Transcript No Slide Title

ASIAN POWERS SYMPOSIUM
Enhancing Competitiveness:
The INDIA Card
June 7, 2006
Rajiv Gulati, Director, India-China Strategy
Corporate Strategic Planning
India Fact File
•
Modern India - A vibrant and the world's largest democracy
•
Home alike to the tribal with his anachronistic lifestyle and to the
sophisticated urban jetsetter.
•
A land where temple elephants exist amicably with the microchip.
•
Its ancient monuments are the backdrop for most modern facilities
where atomic energy is generated
•
Modern industrial development has brought the country within the
world's top ten nations.
•
2nd/ 3rd largest producer of Engineers & scientists as a result of initial
investment in building institutes of higher education like IITs.
•
Industrialization process started post independence (1950s), however
remained in the range of 2-3% (Hindu Rate of Growth) till mid 80s.
One of the world's fastest growing economies @ 6-7% pa* from 1993
onwards.
•
*Source : Projection for 2004-05 (with Q-1 & Q-2 growth being >6%)
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India Fact File
Current GDP = $ 616 Bn (2003-04)*
GDP Growth - % PA
9
CAGR** =
6.5%
8.5
7.8
8
7.3
7.5
7.3
7
6.8
7
6.1
5.9
6
5.8
4.8
5
4.5
4.4
4
*
3
2
1
0
1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 200594
95
96
97
98
99
00
01
02
03
04 05 (E) 06 (P)
** from 1997 – 98 to 2004-05
…Steady & Sustainable Growth
Source: Economic Survey 2002-03, Press note by CSO for financial year 2002-03, * Economic Survey 2003-04
.
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….Increasing percentage of Productive
Population
Popn.
1961
1971
1981
1991
2001
2006
2010
( Projected )
( Projected )
(% )
Below
15 yrs
41.0
42.0
38.5
36.9
35.3
30.6
28.8
15-60
yrs
53.3
52.0
55.2
55.9
56.9
61.9
63.2
Above
60 yrs
5.7
6.0
6.3
7.2
7.7
7.5
8.0
Source : Census India 2001 ; Central Statistical Organization ;
Statistical Outline of India 1999-00
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INDIA – CAPABILITIES
1
Talent
•
Yearly graduates
– 2,460,000 college
– 250,000 post-graduates
– 72,000 business majors
– 80%-90% speak English
Cost**
•
Employee cost for college graduates ~
US$10,400/ year
~ 70% cost savings possible relative to
Europe / US
2
•
3
•
Infrastructure**
– Telcom reliability*: 99.5%
– Outbound international bandwidth: 780
Mbps
– Available Grade A/B building space (sq
ft): 9.2 M; vacancy rate 35%-40%
•
Business Environment
– EIU overall business environment:
6.15/10
– EIU global rank: 40/60
Environment
* Satellite
** Assumes skills, physical infrastructure are similar to those required for BPO activities, without vendor margin
Source:Statistical Abstract of India, 2005 ; Bureau of Labour and Statistical Standards, joint McKinsey/NASSCOM study; EIU; Jampro;
www.stats.gov.cn/english/index.html , Times of India, Company website
June, 2006
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INDIA – CAPABILITIES
4
Vendors
•
Significant vendor base
• Sophisticated BPO environment
• Growth of Indian Multinationals for
Global delivery
5
Risk (A=least
risky, E=most
risky)
•
Overall country risk rating: C
– Political risk: D
– Economic policy risk: C
– Economic structure risk: B
June, 2006
Source:
EIU Viewswire - data as of July 2004
Flat World_2006
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INDIA – the objections of past
Lack of Infrastructure- Examples of turnaround.
– National Highway Development Project- 14.1 M Km of roads by end 2007, cost US
$12 Bn
– Privatisation of ports
– Electricity Privatization
Cost of Capital high– No more
– Banking sector liberalisation leading to nominal lending rates falling to about
11.5%.
– Private banks participation adding to health
Labour laws- Not a barrier
– - Enough examples of smooth restructuring and down sizing in labour intensive
industries.
Indian Manufacturing efficiency has improved significantly due to
opening of markets..
– Ford , Hyundai manufacture and export more cars from here than they sell locally.
Automotive, IT , pharmaceuticals exports testimony to this .
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Leading global corporations have been sourcing services
across the value chain from India since 1994…
Finance and Accounts
HR services
• Payroll
processing
• HR services
including payroll,
recruitment,
HRIS etc.
