India’s ‘Cities of Harmony’ the Way Forward in Shanghai

Op-Ed Commentary: Chris Devonshire-Ellis

Chris Devonshire Ellis with Indian Ambassador to China S. Jaishanker

SHANGHAI, Aug. 19 – The India Business Forum was held today in Shanghai, celebrating not just the Indian Pavilion at the Expo, but also the 60th anniversary of diplomatic relations between India and China and India’s National day earlier in the week.

A packed crowd of about 400 delegates listened to a variety of speeches and presentations from senior Indian and Chinese officials and businesspeople. The Vice President of the Confederation of Indian Industry, B. Muthuraman, opened the proceedings stating that during the global economic crisis, both India and China had demonstrated they were among the few nations of the world to be living within their means and that this represented a sound fiscal platform for the rise of emerging Asia. Noting that India GDP growth is second only to that of China internationally, he stated that bilateral opportunities are very much in evidence and that the projected figure of US$60 billion for 2010 is likely to be met and “would prove to be just the start.”

Dr. Subas Pani, chairman of the India Trade Promotion Organization, concentrated his speech on the Indian Pavilion and the global environment, noting that while the Shanghai Expo is unlikely to be surpassed in terms of size and scale, its lasting legacy will be the recognition of the need to improve technology for development. Unveiling his “Cities of Harmony” concept, Pani explained this as being in harmony with nature and with each other. Describing the Indian Pavilion to illustrate his point, he noted that the entire structure was built from bamboo sourced from nearby Shanghai and that it was completely powered by solar panels and a wind turbine. The water management system for the structure collected, treated and dispersed recycled rainwater and was also self contained. Urging both China and India to begin a new phase of city construction using renewable and sustainable resources, he identified the need to develop new technologies that utilize bamboo and other natural materials. New standards for construction would begin to emerge from China and India in this field he said, while noting that both countries had a long history of using wood and “harmonic structures,” while India for centuries had deployed water management skills that would be ever more necessary in the coming decades. Working with nature was the way forward in achieving sustainability in development, and that work should be harmonious with the needs of the natural world.

India’s Ambassador to China, Dr. S. Jaishanker, commented that China and India held the world’s oldest economic partnership dating back several thousand years. He also noted that the rise in modern times of two equally large populations at the same time was unprecedented. Stating that the two nations needed to focus more on relations as apart from just transactions, he said that the opportunities presented by the simultaneous development of China and India created far more opportunities than problems. In promoting Indian businesses and products in China, the Indian Embassy had sponsored a pan-China national “brand awareness” campaign in 15 Chinese cities featuring a variety of global Indian brands such as Tata and Infosys. The joint development of each others’ brands will further develop bi-lateral trade.

V.K. Topa, managing director of Invest India, provided statistics about the India market, commenting that India’s middle class is growing at a rate of 5 percent a year, and is now 21 percent of the entire population. He also claims that it will become the world’s fifth largest consumer market by 2020. Imports have already increased 500 percent in the past 10 years, while China’s share of supplies to India has grown to 17 percent of Indian imports of iron and steel, 33 percent in chemicals, 31 percent in railway stock, and 15 percent in paper and pulp. India is increasingly an open market for foreign investors to sell to and, in most industries, foreign investment can be utilized at 100 percent ownership. Stating that India now had 111 special economic zones, he advised that foreign investors could find increasing amounts of tax incentives and holidays, and that for companies especially involved in infrastructure, opportunities were rife on a national basis. Infrastructure spending is set to rise to 9 percent of GDP next year, up from the current 5 percent.

The chairman of Indian IT policy maker Nasscom, Harsh Manglik, echoed these views, pointing out that India has the youngest population in the world, with China second, and that this will drive consumption and growth. Around 30 percent of India’s population is under 16 years of age, and both China’s and India’s demographics were favorable to their sustained development. Bilateral trade, he forecasts, will rise from the current US$60 billion to US$250 billion in the next 10 years.

Deep Kapuria, chairman of the CII National Committee of Auto and Robotics, said that India’s growth was just beginning, and while the manufacturing sector has demonstrated strong growth over the past five years, more was still to come. Predicting that growth will rise from 15 percent of national GDP today to 25 percent by 2025, he highlighted the fact that similar to China’s achievements, India was moving people away from agricultural towards manufacturing just as China had done during the 1990s. Highlighting the case of the Mahindra Scorpio vehicle, he stated that the entire development platform for the car had been achieved at a cost of just 20 percent of what it would have been had the same work been undertaken in Detroit. Global economies of scale are shifting, he stated, and like China, India is now moving ahead quickly as a manufacturing and development center with easy access to Indian consumers as well as export markets globally.

In terms of retail, Pranav Vakil, the co-chairman of FICCI Real Estate Committee reported that real estate is proving a lucrative investment in India and that 100 percent foreign ownership is permitted in most cases. As global sourcing offices are now expanding into India, he noted that the minimum investment for real estate development has been decreased to just 25 acres of land from 100 acres, with a minimum investment of US$10 million and a project completion deadline of five years. Shopping malls, hotels, office blocks and resorts are all highly viable investments, he stated, with hotels currently at 70 percent capacity and an immediate need for the development of a further 60,000 beds in four and five star facilities.

Arvind Chandak, the president of Aurobindo (China) discussed the pharmaceutical sector and noted that India’s population is aging at a rate of 5 percent annually and that an on-going need for related products to cater for this represented a huge market opportunity. Noting that pharma growth in mature markets is about 3 percent, growth in emerging markets such as India is running at 14 percent per annum.

The overriding theme of the conference was not China and India as competitors; in fact the development of both nations has gone way beyond that. Both China and India represent huge domestic markets with a combined population of some 2.6 billion people, hence the title of this web site, and the overriding question is not one market or the other – it’s the exploitation and development of both, and the opportunities they equally provide.

Chris Devonshire-Ellis is the principal and founding partner of Dezan Shira & Associates, the specialist foreign direct investment practice. The firm provides due diligence, corporate establishment, tax planning, and on-going licensing, accounting and audit services to multinational investors in Asia. The practice has been established since 1992. Dezan Shira & Associates maintains 10 offices in China, five in India, and owns the business investment titles India Briefing and China Briefing. Please contact the firm at chinaindia@dezshira.com for details about investing or establishing a business in India or China.

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