Author: toymango

Why a handful of Indian firms are rediscovering Russia

Russia lead.png


THIS AUGUST, Russian investment mogul Yuri Milner’s Bengaluru visit popped up in headlines in the Indian business press. That in itself was not surprising. Milner, who has backed Facebook, Twitter, and Airbnb, is a familiar name in India’s startup circuit too, having pumped personal money as well as funds from his venture capital firm DST Global into companies like Flipkart, Ola, and Practo. But this trip had a different agenda: The billionaire was soliciting India’s help for his $100 million (Rs 666 crore) Breakthrough Listen project—through which he hopes to find proof of alien life. In Bengaluru, Milner, a physicist by training, reportedly screened a documentary on aliens before the founders of select startups and senior executives of investment firms, though neither DST Global’s India office nor the invitees would speak to us on the evening’s revelries.

You may find it bizarre, but Milner’s charming little party was a relief from the relentless flow of bad news around all things Russia. In the recent past, Time and Newsweek magazines have put Russia on their covers for completely predictable reasons: President Putin’s tense diplomacy with the West around Russia’s participation in the offensive against the Islamic State (ISIS) in Syria, and the alleged retaliatory bombing of a plane carrying Russian tourists in Egypt by ISIS. Elsewhere too, the leitmotif in stories about Russia has been the West’s crippling economic sanctions against it as punishment for its annexation of Crimea, and the collapse of oil prices that hit the large Russian oil companies hard. The country’s once-promising tech startup scene has disintegrated. Google has shut its Russian engineering ops, and Intel has pulled the plug from its developers’ blog in the country. In a survey by London-based strategic advisory firm Global Counsel, six times as many multinationals viewed the Russian market negatively as those that viewed it positively. Notwithstanding Putin’s hulking claims of restoring national pride, it is clear that Russians could do with some good cheer.

A few friendly extraterrestrials won’t be half bad.

Time was that the country didn’t have to look so far to find friends. India, known to Russians as the land of Bollywood showman Raj Kapoor, had it in a warm embrace. Russia’s role in building India’s defence and manufacturing sectors is well preserved in history. But with the demise of the Soviet era, some say the legendary friendship is an anachronism. “For all our claims of understanding Moscow, we need to remember that the Moscow of today is a very different place,” says Pripuran Singh Haer, who served as India’s ambassador to Iran and is now secretary-general
of the Delhi-based India-Russia Chamber of Commerce. “The Soviets were, by and large, fascinated by India. The challenge for India now is to find relevance among the Russian youth, who are exposed to the best of Europe.”

In a world where commerce is the fastest vehicle for building bridges, those comments are a cue for Indian businesses to court the Russian consumer starved of options. Notwithstanding his aggressive nationalism, Putin knows that the shortage of public goods could dent his popularity among the Russian youth who are used to the good things in life, argues Rajrishi Singhal, geoeconomist with Mumbai-based foreign relations think tank Gateway House. But by all indications, India hasn’t exactly grabbed the opportunity.

According to Department of Commerce data, Russia accounts for an anaemic 0.7% of India’s exports in the last five years. (Its share in Indian imports isn’t much better: a shade less than 1%.) Exports to the U.S., meanwhile, have averaged 11.9% of India’s total kitty. In FY15, India-Russia trade stood at a severely below par $6.3 billion, with $2.1 billion coming from Indian exports. The two countries have set a target of $30 billion in trade by 2025. Compare that with over $64 billion worth of trade India already does with the U.S. “If there was any advantage to be derived by being in the Russian market at a time when the rest of the world has withdrawn from it, Indian firms haven’t been able to exploit it,” says Haer.

Does that signal a monumental lost opportunity, given Russia remains a “strategic market”, as Harkirat Singh, managing director of outdoor-apparel maker Woodland, one of the early Indian companies to have made inroads in the country, describes it? Or does a struggling Russia not matter to an India that is basking in its newfound clout in the West engineered by a savvy Prime Minister? Those are complex questions, but Haer says “there is no way” Indian businesses can ignore Russia. The crisis will pass, and the market is bound to grow. “We simply cannot miss out.”

He finds support in Singhal. Russia is going to increasingly look east due to the sanctions from the West, and there are fewer barriers to doing business with Russia than with mainland Europe, Singhal points out.

