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The BRIC countries – Brazil, Russia, India and China – are projected to contribute 45% to global growth in the next ten years. Despite the recent economic slowdown, countries like India are hungry for products that cost less but are high-value. WNPR’s Sujata Srinivasan reports from India on Connecticut companies that are growing their marketshare.
This is where the city of Bengaluru comes to shop and eat, and that’s the sound of market opportunity for American Multi-National Corporations – or MNCs. GM and Ford inch for space with Indian, European, Korean and Japanese cars on the crowded street. You see a bit of America just about everywhere – KFC, Staples, Levi’s, Nike… You name it, they’re here.
Growth in the BRIC – Brazil, Russia, India, China – has stalled like elsewhere in the world. Even so, in India, the growth rate is still around 6.5% – Three times that of the U.S. because the nation’s economy is in the rapid development stage. That’s why the subsidiaries of Connecticut corporations are expanding here, says Martijn Cremers, associate professor of finance at Yale University.
“For the parent companies themselves, it’s one of the few areas in the world today that shows significant growth. Maybe slowing a bit at the moment, but I think over the next ten years, that’s where I would definitely expect most of the growth to come from.”
One such company is industrial gases giant Praxair in Danbury, which operates in more than 50 countries. It has 11 plants in India and is setting up more facilities to sell gas to oil, pharmaceutical, fertilizer and automobile companies that are also growing their marketshare in the region. Praxair’s Indian subsidiary is growing between 15 and 18% each year, says Niraj Dhote, head of strategic planning for Asia.
“The market in India for industrial gases is estimated at around 850 million to 870 million today and we have about one-third of this market. And the market is growing and so are we.”
Praxair’s growth in India is tied to gas use, which is continuing to increase.
“The opportunities for growth in India are almost unlimited with the growing infrastructure demand and also the fact that India is relatively insulated from the global turmoil, meaning that most of its production is geared for domestic consumption.”
Energy is another sector primed for growth. General Electric in Fairfield sees a $16 trillion global market opportunity in the next 25 years. Nearly 1.5 billion people around the world will gain access to power by then, and much of it will be off the electricity grid. So small-scale wind and biomass solutions are the focus in emerging markets like India. Dr. Gopichand Katragadda is managing director at GE India Technology Center.
“We’re about $2 billion of revenue from India. And we are being challenged by the chairman to grow at three times the GDP. And GDP’s at 6.5%, 7%. So the goal is to grow three times that.”
Part of this growth will be driven by products that are unique to the local market but have a global application. For example, high-end electro-cardiograph machines for cardiac patients cost around $10,000 in the West. Here, the team developed a portable ECG unit priced at $500 for remote rural areas where access and affordability is a huge problem. They tapped into already invented technology from the transportation industry to print the graph the machine puts out.
“Volvo buses for example in Bangalore. The bus conductors print out the ticket using a printer, which is what we use. The reason for that is there is a large volume of those printers already being made.”
This sort of thinking is multidirectional. There is a flow of ideas and new learning between parent companies and each of their global subsidiaries. Corporations that are entering India are also thinking innovatively to grow the market.
“We have our own stores – 400 stores – in which we sell pots and pans. But Cigna has come up with the brilliant idea of selling insurance through those stores.”
That’s T.T. Jagannathan, chairman of the TTK Group.
“When they first suggested it, I thought bunkum; this is not a good idea! But when they explained it to me, it was a brilliant idea.”
Last year, Bloomfield-headquartered Cigna formed Cigna TTK, a joint venture company to sell insurance in India at TTK Prestige stores. Cigna will have access to nearly a million addresses of TTK Prestige customers, and will compete with AIG and Aetna in a market that is growing at 50% a year.
“Health insurance in India is a recent phenomenon and it’s very poorly managed. Governments in India, state governments, are very keen to extend insurance. And Cigna is certainly looking at partnering with governments to be able to provide that. So you can imagine the size of the market. You can’t get that opportunity in very many countries in the world.”
In a 14-year study that ended last year, Yale University professor Martijn Cremers found that publicly-listed subsidiaries of multi-national corporations outperformed the local market and shone in the stock market. Despite the slowdown in Asia, he expects corporations to continue to grow their balancesheet in the region.
For WNPR, I’m Sujata Srinivasan reporting from Bengaluru, India.
