Global Themes

On Globalization & Venture Capital

Happy 60th! – A Day to Feel Proud…

On the occasion of India’s Independence Day, I found it hard to resist the temptation.

Below are excerpts from a spate of recent news-stories about the amazing transformation of the world’s biggest democracy. Happy 60th Independence Day! (Caution: Long Post)


Just under two months ago, TIME magazine featured India on its cover with the title “India, Inc”, accompanied by a series of reports on Mumbai (Bombay), Bollywood, the economy, the Indian stock market and getting “Bangalored”. Some excerpts:

On Mumbai (Bombay):
“You’re so lucky to be here now,” says Samant, 39. “This is an incredible time. It’s all happening. Right here, right now.”

He’s right. If you want to catch a glimpse of the new India, with all its dizzying promise and turbocharged ambition, then head to its biggest, messiest, sexiest city–Bombay. Home to 18.4 million people and counting, the city, formally known as Mumbai, is projected by 2015 to be the planet’s second most populous metropolis, after Tokyo. …

…40% of international flights to India land here, delivering thousands of new visitors every day–an increasing number of whom are staying for good. The reason is simple: to know Bombay is to know modern India. It’s the channel for a billion ambitions and an emblem of globalization you can reach out and touch, a giant city where change is pouring in and rippling out around the world.
Whether Bombay’s entrepreneurial energy can be directed toward lifting more of its people out of despair will help define the nation’s future.

…India does possess one indispensable asset, which has sustained its democracy and catapulted it to the cusp of global power: the ingenuity of its citizens. And nowhere is it in greater supply than in Bombay. “Things just happen here,” says Sanjay Bhandarkar, managing director of investment bank Rothschild’s India. “Because people have to make things work themselves.”…Rakesh Jhunjhunwala, a billionaire trader in Bombay, says initiative represents Bombay’s–and India’s–advantage over its competitors. “It’s people who make countries,” he says, “not governments.”

“On the face of it, the city’s screwed,” says wine impresario Samant. “Look at the traffic, the bureaucracy, the sewage, so much poverty next to so much money. You’d think the place would erupt.” Yet look at how nimbly the city negotiates those obstacles, he says. “There’s no better place to be in business right now.”

On Bollywood (by Mira Nair):
…Today Bollywood is on as many screens in midtown Manhattan as in an Indian neighborhood in Queens. The literary world has learned to pronounce Vikram and Amitav and Jhumpa, and an Amrita Sher-Gil can fetch as much as a Warhol at auction. A click on the Internet instantly conveys the burgeoning scope of South Asian cultural confidence, yielding details of hundreds of art galleries, concerts, readings, plays and indie films. When I was invited back to Harvard for a South Asian night in 2001, I was ushered into a hall brimming with 1,500 heads of shiny black hair. “They’d better be careful,” I joked. “Soon this country will be run by people who look like us.”

On the economy (on rocket fuel!)
Even if you have never gone to India–never wrapped your food in a piping-hot naan or had your eyeballs singed by a Bollywood spectacular–there is a good chance you encounter some piece of it every day of your life. It might be the place you call (although you don’t know it) if your luggage is lost on a connecting flight, or the guys to whom your company has outsourced its data processing…Few modern Americans are surprised to find that their dentist or lawyer is of Indian origin, or are shocked to hear how vital Indians have been to California’s high-tech industry.
In ways big and small, Indians are changing the world.
After decades when it hardly registered in the political or public consciousness, India is on the U.S. mental map.

Among policymakers in Washington, the new approach can be explained simply: India is the un-China….
…the litany of India’s comparative shortcomings omits a fundamental truth: China started first. China’s key economic reforms took shape in the late 1970s, India’s not until the early 1990s. But India is younger and freer than China. Many of its companies are already innovative world beaters. India is playing catch-up, for sure, but it has the skills, the people and the sort of hustle and dynamism that Americans respect, to do so. It deserves the new notice it has got in the U.S. We’re all about to discover: this elephant can dance.

On the stock market:
How hot has India been? Foreign institutional investors poured $30 billion into the Indian market in three years–double the amount they had invested in the previous decade.