Our e-mails to the Russian embassy in Delhi went unanswered, but Global Counsel’s report shows most MNCs are also thinking like Haer. “[Even though] the overwhelming majority of firms have a bleak assessment of Russia … twice as many firms are committed to the Russian market and expanding their presence there as those that are reducing it,” the report says. Food retailer Cargill has announced a new plant in Russia and bought a stake in a Black Sea port, while consumer goods giant Unilever has expanded its product offerings in the country, even though both remain antsy over the direction of the Russian market and public policy. The report calls this strategy “doubling down” and offers multiple explanations: “One is that the firms are holding their options open. Another is that they genuinely see countercyclical opportunities and are seizing them.”

There is a third, far more significant reason. Russia under Putin has made giant strides in business friendliness. In 2011, the country ranked 120 on the World Bank’s Ease of Doing Business Index, when Putin decided to enter the top 50 by 2015 and the top 20 by 2018. Today, Russia ranks 51 on the index. Be it in getting credit or paying taxes, it has shown consistent improvement across categories—some of it miraculous. For instance, in the “getting electricity” indicator, where Russia ranked 143, it now ranks 29. But murky geopolitics has taken the sheen off those achievements: Tellingly, it is placed 170 in the “trading across borders” indicator, below Pakistan and a clutch of sub-Saharan countries.

“SOME PEOPLE SAY you shouldn’t have come now,” Singh of Woodland tells us. The Singhs’ family-owned company and Woodland’s parent, Aero Club, first entered Russia in the Soviet era, selling four million pairs of shoes annually. Singh was then a student in Russia. “Back then you could not sell directly to the consumer. It was a government-to-government relationship. Business was very safe, because when you are working with the government your payments are secure and commitments are kept,” he recalls.

The breakup of the Soviet Union proved disastrous for Woodland. The company lost a lot of money trying to do business with fly-by-night operators that had cropped up amid the chaos. It didn’t suffer alone: inflation, cumbersome customs procedures and tax laws, the rise of a mafia, and an unreliable banking system in the 1990s made it difficult for all foreign companies to do business with post-Soviet Russia, writes Sanjay Deshpande of the University of Mumbai’s Department of Eurasian Studies in the book Significance of Indo-Russian Relations in the 21st
Century. To compound matters, there was the August 1998 financial crisis that sent the rouble into a free fall.

India’s exports to Russia (pharma products, machinery, and apparel are the major export items), in particular, copped a blow when the key port of Odessa became part of Ukraine with the dissolution of the Soviet Union. Exporters had to find alternate routes, through the Suez Canal and via Finland and The Netherlands, resulting in far longer delivery times. Woodland’s shipments, for instance, take 45 days to reach Moscow after setting sail from Mumbai. As a result, the cost of Indian products when they arrive in Russia makes it tough to compete with European goods. “Shipments from Germany reach Russia in four or five days,” says Haer. “Why would the Russians choose Indian products when they take so much longer?”

Singh, the third generation in the family business, is conscious of the historical baggage even as he takes Woodland back to Russia. “I see this as an opportunity, as not too many people are thinking of entering the country at this time,” he says. “It is a big economy, and in the long term it has to become stable. If we can survive now, we will do well later.” The company has a centralised warehouse in Moscow that caters to multiple markets including Moscow, St. Petersburg, Novosibirsk, Yekaterinburg, Perm, Omsk, Vladivostok, Kazan, and Chelyabinsk. Sales happen through multi-brand outlets as well as e-commerce sites, and there are plans to
start exclusive Woodland outlets by the middle of next year.

The ride won’t be easy. For starters, any company going back to Russia now has to shake off the comfortable, state-supported ways of the past. For over four decades, Indian exporters depended on the Soviet foreign trade organisations and Government of India departments and banks to secure contracts, writes Deshpande. “They executed the contracts without knowing the ground realities, like consumer preferences,” and Russian policymakers feel that Indian businesses have not been able to keep up with competition and the changing norms of doing business in the country.


However, assuming that the state hand has disappeared is naive. Recently, Russia opened up to dairy imports from India, thanks to the embargo on food imports from the West. But only two Indian companies, Parag Milk Foods and Schreiber Dynamix, received clearance from the Russian government, thanks to an archaic regulation that a dairy exporter must own at least a thousand milking animals. India’s parleys to relax this clause have been time consuming. On the Indian side too, progress has been impeded thanks to reported delays in finalising a disease control protocol by the Export Inspection Council. “For trade to flourish, the governments have to recede and let businesses have a free hand. But in the case of India and Russia, the governments are very much in control,” a former diplomat tells us on the condition of anonymity. “This is one of the key reasons for the stagnation in trade.”

