It was not a bumper year. Just 722 delegates travelled to Hyderabad for the ICCA Congress. Yet the location for the General Assembly had been well chosen. Economically and politically overshadowed as the subcontinent may still be by the international hype over China, India’s economy is nevertheless growing as rapidly as its importance on the global political stage.
Hyderabad was hosting “not only the first major International Congress and Convention Association event to take place in India,” outgoing ICCA president Leigh Harry said at the beginning of the assembly; at the same time “the first ever international association congress in the meetings industry” was taking place in the IT boomtown. Philip Logan, Chairman of the Local Host Committee, is also convinced that the premiere made sense: “More – and more professional – congress organisers, better flight connections and considerable demand” are driving the industry along a path of rapid development and growth, he believes.
There is no doubt that India, like China, is among the winners of the global economic crisis. Between July and September India’s gross domestic product (GDP) surged by 7.9 percent. Within the space of a year India’s main stock index has doubled in value. Yet India is still only in the early stages of economic upswing – like China ten years ago.
The architect of this rise is Prime Minister Manmohan Singh. When India was teetering on the brink of national bankruptcy in 1992, he opened the country to the world as its then minister of finance – ushering in its economic turnaround. Following his opening period in office as premier, which began in 2004, his re-election last May was the first second term endorsement in India’s history since the days of Jawaharlal Nehru. The subcontinent is on the rise – even though India was not spared the backlash of the global economic crisis either. However, economic stimulus programmes, liquidity aid for the banks and not least the premier’s re-election are shaping a generally upbeat assessment of the future. On the first day of trading following publication of the election results the Sensex leaped by roughly 20 percent. India’s industrial giant, Reliance Industries, is in the process of acquiring the world number one plastics producer, Lyondell- Basel Industries AF, for more than EUR 12 billion; Indian pharmaceutical groups are buying up US firms; and midsized Indian businesses are going on global shopping sprees.
“We are not an export-centric country, we live from our huge domestic demand,” Deepak Parekh, CEO of Indian housing lender HDFC, explains. His view is shared by German investors, who are betting on the Indian market. Despite the global economic crisis the majority plan to expand their operations in India, according to a survey conducted by the Indo-German Chamber of Commerce. Of the 100 managers of German companies in India surveyed, 61 percent aim to increase their commitment this year and next, while 29 percent are pencilling in investment on a similar level to the previous years.
India’s per capita income in 2007 averaged EUR 350. Today an Indian earns EUR 600 on average – an increase of 71 percent in just three years. By western standards this is, of course, still very little. But for that, people’s willingness to consume is relatively high. And it will continue to increase. The Reserve Bank of India predicts that the propensity to spend will rise by an average of 13 percent a year through 2015.Higher wages and buoyant consumer sentiment are most clearly reflected in sales of motor cars. In 1983 about 40,000 vehicles were sold in India, this year sales will hit 2.6 million. By way of comparison: experts expect auto sales in Germany to total three million. By 2012 at the latest India will overtake Germany – and retain its lead in the long run. After all, the low-budget model Nano produced by India’s Tata Motors costs around Eur 1,700, putting it within the range of a growing number of people. At present roughly 300 million Indians possess annual incomes of more than EUR 3,000. That means they would have to spend just over half their annual earnings on their first car, which is comparable to a skilled worker in Germany buying a VW Golf. So far, only 50,000 of more than 200,000 orders have been delivered. To shorten waiting times Tata has ramped up capacities at its main factory in Gujarat and converted another plant to production of the Nano.In relation to its population the subcontinent is still a developing country in automotive terms. For every 100 inhabitants there is just one vehicle. The number of motor cars in Germany stands at 42 million – or 51 automobiles per 100 inhabitants. Particularly in the automotive sector, the mood in India is comparable to that in Germany after the fall of the wall in the GDR. At present there are more than eleven million vehicles on India’s roads; in a few years there will probably be twice or three times as many, depending on how fast the infrastructure can be improved. Prime Minister Manmohan Singh estimates the extra expenditure required for this in the coming five years at USD 1 trillion – money India doesn’t have. Consequently the road building programme is not making all that much headway. Since March a scant 13 kilometres of roads a day have been built, against scheduled 20 kilometres. 45 percent of all settlements are not yet hooked up to the road network, and 50 percent of the railways and 5,000 railway bridges still date from the 19th century Colonial period. Premier Singh therefore wants to invest USD 70 billion on roads in the next three years .Aside from the inadequate infrastructure and overweening government bureaucracy accompanied by rampant corruption, poverty remains India’s most pressing problem. Out of a total population of 1.2 billion there are 300 million illiterates and 480 million people eking out a living below the poverty line of USD 1.25 a day. In terms of the size of its economy the country currently ranks eleventh in the world behind France, Italy or Germany. By 2030 Goldman Sachs predicts that India will have risen to third place, when it will be outclassed only by China and the US.
Two out of every five people on this planet are either Chinese or Indian. And China still hasn’t resolved the key issue facing its political system: In the long run how can the Chinese Communist Party justify its refusal to allow the people – and the growing army of Chinese multimillionaires – to play a part in shaping political affairs? So far, rigid repression of opinions that do not toe the party line and the economic boom in China are keeping the populace quiet. But eventually, even in China economic growth will reach its limits. What will happen then is anyone’s guess.
Unlike China, India has in principle already resolved this systemic problem, as the world’s biggest democracy. Not perfectly everywhere, for sure, and sometimes less efficiently; structural reforms are taking longer, but its political government is democratically legitimated and hence more stable. English is the language of business. And the country is young. 54 percent of Indians are younger than 25, whereas China is getting old before it gets rich. And there is one area in which India captured the top spot quite a while ago: Bollywood is conquering the West, Slumdog Millionaire swept up eight Oscars in Hollywood. The actor Sharukh Khan is feted as a star the world over – and like many of Bollywood’s film greats he is a Muslim. For some time now in Western culture and urban attitudes, the message has been spreading that “India is in”.
DM