• Payroll services
Customer
technology
support
Operations
•
•
Order tracking services
•
•
•
Claims processing
Order tracking and logistic
services
Credit card processing
Ticket reservations
Marketing/Sales/Customer
Service
•
Outbound tele-sales support for
their consumers
•
•
Computer help desk
Web-based interaction for
answering customer inquiries
•
Technical support to retail and
business consumers.
Inbound voice to consumers
•
•
•
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Customer
Service
•
Marketing and
Sales
Customization
Hosting &
maintenance
Outbound
Logistics
•
•
Inbound
Logistics
Software
development
Manufacturing
/ Operations
Product Development
Human Resource
Management
Technology
Services
Technology
Services
•
Finance and
Accounting
•
•
•
Back-office
•
•
Finance accounting
Revenue accounting
Accounts payable
Accounts
payable/receivable,
financial reporting
R&D/Product
Design
•
Clinical Research
•
VLSI design
•
DSP chip design
•
Avionics research
•
R&D and finished
goods
•
R&D and
engineering
services
Inbound and outbound customer
interaction
Customer service
8
India landscape – the BPO Environment
Macro Trends in Growth
Offshore Movement Driven By …
 Sustainable Cost Advantage in LCCs
3rd Party Outsourcing,
 Opportunities to Consolidate / Re-engineer
 Higher Productivity Pressures
Value in Bln.USD
164
UK
38%
High
17
USA
CAGR
2001
Canada
2008
Captive Outsourcing
182
Tunisia
Cost
Value in Bln.USD
26%
Hungary
South Africa
China
Mauritius
India
Mexico
Philippines
35
CAGR
2001
Large Talent Pool
2008
High
Low
Low
Source: Gartner Dataquest; Aberdeen group; McKinsey
BPO&O Initiative
June, 2006
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Workforce Attractiveness/Skills
English
Other Languages
9
Demand Side
Key Trends in India
Offshoring is now mainstream…
Offshoring is now well accepted
worldwide and some large players
in the field
•
Significant long term commitment. At least 10 firms with over
10,000 people each
Business Process Outsourcing
grows faster than call centers –
likely to dominate future growth
•
Value adding business process overtakes call centres in 2004 ie
R&D, F&A, HR
New industries like Healthcare
actively involved
•
•
Telecom, Healthcare, Industrial, R&D collaborations
Sourcing API’s in India ( 75 FDA certified plants )
•
Hybrids - a growing model and captives continue to be preferred
•
Risk management, the dominant theme, with dedicated
governance models
Sourcing Models
Greater risk, compliance and
information security focus
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… and an effective supply side
management is the key differentiator
•
Quest for qualified middle management because of rapid
industry expansion
•
•
Arbitrage is still the primary proposition
India’s cost competitiveness in IT reducing sector will be under
threat in a few years
Market structure: Consolidations,
IPOs and other transactions
•
•
•
Global and regional offshorers catch up swiftly
Growth of Indian Multinational Service Providers
Call centre business consolidates and becomes scale driven
Location Decisions
•
•
Tier II city movement – Pune, Hyderabad
Infrastructure constraints
•
Concerns on actual handling of transfer pricing and tax holiday
cases
2009 Sunset for tax holidays
Talent
Supply side
Cost Competitiveness
Tax and Regulatory Issues
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•
11
Increasing Middle Class
2004
2006 Projected
2002
155 million
300 million
445 million
There are now estimated to be some 300 million middle-income
earners making $2000 to $4000 a year* equivalent to $15K to $20K on PPP basis!!!!
•Source : Report by CIA’s National Intelligence Council 2004.
www.atimes.com/atimes/South_Asia.
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Impact on Healthcare
Improving Hygiene
- Lesser Pollution: 4 stroke engine, lead free gas, polluting
industries relocated, new modes of transport
- Lesser Infections: In last ten years share of anti-bacterials
has reduced from 27% to 17%
- More Awareness: Better diagnosis. Lifestyle diseases now
becoming important. Cardiovascular second largest and
diabetes fourth largest therapeutic area.
- Therapeutic areas now mimic the developed world
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Healthcare Spending
Evolution of healthcare spend
US $ Billion
67
~7-8% of GDP
“Last two years have
finally seen a Sector
emerge…”
•
•
•
•
•
5.2% of GDP
22
CAGR = 16%
3.7 % of
GDP
12
6.2
1990-91
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9-10%: W Europe
8-9%: S. America
7.1%: S. Africa
6.7%: Korea
5.7%: Thailand
1995-96
2000-01
2012
(Estimate)
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Changing Healthcare Scenario
Key Facts:
• Until the early 1980s, Govt.-run hospitals and those operated by charitable organizations
were the main providers of subsidized healthcare.
• Last two decades have seen the mushrooming of corporate and privately run hospitals.
