all kinds of traffic: cars, trucks, buses, rickshaws, motorcycles, bicycles, an occasional camel-drawn cart, and the inevitable cows-in-the-middle-of-the-road. India's Golden Quadrilateral, a superhighway connecting the major cities, can get you from Pune to Mumbai (a distance of 58 miles) in a little over two hours. Getting from the edge of Mumbai to the waterfront hotels at Nariman Point, however, can easily take another two or three hours.

India's ports need to update and increase capacity, as well. As the volume of imports and exports rises, so does the backlog at Indian ports. Kapadia, whose Mumbai-based company, Nabira Exports, imports and exports cotton, spoke of goods that remain dockside for weeks while ships wait offshore for their turn to get loaded.

As the New York Times reported on Sept. 1, 2006: "China invests $7 on roads, ports, electricity and other backbones of a modern economy for every dollar spent by India – and it shows."

"India's lack of investment in infrastructure is frustrating for multinationals," says Bhojraj. But many Indians say it's only a temporary problem. "Traffic is tough to navigate," acknowledges Vaidhyanathan. "But it's a temporary bottleneck. The government sees it. They're building flyovers [overpasses] to help cross- and through-city traffic, and creating satellite towns."

Bhalla agrees that "infrastructure is not a problem. Anybody can lay cable. The government is willing to put that in."

A marketplace in New Delhi
A marketplace in New Delhi
Even the United States had no sophisticated network of roads before WWII, notes Talera. "In any country, infrastructure is built when it becomes a social problem," he says. "The Golden Quadrilateral will be ready in March 2007, then connector roads will come. That's logically the next step for any progression. Reliance, the largest private sector company in India, is laying fiber-optic cable all over India, and putting up online kiosks" – India's answer to Internet cafes.

"For the first time ever, rural India (home to 70 percent of the population) will be connected globally and will have direct access to knowledge and information," continues Talera, who predicts that this revolution in access to information will have impacts comparable to the invention of the printing press in 1400 A.D. For example, he notes, "Equity participation is less than 5 percent of the population simply because of ignorance and access to the equity market; Reliance plans to put online trading kiosks in every village!"

TWO ECONOMIES:Private vs. Public
"India will need $280 to $340 billion in infrastructure investment over the next few years to build roads, airports, and power plants," says Tejpreet Chopra, MBA '96, president and CEO, GE Commercial Finance – India. "GE is focused on financing infrastructure in India." And Chopra has no doubt that the government is serious about doing whatever it takes to push development through. "The Commonwealth Games will force the government to get their act together regarding infrastructure," he says. (Delhi was selected as host of the Commonwealth Games for 2010.)

"The future is in public/private partnerships," says Viswanathan, citing Mumbai's upcoming international airport an example.

"There are two economies in India: private and public," Viswanathan continues. "India's success is in the private sector. The public sector has completely failed India. The infrastructure is an example of that. The Indian industry that's the most famous is software. The government neglected IT, didn't understand it, didn't meddle with it. That's why it flourished."

India has continued to liberalize controls of many aspects of the economy since 1991. But some sectors of the economy – including sugar production and sales – still labor under government-imposed economic controls. "The government tells us how much sugar we can sell every month," says Somaiya. "The international price of sugar is higher than the India price, but we're prevented from exporting." The same applies to other agriculture goods, and Somaiya believes that's impeding rural prosperity and development. "It's the farmer's income that takes a beating. Liberalization so far affects the urban environment. Further liberalization will affect the rural environments, and create another push for growth; that's when the second phase of India's economic growth will be unleashed. But for now, they're still in a control mindset."

That kind of control can stifle innovation. As one who believes in alternative energies, Somaiya invested in creating ethanol from sugar cane. "Alternative energy is profitable on paper, but it hasn't paid off so far," he said in September. "We could sell only to the government-owned state utility; they bought it on paper, but did not actually pay for it." Relief finally appeared on the horizon this year: Beginning in October, Somaiya could opt to sell ethanol privately. But his point is well taken: The payback for innovation has to be free of governmental economic controls before businesses will risk their capital on new ventures.

A New Era
Ultimately, despite the ambiguities, frustrations, and challenges, the consensus is that India has turned the corner and is moving forward into a new era.

"India has been independent for only 59 years, after 1,000 years of Muslim, Mogul, and then British rule," says Talera. "What will we do in the next 50 years?"

"In my view, we've only scratched the surface: India's economy is just waking up," Somaiya said when several Cornell and Johnson School alumni met to discuss India's economy at his offices on Sept. 30. In response to the many concerns and challenges that had been voiced, he asked: "If you looked at snapshots of India 15 years ago, 10 years ago, five years ago, and today – wouldn't that show a clear pattern of progress?" Everyone sitting at the table acknowledged that it would.

"In India we have hope, and that's everything," says Viswanathan. "Our parents' generation was overawed by the West, and inhibited by India's poverty. We're part of a generation that's much more confident about who we are."

