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“This window of opportunity should not be missed”

Interview - January 18, 2016

Advice on doing business in India from one of India’s most prominent business figures, Ashok P. Hinduja, includes key sectors investors should look into and that patience pays dividends. The Chairman of the Hinduja Group of Companies (India) and founder of the Hinduja Foundation also discusses the notable effects of Prime Minister Narendra Modi’s government, and US-Indian relations.



What are your views on India’s current economic performance and could you comment on the potential of India to assume the role of and displace China as a global growth engine?

Considering the economic slowdown that India had been gripped with for the previous three years, the Modi government has moved ahead at a faster clip. Then, India had fallen off global investors’ radars, but credit to Modi, India is blipping loudly on their radars. FDI has increased by 40% on a year-on-year basis. The Moody’s ratings have improved; the World Bank has regarded India as the fastest growing economy. Having said that, yes there have been missed opportunities too. And that would hold true when one is trying to overhaul or bring systemic changes. Some decisions will always pay off better and earlier than others. For instance, land reforms and GST bill delays are examples of missed opportunities. The power sector, railways, and banking reforms are yet to give desired fruits while labor reforms have not even been touched as yet.

Comparison between India and China is like comparing oranges to apples. Both countries have different political ideologies and governance models. India is a democracy which has its advantages on social and institution frameworks but will always move that much slower in bringing about and accepting change. Being a multi-party democracy, it takes time to build consensus and shape common views. An absolute majority in a democracy cannot be equated with license to be autocratic. Plus, the faster rate of growth in India is over a vastly smaller denominator than China. No longer can China be called an emerging economy.


What is your evaluation of PM Modi’s achievements to date?

The big achievements of the Modi government, for me, would be:
(1) Changing attitudes and the mindset of the international investor community towards India thereby increasing FDI inflow;
(2) Opening of insurance and defense sectors;
(3) Financial inclusion to bring in subsidy reduction;
(4) the spirit of positive competitiveness amongst states to attract investments.

Today the CMs (Chief Ministers) and state officials are actively engaging and scouting for industry to come to their respective states. This was virtually unheard of till last year. As I said earlier, an absolute majority mandate in a democracy like India is not a license to be autocratic or ride roughshod over opposition. In India, an absolute mandate comes with a responsibility to still carry opposition along. Therefore, In India, things take time but eventually do happen. We must understand, reform is a continuous process and not a milestone to achieve. Even before his UK visit, the government announced some path-breaking reforms. And we hear many more are in the offing, like bankruptcy laws, start-up policy, IPR policy, etc. Yes there have been hits and misses too: the land acquisition/GST bill, etc.

Let us take the example of Gujarat itself, where Modi was CM for 13 years. It took him first three years to perfect and showcase his development model. For instance, the state GDP hovered around 12000 crores for the first three years when Modi was virtually retooling the systems. It was only from his third year onwards that the GDP of the state took off. It is the same case with power – from 8,500MW in the first three years from 2001 to 2004, and then on it moved up at a fast clip. So, we must have patience and need to give him more time.


India ranks 142nd out of 189 economies in the World Bank’s Ease of Doing Business ranking. Please share your thoughts on India’s business climate today and on the main challenges ahead for it to reach the top 50 by 2017.

The latest reports indicate India has moved 12 places up in one year of the Modi government’s tenure. Perhaps it is the only economy to move up so significantly. I think the investor community can draw lot of solace from this movement, which only indicates the intention of the current dispensation and their movement in the right direction.

Ease of doing business is not just dependent on new policies alone and new reform measures. If we have lagged behind on those indices it is not because we did not have requisite policies in place. Ease of doing business comes from:
(1) Removal of old and archaic regulations and
(2) Speeding up bureaucracy or the real implementers.

Announcing reforms requires one kind of political will and to earnestly implement what you have announced requires another. Lots of reforms are needed at executive level for which even parliament’s stamp is not required. If done, we can move up more on these indices. The government must free up the bureaucrats from fear of prosecution long after they have taken a decision, to enable them to take decisions boldly and fairly.