• They have invested on modern equipment and focus on super-specialties.
• The private sector accounts for 70% of primary medical care and 40% of all hospital care
in India. They also employee 80% of the country’s medical personnel.
• Corporate organization structure for hospitals:
• The Apollo Hospitals Group has pioneered this.
• Wockhardt, Escorts, Fortis Healthcare and Max India are the major corporates
following suit.
• With the strengthening of Healthcare Insurance in India there will be an increase in
number of people opting for private hospitals as affordability is no longer a barrier.
June,
Source:
CII2006
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Corporate Organization Structure For Hospitals:
CHENNAI
DELHI
HYDERABAD
CHENNAI-TONDIARPET
CHENNAI-SPECIALITY
VIZAG
MADURAI
ARAGONDA
HYDERABAD-SPECIALITY
RANCHI
ERODE
SRILANKA
MYSORE
BILASPUR
CHENGANNUR
Apollo Hospitals Network
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Emerging Trends - Medical Tourism
• Medical Tourism - Patients going to a different country for either urgent or elective medical
procedures – is fast becoming a worldwide, multibillion industry.
• India is considered the leading country promoting medical tourism.
June, 2006
Source:
CNBC News
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Medical Tourism – Destination India
Size of up market (private)
• Indian medical tourism market is
2012, Billion USDs
• If medical
growing (+15% in past 5 years,
+30% in 2000), albeit still limited
limited
– Escorts treated only 675 foreign
patients in 2000 (~5% of all its
patients) – now treating several
thousand
4.3-8.5
3.2-6.4
• Medical tourism
– Apollo raising proportion of
international patients to over
10%
market would
then represent 3
to 5% of the total
delivery market
in 2012
• Important to look at Apollo’s
perspective of “end-to-end”
health and well-being – not just
surgery
• Important to look at Ayurveda
June, 2006
Source:
AHS; McKinsey analysis
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tourism were to
reach 25% of
revenues of
organized private
market, $1-$2
Billion US will be
added to the
industry
Without
medical
tourism
With
medical
tourism
“We have
quadrupled in 2
years”
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Medical Tourism – Destination India
• The large difference between the medical/hospital charges in Western countries and here is
one of the main reasons why people are targeting India as a health tourism destination*.
• The focus of medical tourism in the country is mainly on *:
• Cardiac surgery,
• Knee / hip replacement, &
• Dentistry
Consider the differences in charges: Treatment Costs in US $
Category
US
India
Heart Surgery**
30,000
8,000
Bone Marrow Transplant**
250,000
69,000
Liver Transplant**
300,000
69,000
Orthopaedic Surgery**
20,000
6,000
Hip Replacement**
17,000
2,500
300 - 400
20-40
Root Canal*
3,000
100-200
Dentures*
1,000
200
Dentistry-Filling*
Source: *The Financial Express 01 Jan. ’05
**http://www.ximb.ac.in/~u103121/CPProject/Trend_of_medical_tourism_DD.htm
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Indians love the US …
•16-Nation Pew Global Attitudes Survey
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Joke: Outsource NASA to India
WASHINGTON (IWR Satire) - - President Bush on Monday told a joint session
of Congress that in order to balance the budget we will need to start outsourcing
government programs and agencies like NASA to third world countries.
http://www.internetweekly.org/photo_cartoons/cartoon_bush_nasa.html
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Reality: India’s Lunar Mission
•G Madhavan Nair, Chairman ISRO and Michael
Griffin, Administrator NASA; signed MOU on May 9,
2006 to fly two US experiments on Chandrayaan in
2008
•
•
Miniature Synthetic Aperture Radar
Moon Mineralogy Mapper
•Mission cost to India, under $100 million
•Price to the United States: free.
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India / U.S. – “A Win-Win Partnership”
•India invests heavily in R&D
•US exports of equipment to India
up (e.g. mass spectrometer)
•India makes progress in software
development
•India uses computers made by
US companies
•Penetration of PC’s in Indian
households grows
•Intel – Microsoft all over India
•Significant increase in domestic
air travel in India
•Boeing receives largest ever
order to supply aircrafts
•India’s Pharmaceutical
companies focusing on new
molecules
•All want to collaborate with US
Pharma’s for global development
and commercialization
•Outsourcing goes up
•US unemployment goes down
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Conclusion
India: An attractive outsourcing destination AND an
attractive market for products
For Pharmaceuticals …..
•
•
•
Therapeutic areas now aligned with research initiatives of major
Pharma MNCs
Growth of Specialized private hospitals
Introduction of Product Patents
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From Indiana to India – the Emerging
Economy
Marketing
Talent
Indiana
India
Offshoring
Research & Development
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