Russia’s banking system is another weak link. With economic growth slowing to 4.1% and credit slowing due to steep key interest rates, Russian banks are under stress. Moody’s Investors Service forecast that bad loans in the banking system would jump to 15% by the end of 2015 from 9.5% at the start of this year. The country has over 800 licensed banks, simply too many say experts, forcing the central bank to shut mismanaged and undercapitalised banks. But despite the surfeit of banks and the reforms, Singh of Woodland says opening a corporate bank account in Russia can be an ordeal.

There are other challenges peculiar to the country, notably its daunting  geography. Pharmaceutical major Dr. Reddy’s (No. 84 on the Fortune India 500), which entered Russia in 1992, says it takes about a month to ship its products to Russia, and another month for the products to reach the eastern corners of the vast country due to challenging logistics conditions. Temperatures in several parts of Russia tend to fall way below the freezing point, and it can be extremely frustrating for a patient who ventures out in the cold to not find a medicine in the store. “But it is very difficult to predict what will be needed three or four months from now in some far-flung corner of Russia,” says M.V. Ramana, the company’s executive vice president and head of branded markets, India and emerging countries. The long time taken for shipments to travel from India also adds to the futility of forecasting demand.

Just like in India, a company can sink a lot of money in Russia and not gain any substantial footing, Ramana adds. You need to be clear about the value you are providing, and then be flexible in your strategy to overcome the country’s unique constraints. Dr. Reddy’s, for instance, decided to shift from a forecasting-led model to a consumption-based model. The company collects information from retailers every day and has created buffers in its central warehouse from where new supplies are shipped as soon as stocks get consumed. Orders are placed at the Indian manufacturing facility based on inventory movement.

RAMANA SAYS ONE TRAIT of Russian consumers makes all the trouble worthwhile: their brand loyalty. “Russians are brand conscious and reward you when you keep a long-term view,” he says. “Since entering Russia, we have witnessed two crises—the 1998 rouble crisis and the 2008 global meltdown. Many companies several times our size quit the Russian market, but we stayed on.

Today we are the No. 1 Indian pharmaceutical company in Russia [by volume]. The companies that had left haven’t been able to find a footing again.” Dr. Reddy’s crossed $200 million in sales in Russia in 2011 and claims to be growing at 14% annually. Revenue for the second quarter of FY16 stood at $45 million, down 29% year-on-year. However, it grew 11% year-on-year in constant currency terms. “There was complete chaos when the currency broke the barrier and got devalued,” Abhijit Mukherjee, the company’s chief operating officer, said in an analyst call referring to the fallout of the sanctions. “Retail trade tried to increase prices, so basically on a wallet which was getting leaner, it was a double whammy. I think the turmoil is over,” he added. Dr. Reddy’s now employs 850 people in Russia, out of which 840 are Russians and 80% are women.

Singh’s big learning from Woodland’s two innings in the country is that “the Russians like to become friends first”. The advantage: They stick by you when the going gets tough. There is a view that the harsh climate and turbulent past have made Russians partial to stability and predictability, qualities that a company can demonstrate by not running away at the first sign of trouble. Those are also qualities that endear a company to its employees. “Once they trust you, they stick by you and help you grow,” says Singh.

Given Woodland’s past association with the country, it already had allies there. But this time, the company didn’t employ the same people it had decades ago. “To do business now you have to hire the new generation. This time our sales people are mostly 30-35-year-olds. They understand brands better and know how to do business like the Europeans,” says Singh.

But old loyalties remain handy. Singh tells us of a time he had to leave the Woodland stall at a Russian trade exhibition for an urgent meeting, putting two Indian colleagues in charge. The problem: They couldn’t speak Russian. Coincidentally, Singh got a call from a former Russian associate he hadn’t spoken to in years. Out of desperation, Singh asked him for help in manning the stall till he returned. The meeting lasted much longer than he had anticipated, and the associate ended up spending the whole day at the stall “though he didn’t have to”, says Singh.