…An Indian student at Harvard Business School told TIME that one of the U.S.’s best-known hedge funds had given him $5 million to invest in Indian stocks–never mind that he hadn’t yet graduated. “The joke going around was that if you had an Indian girlfriend when you were at college in Boston,” says Manish Chokhani, director of Enam Securities, one of India’s biggest brokerage firms, “you could have stood on a street corner and raised $200 million to invest in India.”

Marc Faber, a renowned emerging-markets investor based in Hong Kong and Thailand, expects a further fall in the next six months as that uncertainty deepens. “In the near term, you have to be cautious,” he warns.

Yet the long-term picture remains sunny. “It’s like China maybe 15 or 20 years ago,”
India also has a younger population than any other major country. According to Ridham Desai, Morgan Stanley’s head of Indian equities research, about 125 million Indians will join the workforce in the next decade, and they will be key to the country’s growth. …Thanks to this demographic advantage, “India will grow faster than the rest of the world,” says Desai.

On getting Banglored:
A new word has appeared during watercooler conversations in offices across the U.S. The term is Bangalored. It refers to India’s high-tech hub, and it means your job has just moved to India without you….


In its July/August issue, Foreign Affairs brought together four top experts to analyze the sources and implications of India’s rise in a special titled “The Rise of India”.

Amongst them was Gurcharan Das, a respected former CEO of Procter & Gamble India and the author of “India Unbound” who talked about the The India Model. Excerpts:

Although the world has just discovered it, India’s economic success is far from new. After three postindependence decades of meager progress, the country’s economy grew at 6 percent a year from 1980 to 2002 and at 7.5 percent a year from 2002 to 2006 — making it one of the world’s best-performing economies for a quarter century.

…The notable thing about India’s rise is not that it is new, but that its path has been unique. Rather than adopting the classic Asian strategy — exporting labor-intensive, low-priced manufactured goods to the West — India has relied on its domestic market more than exports, consumption more than investment, services more than industry, and high-tech more than low-skilled manufacturing.

This approach has meant that the Indian economy has been mostly insulated from global downturns, showing a degree of stability that is as impressive as the rate of its expansion. The consumption-driven model is also more people-friendly than other development strategies. As a result, inequality has increased much less in India than in other developing nations. (Its Gini index, a measure of income inequality on a scale of zero to 100, is 33, compared to 41 for the United States, 45 for China, and 59 for Brazil.) Moreover, 30 to 40 percent of GDP growth is due to rising productivity — a true sign of an economy’s health and progress — rather than to increases in the amount of capital or labor.
More than 100 Indian companies now have a market capitalization of over a billion dollars, and some of these — including Bharat Forge, Jet Airways, Infosys Technologies, Reliance Infocomm, Tata Motors, and Wipro Technologies — are likely to become competitive global brands soon.

…Bad loans now account for less than 2 percent of all loans (compared to 20 percent in China), even though none of India’s shoddy state-owned banks has so far been privatized.

…For now, growth is being driven by services and domestic consumption. Consumption accounts for 64 percent of India’s GDP, compared to 58 percent for Europe, 55 percent for Japan, and 42 percent for China. …as the economist Stephen Roach of Morgan Stanley puts it, “India’s consumption-led approach to growth may be better balanced than the resource-mobilization model of China.”

…The Indian state’s greatest achievements lie in the noneconomic sphere. The state has held the world’s most diverse country together in relative peace for 57 years. It has started to put a modern institutional framework in place. It has held free and fair elections without interruption. Of its 3.5 million village legislators, 1.2 million are women. These are proud achievements for an often bungling state with disastrous implementation skills and a terrible record at day-to-day governance.

…The stubborn persistence of democracy is itself one of the Indian state’s proudest achievements. Time and again, Indian democracy has shown itself to be resilient and enduring — giving a lie to the old prejudice that the poor are incapable of the kind of self-discipline and sobriety that make for effective self-government. To be sure, it is an infuriating democracy, plagued by poor governance and fragile institutions that have failed to deliver basic public goods. But India’s economic success has been all the more remarkable for its issuing from such a democracy.