Sources: United Nations Human Development Report 2005; Daily News & Analysis; The Hindu Business Line

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A First in Hotel Hospitality HELP YOURSELF
Harshad Talera, MBA '05, opens Smart Inn

At first glance, the concept of self-service hospitality may seem like an oxymoron. But if hotel guests get what they want at the price they want it, isn't that real hospitality?

Harshad Talera thinks so, and he's put that idea to the test by creating the Smart Inn, which he claims is "the first fully automated, self-service, unmanned hotel in the world." Smart Inn is a hotel for business travelers that gives them exactly what they say they're looking for, according to surveys Talera has conducted: a central location, a comfortable bed with en-suite bathroom, breakfast (which is outsourced); in-room dining (delivered from a wide variety of restaurants in the area) and all the hi-tech amenities, such as Wifi (wireless Internet access), free local phone service, air conditioning, LCD flat-screen television, and, for added panache, a rain shower (high water pressure shower that falls from the center of the shower stall ceiling). Rate: $20/night.

How can he do it? Talera avoids front-desk staffing costs – and turnover headaches – by offering guests self check-in via a kiosk at the entrance to the hotel. "The turnover rate for Indian hotel staff is 150 percent," says Talera, director of hospitality for the Talera Group of Hotels. "If a BPO gives you more money, you're not going to work for a hotel."

Harshad Talera, MBA '05
Harshad Talera, MBA '05, whose Smart Inn, located in Pune, India, is the first fully automated, self-service hotel in the world.
Talera also cuts costs up front by leaving out features that are both expensive to build (kitchens, pool, expansive lobby) and require a large footprint, consequently adding to the cost of a centrally located hotel that sits on premium real estate. "Our surveys show that the average business travelers only sleep at a hotel – they don't need a large lobby, or a swimming pool, or several restaurants to choose from," says Talera.

"Land is a major component of budget costs," Talera continues. "This concept has to be located in the city center: trains bring people to the city centers, where most of their meetings are held, and where land is expensive. This concept requires a small piece of land."

Talera developed the business plan for Smart Inn as a student at the Johnson School, where he worked with Assistant Professor of Marketing Young-Hoon Park. "My internships and courses all revolved around this," says Talera, whose 80 credits at Cornell included several at Cornell's School of Hotel Administration. The first Smart Inn opened in November.

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The Johnson School was among 39 of the world's top MBA programs to participate in the MBA Tour Asia in September, as it does each year. Kim Killingsworth, associate director of international admissions, traveled to India to represent the Johnson School at MBA Tour fairs in New Delhi, Bangalore, and Mumbai. With literally hundreds of prospective students firing questions nonstop for three hours, Killingsworth relies on alumni volunteers to help staff the fairs: Sumanth Vepa, MBA '04, was on hand to respond to prospective students' questions at the New Delhi fair, which attracted 900 attendees; Amol A. Palkar, MBA '04, and Satyam Viswanathan, MBA'02, spoke with students at the fair in Mumbai, which attracted 1,500 attendees. For prospective students it's ideal to be able to speak directly to a Johnson School graduate to get an insider's perspective.

Kim Killingsworth, associate director of international admissions, speaking to prospective students at the MBA Tour fair in Mumbai on September 30
Kim Killingsworth, associate director of international admissions, speaking to prospective students at the MBA Tour fair in Mumbai on September 30
Killingsworth is indefatigable – and unequivocally direct – in her responses to prospective students' questions, and emphasizes the importance of the application essay: "It's an opportunity for you to show us show how a Johnson School MBA will further your career goals," she tells them. "Convince us that coming here will make you successful, and show us how."

Admissions staff travel to numerous cities, both in the United States and throughout the world, to host information events, tell prospective students about the Johnson School, answer their questions, interview selected applicants, and, sometimes, set up exchange programs, as Killingsworth did with the Indian Institute of Management at Bangalore in September. In winter 2007, she hopes to return to India to interview selected Johnson School applicants.

Other trips to India the Johnson School has on the 2006-06 academic year calendar:

Dean Robert Swieringa, Associate Dean Becky Mitchell, and Director of Alumni Affairs Karrie Borgelt traveled to India during the second week in November as part of a trip to visit alumni in Asia that also included Hong Kong, Tokyo, and Seoul.�

Visiting Lecturer of Entrepreneurship Mel Goldman has organized a study trip to India for Dec. 27 through Jan. 11. Participating students will visit a host of businesses in Bangalore, Pune, and Mumbai, including Cummins Engine, Bharat Forge, a Bollywood studio, and several high-tech companies.

Professor Stuart Hart will visit Samir Somaiya, MBA '93, and�Ratan Tata '62, as well as other alumni in India, for further discussions�regarding a potential�partnership between the Center for Sustainable Global Enterprise and the Indian School of Business in Hyderabad.