WHILE FIRMS LIKE WOODLAND AND DR. REDDY’S are hustling it out in Russia, such examples are too few to make a meaningful dent in the deep-rooted inertia. Business will get a crucial fillip with the launch of the International North South Transport Corridor through Iran, a ship-rail-road route connecting India with Russia and the markets of Central Europe. An intergovernmental panel recently cleared the draft transit and customs agreements to set the corridor in motion.

Haer suggests that so long as Russia-bound businesses get such enabling conditions, they wouldn’t be bothered about Putin’s larger troubles. Trade cannot be equated with politics,” he says. “An apparel manufacturer in Karol Bagh is not interested in foreign policy.” If anything, experts say India’s relationship with Russia hasbeen freed from ideological baggage under the Putin regime.

Writes Deshpande: “In the Soviet era, bilateral ties were cast in the paradigm of Cold War compulsions … but Putin has put partnership with India on the solid base of … ‘the concurrence of long-term national and geopolitical and economic interests of Russia and India’.”

That said, several insiders we spoke to point out that business ought to be a two-way street, and Russian firms need to do more to demonstrate interest and build trust in India. Between April 2000 and September 2015, Russia invested $1.07 billion in India, a measly 0.4% of India’s foreign direct investment receipts. “Many Russian firms find it very difficult to participate in the tendering process in India because all the forms and documents are in English,” says Haer. But it is hard to have empathy for that problem at a time when India has emerged the world’s top FDI destination, attracting tens of billions of dollars from other non-Anglophone countries like Japan and the Netherlands.


Two recent big-ticket announcements promise to impart new momentum in business partnerships. In July, the Russian government and Anil Ambani’s Pipavav Shipyard tied up to manufacture a naval frigate under the Make in India programme. The deal size is estimated to be upwards of $3 billion, making it the private sector’s biggest-ever warship-building project. There’s also Russian oil major Rosneft’s proposed acquisition of a 49% stake in Essar Oil (No. 14 on the Fortune India 500) for a reported $2.4 billion.

Ultimately, such deals will push both countries to cast aside history and let business refashion the relationship. “The partnerships that will be formed now will not be based on nostalgia but purely on economics,” says Ramana. That, plus our shared hunt for other intelligent life in the universe.

(Additional reporting by Rajiv Bhuva; illustrations by Nilanjan Das; first published in the December 2015 issue of Fortune India; one fact has been corrected since this story was first published.)

Inside India’s Coder Boom

Code lead

Amid the deafening hype around billion-dollar tech startups, India is quietly counting down to a massive milestone: It will soon have more software programmers than any other country. Here’s why that’s not good news.

NASHIK, HOURS BEFORE SHAHI SNAN, the royal bath, an especially auspicious day at the Kumbh Mela. Ten million pilgrims are expected to turn up this year, 25 lakh of them for the holy dip. It’s an unfair burden for the bamboo barricades and police bandobast at one of the most hazardous mass gatherings anywhere in the world. More than 40 people died in fires and stampedes and close to three lakh went missing during the 2013 Allahabad Maha Kumbh. The Haridwar Kumbh of 2010 saw seven stampede deaths and two incidents of drowning. Nearly 40 died in the 2003 Kumbh, again in Nashik. Farther back, the 1954 Kumbh in Allahabad left close to a thousand dead by some estimates. None of this includes the toll taken by assorted infectious diseases at every edition.

A few kilometres from Nashik’s bathing ghats is City Centre Mall. A group of young people with backpacks is making its way to the grand ballroom on the mall’s top floor. Once inside, they take out laptops from their bags and fall into groups. They will spend the rest of the day writing code.

This is the mission command of Kumbhathon, a weeklong innovation camp run by the Massachusetts Institute of Technology (MIT) in association with, among others, Nashik’s engineering colleges, a couple of IITs, the Maharashtra Police, and a bunch of companies including TCS, Google, and Xerox. Where most see chaos, Kumbhathon’s coders see data. The kind spewed by the behaviour of massive shifting crowds, or germs. The idea is to use the data to unravel urbanisation’s most complex  problems. The ultimate goal: “Build multimillion dollar companies” that will solve those problems, and “improve millions of lives”.

In one corner of the room is the team that built Epimetrics, an app that tracks fast-spreading diseases and predicts epidemics. It’s been only a few days since its launch, and the app has already helped the city administration prevent an outbreak of malaria.