Earlier in March this year, Newsweek profiled India on its cover with the title, “India Rising”. Excerpts:

“…Every year at the World Economic Forum in Davos, there’s a star. Not a person but a country. One country impresses the gathering of global leaders because of a particularly smart Finance minister or a compelling tale of reform or even a glamorous gala. This year there was no contest. In the decade that I’ve been going to Davos, no country has captured the imagination of the conference and dominated the conversation as India in 2006.

…INDIA EVERYWHERE, said the ubiquitous logo. It was.

…And everyone now is in India—most significantly, of course, George W. Bush, who will arrive there on March 1. Jacques Chirac was there two weeks ago. (So was Bill Clinton, who can’t stop returning to the country.) Two weeks before that it was Saudi Arabia’s newly crowned monarch, King Abdullah. The week after Bush leaves, Australian Prime Minister John Howard arrives. And that’s all in six weeks. …
…Over the past 15 years, India has been the second fastest-growing country in the world—after China—averaging above 6 percent growth per year.

…A much-cited 2003 study by Goldman Sachs projects that over the next 50 years, India will be the fastest-growing of the world’s major economies (largely because its work force will not age as fast as the others). The report calculates that in 10 years India’s economy will be larger than Italy’s and in 15 years will have overtaken Britain’s. By 2040 it will boast the world’s third largest economy. By 2050 it will be five times the size of Japan’s and its per capita income will have risen to 35 times its current level. Predictions like these are a treacherous business, though it’s worth noting that India’s current growth rate is actually higher than the study assumed.

…At this point, anyone who has actually been to India will probably be puzzled. “India?” he or she will say. “With its dilapidated airports, crumbling roads, vast slums and impoverished villages? We’re talking about that India?” Yes, that, too, is India….But that is the familiar India, the India of poverty and disease. The India of the future contains all this but also something new. You can feel the change even in the midst of the slums.

To new visitors, it won’t look pretty…India’s growth is messy, chaotic and largely unplanned. It is not top-down but bottom-up. It is happening not because of the government, but largely despite it. India does not have Beijing and Shanghai’s gleaming infrastructure, and it does not have a government that rolls out the red carpet for foreign investment—no government in democratic India would have those kinds of powers anyway. But it has vast and growing numbers of entrepreneurs who want to make money. And somehow they find a way to do it, overcoming the obstacles, bypassing the bureaucracy. “The government sleeps at night and the economy grows,” says Gurcharan Das, former CEO of Procter Gamble in India.

There are some who argue that India’s path has distinct advantages. MIT’s Yasheng Huang points out that India’s companies use their capital far more efficiently than China’s; they benchmark to global standards and are better managed than Chinese firms. Despite being much poorer than China, India has produced dozens of world-class companies like Infosys, Ranbaxy and Reliance. Huang attributes this difference to the fact that India has a real and deep private sector (unlike China’s many state-owned and state-funded companies), a clean, well-regulated financial system and the sturdy rule of law. Another example: every year Japan awards the coveted Deming Prizes for managerial innovation, and over the last four years, they have been awarded more often to Indian companies than to firms from any other country, including Japan.

…Statistics don’t quite capture what is happening. Indians, at least in urban areas, are bursting with enthusiasm. Indian businessmen are giddy about their prospects. Indian designers and artists speak of extending their influence across the globe. Bollywood movie stars want to grow their audience abroad from their “base” of half a billion fans. It is as if hundreds of millions of people have suddenly discovered the keys to unlock their potential….


In June, the Harvard Business School Alumni Bulletin, profiled India in a story titled, India Arrives on the Global Stage”. It talked about “a country that has captured the world’s imagination”. Excerpts:

“Everything you hear about India is true; in one sense, the attention is overdue,” says Anand Mahindra (HBS MBA ’81), vice chairman and managing director of Mahindra & Mahindra……India is one of the world’s greatest experiments,” he continues. “The challenge is to lift a huge percentage of humanity out of poverty, and to do it in the context of a very freewheeling and open democracy. It could be a huge example for the world.”