On the Make in India initiative, the ball is now in the states’ courts, given that each state is free to evolve its own land acquisition policies and make it available for industry to create jobs. Central government can create a favorable environment to reduce the cost of capital and kickstart labor reforms. Only then, Make in India can happen. It is not to say that the initiative has not taken off; but it needs to gather momentum.


Could you provide an overview of Hinduja Group and its contribution to India’s socioeconomic development?

One of the key reasons for our success has been retaining 51% of equity stake in our public ventures. Our companies have never overleveraged their assets.

We believe in creating shareholder wealth only after achieving customer satisfaction. We believe in profits but not profiteering. If we enter a sector, we remain committed to it to invest resources, men and material.

Defense, healthcare and renewable energy sectors are where we are scouting very actively for opportunities.

Currently India’s contribution to our global turnover has been around 15%; we want to make it 25% in next three years.

Africa is our next investment hub. We plan to invest US$1 billion over the next five years.


With education and healthcare as its main focus, please elaborate on the specific activities of the Hinduja Foundation and to what extent they have helped reducing poverty, one of PM Modi’s prime objectives.

We employ close to 90,000 people here. This is apart from the indirect employment that we generate.

Education and healthcare have been our focus areas where our group’s Foundation has actively attempted to give back to community; but we have never chest-thumped about it, because we believe in sustainable development through our philanthropic efforts rather than one-time help.

Our PD Hinduja Hospital in Mumbai always surpasses the minimum stipulations set by government by miles in reaching out to poor patients. This is apart from numerous charitable hospitals/clinics that are run and funded by us.

Our flagship automotive venture, Ashok Leyland, does lot of community upliftment work in skill development around its plants. You may be surprised at one of our plants; the shop floor is managed mostly by women from the community around after skilling them. Today we are actively considering a plan to set up a hospital there.

Our KPB Hinduja College of commerce in Mumbai is one of the best-rated educational institutions of Mumbai University. In addition, our Foundation has supported thousands of meritorious students with fully paid scholarships that go right up to post graduation levels.


What are your views on the Make in India initiative and its ambition to transform India in a global manufacturing hub?

The program is imperative for India. The country has 65% of its population involved in agricultural activity, which contributes around 17-18% of GDP. This single data highlights how imperative the initiative is. We believe the program should have three active dimensions: Make in India – for India, for Indians abroad, and for the world. The Indian program is demand driven whereas China’s was focused mainly on the world. Normally one tends to see the program from one or two dimensions, at best.

Our group keeps all three segments in mind. Ashok Leyland and Gulf Oil are expanding their footprints across the Middle East and Africa by setting up assembly plants there in key anchor markets. Each assembly unit has a snowball effect on our domestic capacities. Our services backbone through HGS gets strengthened. IndusInd Bank today has become the go-to bank for the diamond industry, which is dominated by Indians throughout the whole value chain. Our media venture is rolling out digitization through indigenously developed solutions for tier 3 and tier 4 towns, reaching millions of Indians.


Despite the positive measures implemented by PM Modi, India is only America’s 11th largest trading partner and 18th largest export market. What is your view of the bilateral relations between India and the US?

Commerce between the two countries can be doubled from current $67 billion in the next five years if there is the necessary political will to create consensus between both sides.

Defense, IT, and renewable energy are the biggest areas of cooperation. A lot is happening already, but lot more can happen to cut down the timelines. The automatic route announced for the defense sector should help.

Education and healthcare delivery are the two big platforms where collaboration could take place.

The trade treaties and IPR regime’s contentious issues can lead to an uptick in trade. India too needs to pass GST bill so that it can present itself as one unified market.


What is the importance of the US market for Hinduja and what would be your main message to an American investor considering India as a future investment destination?

We already have significant presence in the services sector through HGS, and with commerce increasing between the two, the back-office services would increase and HGS would benefit. Already we are highly respected in the healthcare, wellness and insurance sectors there.

As for my main message, this is the best time to be in India and this window of opportunity should not be missed. Yes, dealing with India, you need to have patience but it eventually pays handsome returns.