Two tables away, the crowd steering team is monitoring heat maps lighting up a Google Maps feed. The maps show the real-time movement of crowds at the Kumbh, data for which is pulled from mobile phone towers in the area. The team passes the data through a visualisation algorithm that converts it into an easy-to-read spectrum from green to red, signifying ‘not crowded’ to ‘chock-a-block’. The police use it to control the flow of people and prevent overcrowding in any one place.

Ingenuity of this kind has its limits; crowd-control tools couldn’t stop the ghastly death of over a thousand during the Hajj last month. But in Nashik, Kumbhathon is helping host the safest Kumbh in years. No one has gone missing. Barring stray reports of drowning, no one has died.

BENGALURU, A SUNDAY MORNING IN EARLY FEBRUARY. Ola, India’s largest cab aggregator, is hosting a 24- hour hackathon in its office. Most of the 200-odd coders are twentysomething men, carrying laptops plastered with Game of Thrones, Incredible Hulk, and Green Lantern stickers. The night before there was unlimited free food and Red Bull, a DJ, even an impromptu birthday party. Now, with hours left, everyone’s manic. The best coders will land jobs in the company that’s said  to be worth $5 billion (Rs 31, 585 crore). There are also cash awards.

The brief: Build anything that improves user experience.

Non-coders will be thrown by the vagueness of “build anything”. But if you want to rev up coders, you could think of worse problem statements. Ramesh Raskar, associate professor at MIT Media Labs and one of the brains behind Kumbhathon, would tell you it doesn’t matter whether the task is to prevent stampedes or make cab rides safer, as the Ola hackathon winner set out to do. To code is to change the world. “The biggest cab company in the world doesn’t own cabs. The biggest media company doesn’t own media. People are going to schools without buildings, transacting without cash. Soon they will grow food without farms,” Raskar says. “All this amazing transformation is because of code.”

There’s a profusion of ways in which others have paid tribute to code. Here’s Steve Jobs: “Everyone in this country should learn how to program a computer, because it teaches you how to think.” Tech news portal ReadWrite calls coding “the core skill of the 21st century”. Don’t trust geeks? Take it from former British education secretary Michael Gove, who unleashed the biggest reform in the country’s education system last year by making coding lessons mandatory in schools for kids aged 5 upwards. “Teaching pupils, over and over again, how to word-process, how to work a spreadsheet, how to use programs already creaking into obsolescence [is] about as much use as teaching children to send a telex or travel in a zeppelin,” Gove reasons. “Our new curriculum teaches children how to code … not just how to work a computer, but … how to make it work for you.”

Silicon Valley prophet Marc Andreessen sums up the urgency: “Software is eating the world.”

It’s the kind of futurism that feeds the “coders love Star Trek” jokes. Shailesh Nalawadi, former project manager at Google Maps and Streetview and co-founder of Mavin, a company that wants to provide cheap Internet in developing countries, says that’s because Star Trek is coding utopia. “Spock is the prototypical engineer. In his world, you don’t fight for money. You explore for the sake of exploring.” The job and the cash are incidental. The true coder says, I got into this because I can build anything. “Larry [Page] and Sergei [Brin] always asked us to solve the 10X problem,” Nalawadi reminisces. “Don’t improve by 20% or 40%. Make it 10 times better.”

"I just wanted to be part of something that has purpose." - Shashank ND, co-founder and CEO, Practo

“I just wanted to be part of something that has purpose.” – Shashank ND, co-founder and CEO, Practo

You don’t have to begin with grand visions. Shashank N.D., whose love of code grew into the health-care startup Practo, says all he wanted was “to be part of something that has purpose. I thought it was ridiculous that I could order a pizza in 30 minutes but not monitor my health records online in that time. Someone had to build a smarter algorithm.”

Now that he has a business to run, Shashank misses coding. He stays in touch through hackathons, like the one Practo conducted in March. “Congratulations @RahoolGads on kicking ass at Practo Hackathon. A brilliant hack on the Practo Tab. Can’t wait [for] the next hackathon!!” he tweeted afterwards.

That’s not just nerdy excitement: Practo Tab—a device for doctors to manage patient data and spare patients the bother of filling lengthy forms—is one of Shashank’s big bets, the kind that has got investors queuing up for a piece of his seven-year-old company. In a recent funding round, a group led by Chinese behemoth Tencent pumped in $90 million. Ola, which has coded critical new passenger safety features into its app since the February hackathon, is reportedly raising $500 million.