“Everything you hear about India is true; in one sense, the attention is overdue,” says Anand Mahindra (HBS MBA ’81), vice chairman and managing director of Mahindra & Mahindra…As founder and chairman of Satyam Computer Services, B. Ramalinga Raju (HBS OPM 19, ’93) is one of the earliest pioneers in offshoring, heading a services company that provides end-to-end technology solutions to over 150 Fortune 500 clients. With 28,000 employees located in 54 countries, Satyam, founded in 1987, had revenues of $1 million when it went public in 1992. In 2005, that figure topped $1 billion.Satyam’s ascent mirrors the dramatic rise of BPO as the primary driver of the new Indian economy. “Everything you hear about India is true; in one sense, the attention is overdue,” says Anand Mahindra (HBS MBA ’81), vice chairman and managing director of Mahindra & Mahindra… In 1990, the company was focused primarily on businesses in manufacturing, textiles, and infrastructure—its technology arm had been operating for only a year, and Raju was hesitant to even include the word “computers” in a summary of Satyam’s activities. Then, in 1991, Raju suggested to an Illinois client that Satyam move its twenty associates back to India, where they would perform the same work but be paid in rupees, at a savings to both parties. The client requested that Satyam first simulate the same conditions (such as connectivity) at a “Little India” just outside town limits.

At the end of a six-month trial, the experiment was declared a success.“We’re very proud to have been at the forefront of offshoring,” says Raju, who sees his company’s growth as representative of a broader development. “There’s a growing realization that wealth creation has nothing to do with nations so much as it does with companies, professionals, global consumers, and global capital,” he notes. “Boundaries between nations are becoming thinner; companies are acquiring a global character.”

…Another prime indicator of India’s emergence as an economic powerhouse has been the rise of the country’s private-equity and venture-capital industries over the past five years. When Renuka Ramnath (HBS AMP 156, ’99) was appointed managing director and CEO of ICICI Venture Funds in 2001, she recalls that many wondered if the new job was a “punishment posting” or perhaps a move that signaled her desire for a slower-paced lifestyle after a fifteen-year career in various areas of ICICI Bank.

“There were no visible indicators that signaled the potential for private equity in India,” she says. “The notion of value-added private capital was not understood or believed. Before people saw and understood the real results of private-equity involvement, 75 percent of my time was spent establishing my credentials.” From 1988 to 2001, she notes, ICICI raised $150 million in private equity; from 2001 to 2005, that figure rose to $1.5 billion

.…With 500 million citizens under the age of twenty-five, India has the youngest population in the world—and the potential to create a powerful engine for future growth, if those millions can be educated and leveraged as a skilled global workforce. …”Many investors are willing to take the pain of dealing with our infrastructure because of the work ethic and honesty of Indian workers,” remarks Balaraj. “A worker earning a salary of $100 a month will work seven days a week if that’s what it takes to get the job done. It’s a huge competitive advantage.”
Multiply that level of commitment by a factor of several hundred million and it’s easy to envision the change India is capable of in the coming years.
“Those young people could be the country’s demographic dividend,” says Ravi Venkatesan (HBS MBA ’92), chairman of Microsoft India. “India is at an interesting point in time. We have a historic, twenty-year window of opportunity to become a truly developed country,” he observes…


Strictly speaking, I should not have included this – it is more than a year old. But I could not resist! This is the Forbes cover story on India Rising in May ’05 and it features Promod Haque, Managing Partner of Norwest Venture Partners. Excerpts:

… Haque goes back to India a lot these days, in search of high-tech gold. India is on the rise, a booming supplier of-and a thriving market for-backshop software, wireless infrastructure, chip design and more. Haque, 57, is the managing partner of Norwest Venture Partners, a $1.8 billion fund in Palo Alto, California; 12 shops in his portfolio, one-third of the active total, have links to India. U.S. venture firms will raise $1 billion for India by the end of this year. Soft Bank Asia Infrastructure Fund has earmarked $100 million of its new $650 million fund for India. WestBridge Capital Partners is closing a $200 million India-only fund. “We’re seeing tons of competition for deals. It’s a huge opportunity, and everybody knows it,” says Rob Chandra of Bessemer Venture Partners .“We need to think about where the technology centers of the world will be in ten years and make sure we’re there now,” says Haque. “The reason Silicon Valley is a mecca for startups is that it has the entire ecosystem in place. If it is not developed where we want to do business, we need to build it.” …We drive out of the city and over rugged mountain passes to Pune, a university town that Haque says one day will rival Palo Alto in Silicon Valley…”Pune is the hot city to watch,” Haque tells them. “It is where the Silicon Valley was 20 years ago.” Promod Haque will repeat this grueling trip back to his homeland every three months for the foreseeable future, traveling thousands of miles over multiple time zones and rutted roads in search of venture gold. India is on the rise, and Silicon Valley wants a big piece of the action


And finally, a well-made ABC news-clip on how the off-shoring/ outsourcing wave is changing the lives of a billion people “The Rise of India

August 15th, 2006 Posted by | India | 10 comments


  1. Hi Shantanu,

    Great blogs and great information !
    Could not not stop reading it till the end.

    Best Regards,

    Comment by Anand Moghe | August 16, 2006

  2. Excellent effort keep it up some day Indians will wakeup,”GOD SEES TRUTH BUT WAITS”
    Best Wishes,

    Comment by Pramod Athaley | August 17, 2006

  3. Shantanu,

    Greatjob. Good to see you keeping track of India and the progress we are making. Staying here we don’t pause and look. It was good reading it all togetehr.


    Comment by aluri | August 17, 2006

  4. Shantanu – I was in India 3 weeks ago. I travel back eery 6 weeks. It reminded me of the pre-1999 days. Activity is phenomenal. VCs are pushing millions in your face. Lot of the stuff you talk about is very visible in peoples faces and their talk. There is tonnes of confidence. Although things are moving slowly, but they are moving.

    Comment by Sunil NIGAM | August 17, 2006

  5. Hey Shantanu,

    Great one. Last week was my 6th trip back to India this year. Everytime I go, be it Delhi, Bangalore or Mumbai, the economic progress hits me in the face. Malls, roads, entrepreneurs, opportunities. Still a long way to go on the social front but we are on the right path.


    Comment by Amit Mehra | August 18, 2006

  6. Thanks everyone for the comments. I am glad that you enjoyed it.
    Its a slow and long haul…but we will get there.

    Comment by Shantanu | August 19, 2006

  7. “…The Indian economy is looking good at Macro level but at micro or state level, the picture remains rather pessimitic. Somehow the sustaining factor that is required from the State to make ‘India Shining’, is missing….”

    Comment by Sandeep Tandon | August 25, 2006

  8. “I read this with slight reservation for as proud as I am to be indian being here this time has filled me with less hope than previous visits. Maybe its because of all this hype that I had too many high expectations bu thtere is still too much indiscipline and lack of professionalism here and I wonder how and when this changes (without need for foreign intervention).

    Yesterday there was a programme on national tv in which about 70 MP’s were quizzed on basic questions (just after flag hoisting ceremonies) such as what colour is the top band of the indian flag, what is the indian national anthem, who is bapu? you’d be shocked but these mps werent able to answer these questions and whats more were not even ashamed by the ignorance. They laughed and even made excuses such why are these things important/i’m too young to know that etc. Even the likes of Nazma heptullah ( VP of rajya sabha), an education mister didnt know these questions!…”

    “…I am interested to hear your thoughts and to seee how hopeful you are inth face of such leadership.”

    Comment by Janhavi | August 25, 2006

  9. Shantanu good read. Have already bet my life on India and am certain of its potential.

    Like most articles say development is despite the government. So all indications are that develpoment will continue afoot – albeit with some hickups.

    Comment by Sakate | September 4, 2006

  10. Agree with all you have to write the best thing is that this is despite the politicos doing their best to upset the things now only if someone could clean that scene in this country it would be what is referred in hindi as sone me suhaga

    Comment by vivek | September 8, 2006

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