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1
YOU THOUGHT CHINA WAS HOT? TAKE A LOOK AT INDIA!
TRENDS YOU CAN USE FROM THE KETCHUM GLOBAL RESEARCH NETWORK
NOVEMBER 2005
Have you called your computer company’s tech support line recently? If you have,chances are your call was
forwarded to a calling center somewhere in India. Withan average 20 million Indians graduating from universities
each year–-many in thefields of math or computer sciences–-Silicon Valley has taken notice of this highlyeducated
workforce and has outsourced many of their technical calling centers tothis region as a way of cutting expenses
while still maintaining a skilled workforce.
India is on the rise, and is quickly becoming a booming supplier of—and a thriving
market for—backshop software, wireless infrastructure, chip design and more.1
And, it’s not just the field of computers that is growing by leaps and bounds in
India. The country’s airline companies have been on a buying spree this past
summer, placing jet orders in record numbers, fueled by India’s recent
deregulation measures. And jet manufacturers like Airbus and Boeing are now in
heavy competition for this market.
A booming services industry, falling interest rates, and a surging stock market are
also spurring the explosion of the Indian market.
In this edition of the Ketchum Global Research Network newsletter, we examine
how the economic growth of India will impact our clients’ business. Specifically, we
look to understand the emerging Indian business and consumer markets that
represent a significant opportunity for our clients around the world.
India Versus China
September’s Newsletter focused on the emergence of China in the global
marketplace. And while China is poised to have a huge impact on the global
economy, it is India that could have a far greater impact, and in a shorter
timeframe.
Why?India will have the world’s largest population by the year 2050–-1.6 billion
people versus 1.4 billion in China. And, more importantly, India’s population will be
much younger and more highly educated.Sixty percent of India’s population is
under age 32, while the Chinese demographic skews much older. In 20 years,
China will have an estimated 300 million people age 60 or older. China typically
relies on cheap labor from unskilled workers to drive its export business and has
largely ignored an investment in high technology industries. India, on the other
hand, has an educated workforce that for the most part is fluent in English. As
things stand, India will soon have more English-speaking computer operators than
the entire rest of the world put together, and it will be organically linked to all the
advanced economies.2

2
The role of government is also critical to
both economies. China still remains a
communist regime while India’s government
is a more progressive federal republic. Just
take a look at the billboards plastered
around Bombay—these ads speak out on
everything from local politics to sex. Such
freedom of ideas and expression are almost
unheard of in China.
A look at Indian and Chinese publicly listed
companies reveals that Indian businesses
have, with a few exceptions, outperformed
their Chinese counterparts on return on
equity (ROE) and return on invested capital
(ROIC).3
“Of all the emerging markets countries, India
is the one with the solid foundation,” says
Christopher Taylor, emerging-markets
portfolio manager at Hudson Fairfax Capital.
Consumerism of the Middle Class
The rapid growth in outsourcing has created
good jobs in India. As the Indian economy
has become more robust, the emerging
middle class—some 300 million strong—is
now in a much better buying position.That
includes being able to buy automobiles, cell
phones and other luxury items that they
could not have afforded before. For
instance, in 1999 India had 2 million cell
phone subscribers. Today, that number
signs up every month.
Five years ago Indians saved 30% of their
income; today the savings rate is 18%. This
additional disposable income makes the
Indian middle class an attractive consumer
market for all the world’s manufacturers. Cell
phone companies, banks, car manufacturers
and insurers are all looking to sell their
products to the growing middle class.
And, more disposable income means more
flexibility when it comes to travel. The recent
deregulation of the Indian airline industry
makes flying cheaper–-both domestically
and internationally.
Moreover, India’s GDP (gross domestic
product) increased 8.2% last year, and 7% is
expected in 2005.4 Advertisers and retailers
have quickly gotten on board with this
economic boom. Shopping malls are
popping up in major cities. With only a
handful of malls in existence only three
years ago, it’s anticipated that there could be
100 malls in and around New Delhi alone
within the next several years.
“The increase in the number of
households headed by salary
 earners, professionals and
business persons, and the
emergence of a thriving
consumer finance business, are
expected to continue the
consumerism boom in India.”
—Ernst & Young
Poverty Affects Education
While its middle class is indeed growing,
India is still one of the poorest nations on
earth, with as many as 70% of its people
living in poverty and having a per capita
annual income of only $500.5 In just two
decades, China’s people have become twice
as rich as India’s.
India is a nation striving to be a global leader
in brainpower and produces four times as
many engineers annually as does the U.S.
But it struggles to provide adequate
education for its poverty-stricken youth.6
“Education is the ticket out of poverty,” says
New Delhi economist Surjit Bhalla.
In 2001, an education law was passed to
help boost enrollment and graduation rates.
Public education was to be free and
compulsory for all children. Increasingly,
Indian parents want their children educated,
particularly in English and computing.

3
The Affluent Indian Market
With the middle class gaining economically, so too are the elite Indian upper class. It isestimated that there were
61,000 Indians whose financial assets exceeded $1 million in2003. That number rose 22% from the previous year,
thanks to stock market gains andsolid economic growth.7
Louis Vuitton, Zegna, Porsche and Bentley are among the cachet brands being
purchased by affluent Indians. And there’s a sort of turf war between the super rich and
the regular affluent. India’s super rich are buying luxury goods to maintain their
distinction from the merely affluent and showcase their place in Indian society. The
super rich status is bestowed on only the top 1,000 families in the country. Their high-
end taste is derived from travels to other Asian destinations such as Singapore,
Thailand and Hong Kong.
Foreign Investment Is Now Welcome
Another key component of the Indian economic boom is the influx of foreign investment
into the country.
Take the media sector, for example. Just last year, New Delhi changed the rules barring
foreigners from the media sector. Now, foreigners can hold up to 26% of Indian news
media companies (radio, television, newspapers). In the past 18 months, Indian media
ventures have raised $3 billion in foreign funds and an additional $250 million is
expected to be added later this year.8
Although progress has been made, investors are still holding back due to shortcomings
in India’s infrastructure, according to a study by KPMG. The electricity is unreliable.
Poorly maintained roads and ports, as well as corruption and bureaucracy, make
transporting goods difficult. Pockets of excellence do exist, such as the campuses built
by the big software firms. While China is way ahead in this area, a more positive attitude
by the Indian government toward foreign investment is helping India start to catch up.9
Indian Companies—Shedding Traditional Business Practices
With all of the changes happening on the Indian economic scene, the biggest change
of all is expected to be the internal business practices of Indian companies.
Until now, Indian companies have conducted business almost exclusively in India,
selling products and services to Indian customers and managing a workforce comprised
almost entirely of Indians.
Reaching out to the worldwide marketplace means that Indian execs must now learn to
deal with a multi-ethnic, multi-cultural workforce and consumer. And to compete
globally, they will need to focus on employee issues, corporate social responsibility and
ethics.10

India vs China
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