THE DELUGE OF FUNDING FOR TECH STARTUPS may have lionised the coder at the heart of it, but not everyone is chuffed. Bhavin Turakhia, 35, learnt to code when he was 10 and was so good that his teachers were soon taking lessons from him. At 18, Turakhia started a web-hosting business with his brother, which grew into a conglomerate of 13 companies, “all profitable”—without raising a penny by way of funding. Last year, he sold three of the companies to a Nasdaq-listed firm for $160 million. And yet, chances are you’ve never heard of Turakhia or his company Directi in the noise around big bang deals.

So we expect him to be upset when we ask him about the zeitgeist in Indian tech. He is, but not why we thought. “It’s annoying and frustrating that China, Canada, even Poland, beats us year after year,” he says. The reference is to India’s plight in the International Collegiate Programming Contest (ICPC), the world’s oldest and toughest competition for coders. Indian coders have struggled to break into even the top 50.

Turakhia says coding is a life skill in a world where people communicate more with smart devices than with other people. Not everyone needs to be writing complicated algorithms. But if, as Michael Gove says, you want to make technology “work for you”, working knowledge of its lingua franca is a must.

“Millions of people are getting access to intelligent and completely programmable devices. If they learn how to maximise their potential, they can fundamentally transform the economy,” argues Turakhia. Going by the ICPC results though, revolution via coding is a far cry. “Nasscom keeps touting that India is a software powerhouse,” Turakhia says. “There’s no way that can be true if we can’t beat countries 1/20th our size.”

NASSCOM’S CHEST-THUMPING ISN’T BASELESS. India is producing coders like never before. In 2013, California-based market research firm Evans Data Corporation estimated that by 2018, the country will have 5.2 million coders—by far the highest in the world. Rishi Das, CEO of Bengaluru-based recruitment firm HirePro, says India’s population of software professionals has jumped fivefold in the past decade alone, driving a technology and services industry that is on track to hit $225 billion in revenues by 2020 and $350 billion by 2025, per a report by McKinsey and Nasscom. They also fuel the Prime Minister’s catchy marketing campaigns—Digital India and Startup India—which seemingly wowed Valley mavens during his recent tour.

But here are the other numbers you ought to know: Over 90% of Indian computer and IT engineers have poor domain knowledge, says talent development firm Aspiring Minds, meaning that they lack “the ability to apply basic principles of engineering to real-world problems”. Little wonder that not even 2% of the glut of Android apps built in India make it to the top 1,000 globally. That’s actually a benign problem compared with what recruiters have to face: a shocking 3% of India’s engineering graduates are employable (read: job-ready) in IT product roles, less than 8% are fit for design roles, and about 18% for IT services roles (see graphic).

To be sure, warning signs for the Indian software industry began with the slowdown in outsourcing, which can no longer absorb lakhs of coders in low-end testing and maintenance work, leading to oversupply.

"I just wanted to be part of something that has purpose." - Bhavin Turakhia, co-founder and CEO, Directi

“It is very annoying and frustrating that China, Canada, even Poland beats us year after year.” – Bhavin Turakhia, co-founder and CEO, Directi

The legendary cost arbitrage of the Indian coder is also on the wane. Compounding matters is the tidal shift that has IT firms everywhere scurrying: Legacy expenditures—think infrastructure, traditional application development, and packaged software—will see a 20% to 25% cut, as demand soars in newfangled areas like the Internet of Things, analytics, and cloud.

“The software market is becoming increasingly crowded as large, multiline firms transform their portfolios to focus more on solutions that have a direct business impact,” says C.P. Gurnani, vice chairman, Nasscom, and CEO and managing director of outsourcing major Tech Mahindra. The upshot: an urgent need to upskill 5 million-odd people.

Aruna Jayanthi, CEO of IT consultant Capgemini India, argues that in terms of pure programming skills, Indian coders are on a par with their global peers. But being competitive today is not only about writing code—“a programmer must be able to visualise how scalable the code is, and in what environments it can operate”. Truly good code is the result of holistic thinking, Jayanthi says. She finds support in American economist Tyler Cowen, whose book Average Is Over talks about the future of jobs. “Take Mark Zuckerberg who, of course, has been a great programmer,” says Cowen on learning portal “[But] there is much more to Facebook than that. It’s appealing, it gets people to come back, and he was a psychology major. It’s that integration that’s important.”


