High Tech India?

ralph.moreau@fitagency.com

Technology Attaché, Flanders Investment and Trade

Embassy of Belgium, New Delhi

Perception of India today

Sources: Economist, Newsweek, Businesweek

A thriving business environment opening up

Tremendous economic growth

Population and market of

> 1.1 bil. people

> 50% < 25 yo

Perception of India today: mixed signals

Sources: Economist, Newsweek, Businesweek

But…A lot of work to be done on basic

infrastructure, education and healthcare

capacity

Are certain industries overheating? Attrition

rates, salary inflation…

~1000 mil.

people ~50 mil.?

400 mil. ?

people

Middle-class

Also…

Is there reason for the India hype?

If you know your facts…

India is not 1 country, but a sub-continent, with strong regional tendencies, powerful states

Complex society, mix of religions, legacy of caste system

Young democracy, with the legacy of the ‘socialist’ period, with a heavy bureaucracy, related

corruption, …

Local way of doing business, long vs short term, …

… the potential is there!

India has come a long way, since the mid 90’s,

things are changing!

Industries that have been liberalized have boomed!

The potential is in the numbers!

Number Champion: Telecom!

3rd largest telecom market in the worldRevenue > US$ 22 BnSubscriber growth 45%, revenue growth 25%, 2.83% of GDP

Sources: TRAI, DIPP, FICCI, PWC, GOI

15

E.g. Nokia plant in Chennai : 100 mil. mobile handsets / year.

The magic is in the numbers!

• 500 million people under the age of 25 (“the future belongs to India”)

• World Bank & UN predict the following GDP scenario, based on the positive Indian demographic situation

• Every year India produces:– 6,000 New PhDs– 200,000 New Engineers– 300,000 New Science Grads

% of Global GDP

2005 2025 2050

EU 34% 25% 15%

US 28% 27% 26%

Japan 12% 7% 4%

China 4% 15% 28%

India 2% 5% 17%

Other 20% 21% 10%

Where do Indians live?What do they do?

Where do Indians live?What do they do?

• Agriculture, 20% of GDP, ~70% of population• ICT, 5% of GDP, ~0.2% of population

~ $1.209 trillion

IT, Technology, R&D, … in India, what to expect?

?

What about R&D ? IP ? Products ?

Feb 4 2008

Dec 24 2007

Some facts…

• Public/Private ratio of contribution to R&D,in Belgium (and Western/developed world): 1 to 2 | in India: 6 to 1

• People in “research” related jobs / 1,000 persons employed:India 21 / 1,000 | China 85 / 1,000 | US 285 / 1,000

• Direct Relationship between the R&D investments of any nation and its prosperity. in USA 2.6% of GDP | in India 0.8% of GDP | in Belgium ~2%

• In 2005, India filed 17,000 patents, but… – Most by foreign

companies or subsidiaries, – only 3,500 by ‘Indians’,

and top 5 ‘Indian’ filers were government sponsored institutes

Initial conclusion of the facts

• R&D is Business, Western countries have since long treated R&D as Business

In India R&D has long been considered primarily an academic exercise.

Until recently there was practically no link between research and industry.

• Research primarily done at government institutions, private companies carry out some R&D, mostly to solve their own production problems.

• There are very few R&D-driven companies in India.Industries that are the exceptions are mostly active in:- ICT, Pharma, Biotechnology, Medical, Clinical testing, Renewable energy, ‘Water’-technology.

• World Bank report states “India’s national output could be 5 times bigger today, if only enterprises were to absorb and use knowledge that already exists”This means, major productivity increases, based on adopting existing IP.

Why should we work with India ?

“The future growth markets are likely to be in countries like India,

which have different consumer markets than the West.

Working with Indian partners allows you to better tailor your products

to these emerging markets.”

Everybody

(neighbouring countries, companies, …) is going to India,

we need to catch up now!

What are the challenges, for India? Partners working with India?

• Regulatory environment discourages risk taking• Business climate, short vs long term perspective• Skills and industry knowledge• Quality control• Government hurdles, red tape• Low absorption of technology by SMEs, and the informal sector.

90% of workers are in the informal economy

Mother of all challenges = Infrastructure!

Conclusion

Success of IT, BPO, KPO, … industry created the “India brand”

Cost pressure triggered the need to move up the value ladder

This inspired multinational firms to set up R&D centers

Catapulted India from being adaptor to an innovator

Even though conventional metrics (# of patents, product companies, etc …) do not yet show the importance of India, a non-linear model of development and growth is expected (as soon as a number of basic building blocks will come in place)

Collaborative product development is an opportunity for our companies, bringing process skills and domain expertise to the table

If you come to India with your product, service, … make sure it is geared for the Indian market (specifications, market size, buying power, … ! )

Do your homework, as you would do with any other market !