Look East… New Mantra

Asoke K. Laha
President & MD, Interra IT

A few centuries ago, some three hundred years back, how many would know that India and the Indians were closer to the countries in the East than with any other region in the world. British Raj had initially the capital at Calcutta (Kolkata) and from there accessibility to Burma (Myanmar) China, Malaya (Malaysia), Singapore, Indonesia, etc. by land and sea was shortest. That led to many Indians settling in these countries and doing business.  Traders from the Middle East used to buy goods from India and sell to these countries at huge profit. Part of these goods were travelled down to Europe, particularly spices and condiments. Vasco Da Gama, the Portuguese, who anchored his ship in Calicut (Kozhikode) in Kerala set sail to India to beat the Muslim traders who had monopoly in spice trade from India. From there on, trade was monopolized by the Portuguese, Dutch, French and then British, who ruled India for several years. The new generation might be reading these from the history books and to that extent their knowledge is from the secondary sources.

I want to build the thread from what that has happened at the recent ASEAN Summit, not for eulogizing the historical backdrop but for flag-marking some of the possible realms that can hold India and countries in the region in good stead. I strongly believe that, had not the South East meltdown happened in the early 90's, the economic interface between India and the region would have been at a much higher pedestal. India would have been their natural ally in the development process and also a lucrative investment destination. One has to look at the logistics advantage which India would have provided since our country lies almost in the middle between western and eastern hemisphere, which would mean that by setting up a manufacturing unit in India, enterprises in these countries can export to most of the destinations in the West at half the time and, perhaps, at half the cost. Also, India's headstart in the software would have provided a digital backbone to these countries, thereby value adding the electronics items in terms of cost competitiveness of embedded technologies. In short, the electronics capacities built in these countries combined with India's software capabilities would have made these items most competitive both in terms of quality and price.

Nothing much is lost even now. Beneath the willingness of India and the ASEAN region countries to engage themselves more meaningfully lies the realization that there is a win-win situation that has to be tapped and more importantly explored. A beginning has been made by granting India an observer status and a dialogue partner with ASEAN. The recent symbolic car rally, second of its kind, the first being held in 2002, was an expression to intensify the economic engagement.  With Indian participation, a number of high-level meetings were held in the ASEAN to map the opportunities and to evolve strategies for tapping them in a time-bound manner. Importantly, IT is a focus area that will be pushed to the centre stage.

Let me give my perspectives to tap the growing IT market in the East, so as to reduce our dependence on the West for exports. The important areas in IT that may be relevant to these countries could be the software for e-learning, e-governance, linking enterprises, accounting, designing and manufacturing. These countries are now experiencing growth trajectories, which are higher than most of the countries in the world. For instance, five major ASEAN economies –Indonesia, Malaysia, Philippines, Thailand and Vietnam – are expected to grow over 6 per cent annually till 2016. The GDP of these countries will vault to US$4 trillion, which will be four times more than the present GDP of India. Coupled with GDP of other five countries like Brunei, Singapore, Myanmar, Cambodia and Laos, the total GDP of the group would surge close to US$7-8 trillion by 2016, which, by any standards, is huge. Macroeconomic variables for this group of countries show positive signs. The inflation will be 3.23 per cent on an annualized basis and the import of goods and services would grow by 7 per cent annually. Prognostications also reveal that the investment from within and from external sources would constitute close-to 35 per cent of the combined GDP, which is quite significant, given the fact that estimates for global flow of capital will be considerably contracted in the coming years.

There are huge opportunities for the Indian IT companies to partake in the developmental activities that will unleash in these countries. A few statistics will indicate the quantum and velocity of the economic indicators. The government expenditure for the five largest economies will be close-to 22 per cent of the GDP and the tax to GDP ratio will be a healthy 20 per cent, which would mean that there will be sufficient domestic resources at the command of the governments to spend.

Where could the Indian IT companies pitch on? There are many. First and foremost, all these countries are about to unveil massive plans for e-governance, linking colleges and universities, banks and financial institutions, courts, making hospitals and diagnostic centres digitally connected.  A large number of manufacturing companies that are springing up in these countries need ERP and other digital connectivity. However, the main demand that has to be tapped is with regard to the embedded software they might require for electronics items. Presently, such things are being sourced from western countries, including the US. Also, there are many global IT companies that have set up their units in these countries to gauge the local demand and to address them spontaneously.

Yes, the Indian IT industry is at crossroads and we are upfront with many problems. For resolving them, we have to bring about paradigm changes in our business models. We have to scout for markets that we have thought are not market in the real sense. East is enticing and at the same time challenging. Maybe, literature, history, culture, cordiality and traditional ties can combine with business interests and pursuits. Yes, one thing that we have to remind ourselves is that reaping benefits is not uni-dimensional or a single-track affair.