India’s bias for rote learning and lack of application orientation leave little room for such thinking. “Even when we recruit engineers from the best colleges, it sometimes takes months of retraining before their skills are up to speed. That’s far too long,” says Chandan Chowdhury, former dean (academics) of the National Institute of Industrial Engineering and managing director of Dassault Systèmes India, a subsidiary of the French industrial behemoth. As a contrasting case, Chowdhury tells us the story of his daughter who went to Stanford for a computer science degree. “They were asked to learn a new language and deliver a project in a week,” he recounts. “It’s not about learning a specific language, which will anyway become obsolete. It’s all about learning how to learn.”

THERE’S A SENSE OF DÉJÀ VU in any story on India’s ramshackle skill situation. By the government’s own calculation, only 2% of the workforce goes through any kind of formal skills training. The rest turn to jugaad, the peculiar Indian skill of getting by. But the failure to gear up for a whole new world, ruled by specialised software that is expected to do dramatically new things, could be setting India up for its worst-ever skill disaster.

What’s scarier: The jingoism around our tech prowess—Indians head Google, Microsoft, and Adobe, after all—could be blinding us to it. The danger is more than just economic—it’s psychological. The narrative of post-globalisation India relied heavily on its rise as the world’s technology vendor. More recently, the country has been in the throes of an image makeover: a cornucopia of tech startups with Valley-esque aspirations. The degradation of programming skills blows holes in that image (and adds heft to what haters have been saying in anti-outsourcing forums).

It also signals a potentially huge missed opportunity: For instance, the U.S. Bureau of Labor Statistics says there will be 1,240,600 programmer jobs by 2022, a 22% jump over 2012—double the growth rate of any other job. The uptake of programming as a career among Americans, on the other hand, is slowing. “The shortage of engineers is a global crisis, and India’s large engineering population could be a big hope,” says Naomi Climer, president of British industry body The Institution of Engineering and Technology, “provided there is committed focus on quality and professional standards.”

unskilled india

For the media, the quality of coders is far too abstract a subject compared with funding or valuation. But from time to time, the malady outs itself. In May, Snapdeal co-founder Rohit Bansal spoke to the Wall Street Journal about the company’s travails with local programming talent. Flipkart’s Sachin Bansal tore into him on Twitter: “Don’t blame India for your failure to hire great engineers.” The episode was a cue for the tech press to start a meaningful debate, but few went beyond bluster.

Meanwhile, at least one aspect of the market speaks to Rohit Bansal’s point: Salaries for employable coders have  gone through the roof. Peeyush Ranjan, Flipkart’s chief technology officer and head of engineering, gives it the usual “investment in talent” spin. Shashank of Practo acknowledges spiralling wages but says it is only fair. “Coders have been underappreciated. If you are writing products that can change the world, you better be paid for it.” Even legacy companies not known to be generous paymasters have had to increase pay for freshers, and keeping up is becoming onerous if you don’t have access to big money, says a Bengaluru-based early-stage entrepreneur.

Britain introduced coding to kids who can barely spell, partly as a response to tech firms spooked by the talent crunch. We ask Geoff Smith, head teacher of Kehelland Village School in Cornwall, what schools are making of it. There are big challenges, Smith says. The curriculum isn’t based on the latest industry practices, teachers are at sea, and infrastructure is a concern. But the policy “will hopefully leave children with skills that will be valued in the industry. Children also seem to take pride in the coding projects they have completed,” Smith adds. Codecademy, an American startup that is helping British schools build capacity, calls it a visionary move. “Change can be frightening,” the company’s 25-year-old CEO Zach Sims tells us over Skype. “But if you think of coding as the backbone of the modern economy, the return on investment is huge. Even if all those kids don’t become programmers, problem solving through coding can make them better at whatever they choose.”

In India’s schools, computers occupy a limbo. “Most parents are fixated with making their children software engineers. We are forever talking about software being the future. But our education boards relegate computers to just another elective,” says Arghya Banerjee, an IIT-Kharagpur and IIM-Ahmedabad graduate who founded The Levelfield School under the Central Board of Secondary Education (CBSE) in Suri, a tier III town in West Bengal. Data from code-learning and competition platform HackerRank shows that a little over 20% of CBSE students at the Class 12 level opt for either of the two electives, Computer Science or Informatics Practices, with an overwhelming absence of non-science students. (In a rare piece of good news for diversity votaries, the number of Indian women enrolling for computer science courses at the college level has been inching up, but that’s the subject for another story.)

