More evidence of the myth of de-globalization: outsourcing to India rebounds dramatically

WSJ story:  India's three top outsourcing firms (TCS, Infosys, Wipro) all experience big rebounds in revenue for work outsourced from West.  Each had negative first and second quarters in 2010 and each will have 10-20% boosts happening in 2010's 4Q.

Doesn't mean everything goes back to what it was; it never does.

The turn of events marks a reversal from a year ago, when Indian firms were reeling from a steep drop in orders for software services. But the tech-services sector differs now from the Indian firms' boom years of 2003 to 2007, and new hurdles have arisen. 

Long-term challenges include rising labor costs, sliding billing rates and currency-exchange risks. The upshot is that despite optimism in Bangalore and Mumbai spurred by the recent turnaround, the companies likely won't be able to return to 30%-plus annual revenue growth without restructuring their business models and the types of services they provide.

"Is there a revival? Certainly. But is it a return to the go-go days of offshoring three years ago? No," said Sid Pai of Houston-based outsourcing-advisory firm TPI.

Pricing will be a long-term issue. Indian firms cut billing rates 5% to 10% during the downturn to keep clients, and many analysts say increasing prices now won't be easy.

"There'll be niche services where you can charge a premium, but in other areas, the pricing pressure is only going to continue," said Forrester analyst John McCarthy.

Meanwhile, as they grow bigger, the top Indian companies are beginning to confront a problem that larger competitors like International Business Machines Corp. and Accenture Ltd. have struggled with for years: how to increase revenue faster than head count.

A sign that the outsourcing sector in India is moving off the easier challenges of extensive growth to intensive growth.

It happens to the best; it happens to the rest.

[name the movie by David Mamet in which that line appears!]

India-US car makers: warming up to each other's markets

Mahindra & Mahindra aims to become the first company to sell an Indian-made truck in the U.S.  (factory pic-->).

Meanwhile, GM is doing boffo business in India:

Sparks fly and robotic machines buzz and hum. Assembly-line workers in coveralls, the sons of peanut and rice farmers, seal windshields and weld doors. They're making zippy little cars called Beat and Spark in the gleaming new General Motors plant here -- and they're making boatloads of money.

The iconic American carmaker went bankrupt last year, but its Indian operations have never been busier, evidence of India'sbooming economic growth and the rising prosperity of middle classes that are increasingly demanding first-world trappings in one of the fastest-rising countries.

"The new generation wants to hold the steering wheel in their hands," said Prabhjot Singh, manager of a driving school who said young Indians who used to go to him to learn how to drive scooters are now flooding in to learn how to drive cars.

GM builds for Indians in India.  Mahindra plans on doing the same as soon as possible.

I like GM's chances better.  America's truck market is stuffed, while there is only 10 cars per 1,000 Indians (America's numbers are more like 830-40).

But great to see the connectivity and ambition moving in both directions.

China to India telecom market: pretty please, let us in!

Huawei is China's biggest telecom equip manufacturers.  It's working hard to get into India's booming market space, and recently India took a hard line on its imports, blocking orders on the rationalization that the gear might come with spy devices.

Now, Chinese expats are adopting local names (a famous Chinese trick) and dress and going heavy on the charm.

India is worth $1.4B of Huawei's revenue now, or 11%.

I like to see this tussle.  It's part of China's learning process:  the more it penetrates other markets, the more those markets will push back on its lack of democracy and everything that deficiency suggests about its business practices.

The upcoming political generation in India & what it means

Confession:  I was approached a while back by a young politician in India who said he was organizing a new party.  He wanted me as an adviser on international affairs and listed a few other Westerners already brought on board.  I said I would consider, and then, following some Googling, I asked him about his stance on a couple of hot-buttons issues.  I thereupon got a reply email saying he didn't need to explain his positions to anybody, least of all a foreigner, so I was out!  Naturally, I was less than crushed, as the whole interaction timed out in about one hour.  But it was an interesting exchange with a member of the rising political generation in India: this guy was young, ambitious, highly opinionated, and intolerant of criticism.

Now, except for the young part, I'm not sure what's all that different between the old generation of leadership in India, with whom I've interacted over the years, and the new one coming up, especially when we're told that the leading star is yet another Gandhi (Rahul, 39, son of Rajiv).

So I was interested to peruse James Lamont's piece in the FT.

India is a lot younger than most rising powers--especially China. 70% of its 1.2B people are under 35.  As a rule, we are told, there is a new political generation every 25 years or so.  The big difference with this one will be that it's accompanied by a huge demographic dividend, meaning India is heading into the same golden period (not that many kids and elder dependents and a max percentage in workforce) that China enjoyed the past couple of decades--but which is ending for China now).

Plus, this is the first generation of leadership that is so globalized in its background and training:

Many have been educated abroad, often in North America, have worked for multinational corporations and share a pro-market world view.

All this suggests a stronger pro-globalization trend for India. International business is looking forward to working with this crowd.

Still, we are told, younger pols tend to be denied positions of great responsibility in a government that currently features a 77-year-old PM and a 74-year-old finance minister. Plus, there is the usual dynastic bit (yet another Gandhi).

So we keep an eye on developments to see how this promising new generation pans out.

We will be played for fools by Pakistan--and by China by extension

From a WAPO article: 

A man who guided Shahzad from Karachi to the country's northwest, Pakistani officials say, was arrested this week at the mosque, which is affiliated with Jaish-i-Muhammad. The al-Qaeda-linked group is one in a mosaic of domestic jihadist organizations that were created or cultivated by Pakistan's intelligence services to antagonize Indian troops in the disputed region of Kashmir but have gone increasingly rogue.

U.S. officials say they are worried about these militant groups based in Punjab province, many of which are banned but still operate freely. The most prominent among them is Lashkar-i-Taiba, suspected in a deadly 2008 siege in Mumbai. The group has changed its legal name, but its leaders remain free.

Some elements in Pakistan's security establishment continue to view such groups as assets against India, and Punjabi politicians court them for political support. It is uncertain whether Pakistan would take aggressive action against the organizations, even if they are found to be definitively connected to the Times Square bombing attempt.

We are being held hostage to this fight.

And given the choices, why note choose India and force China to step up more and deal with Af-Pakistan?  Or should we fund all the security (or lack thereof) and let China build the ports and dig the mines?

Obama: any grand vision for Asian security architecture? None yet detected.

Former Indian ambassador to Pakistan writing in WSJ (via WPR's Media Roundup).

Gist:  Obama seems eager to make any sort of relationship happen with China.  I could add:  Ditto on Pakistan.

The loser in these foci?  India, of course.

India has tried to prod the Obama administration into a more active role. New Delhi has recently had a detailed exchange of views on the Asia-Pacific region with the State Department's highest-ranking Asia official, Kurt Campbell, but much more needs to be done. While New Delhi welcomes cooperative and constructive relations between the U.S. and China, concerns in India are inevitable when the Sino-U.S. relationship is marked either by confrontation or collusion which undermines Indian interests.

Many Indians wonder if the Obama administration has any grand vision at all in shaping the emerging architecture for security and cooperation in the Asia-Pacific region. No one doubts that relations with the U.S. will remain a key feature of Indian foreign policy. But in the absence of mutual trust which characterized the relationship in the recent past, existing misgivings will not be put to rest merely by grand state banquets or glib talk about democracies being "natural partners."

I have advocated prioritizing China over India, but likewise India over Pakistan.  From India's perspective, Obama's performance to date must seem entirely opportunistic and reactive--the unwinding of crises with little sense of the structure to emerge.

I would not contest that characterization.