“Programming is a fundamental skill and you have to start in school.” – S Ramadorai, chairman, National Skill Development Corporation and National Skill Development Agency

The lack of preparation hurts industry. “We recruit people from different streams, not just computer science, and sometimes we find that the fundamentals are not very strong with people from these other streams,” says Jayanthi of Capgemini India. Compulsory computer lessons at the primary level, before a kid is pigeonholed in ‘science’, ‘commerce’, or ‘humanities’ silos, is one way to correct this, but that isn’t even a conversation. To break free, Banerjee’s school, which has won awards for its focus on skill building, is thinking of dumping CBSE and enlisting under an international board.

MATCHING STEP WITH technological disruption is a hairy problem for most governments. India has the right person for the job: The guardian bodies for skill development in the country—the National Skill Development Corporation (NSDC) and the National Skill Development Agency (NSDA)—are chaired by S. Ramadorai, former CEO of TCS, India’s No. 1 software firm. “Programming is a fundamental skill for everything from industrial prototypes to cybersecurity, and you have to start in school,” Ramadorai agrees. “But we can’t copy-paste solutions from elsewhere without ensuring critical infrastructure like broadband.”

The hope is that kids will train themselves once they are given the infrastructure. “These days there are so many online tutors. Not all learning needs a classroom,” Ramadorai says. What about making programming a part of the skill development framework, often accused of being stuck with old-world technical skills? “In all honesty, things are still in the early awareness stage,” he says.

NSDC’s managing director and CEO Dilip Chenoy says programming is only one piece of the puzzle. “More critically, we need to train people on using what the programmers build, from smart grids to smart homes to smart cars.” That also means upskilling vast numbers of professionals—electricians, plumbers, mechanics—who were the product of a blue-collared paradigm of skilling and may find themselves left out in the cold.

The private sector is getting a move on. Turakhia, for instance, funds CodeChef, which he claims is India’s largest code contest website. In five years, CodeChef has signed up over 2 lakh users who have submitted 6.5 million solutions to all sorts of challenges. Now Turakhia wants to make CodeChef part of the curriculum in colleges. The plan is to run a year-round skill assessment programme in the college and score students at the end of the year. The college can convert that score into credits. “We tell them that students with better algorithmic skills end up earning four to five times more than the rest. The good news is, anyone can get better at it, just like languages or math. Colleges have been very receptive,” he says.

Then days before we went to press, American online education company Udacity, founded by Stanford professor and the inventor of the autonomous car, Sebastian Thrun, announced that it will bring its Nanodegree courses in Android development to India in partnership with Google and Tata Trust. This is Udacity’s first overseas venture. What will help such programmes gain momentum among people from all backgrounds is programming itself getting less geeky. “The last few languages that have been launched read like English,” points out Harishankaran K, co-founder of HackerRank.

HackerRank also represents the growing breed of coder-discovery platforms that help companies locate talent. The premise: Many coders are self-starters who may not be found through traditional recruitment channels. “Also, pen-and-paper tests don’t work here”, says Hari. “A resume can only state that this person knows Java, it doesn’t tell you how good and clean the code is.” HackerRank has placed coders in companies like Facebook and Palantir and raised some $20 million for its troubles.

BUT WHAT IF THE FUSS AROUND CODERS in idealistic startups is just selection bias? Where’s code in our primordial industries, we ask Chowdhury of Dassault. Couple of months ago, Chowdhury had visited the Fortune India office to showcase Dassault’s 3D technologies. The pièce de résistance was the Living Heart, a giant 3D simulation of the human heart. Doctors can walk inside it, study and predict problems, and prescribe personalised treatments. Dassault says this kind of computational modelling is the future of medicine and the end of luck and intuition. Now, Chowdhury tells us about a different world where luck and intuition loom large: mines.

Most mine owners are clueless about the capacity of their mines or the quality of their reserves, because mines, typically located in remote areas, offer terrible visibility, Chowdhury says. “Worse, many miners don’t know the boundaries underground and get into trouble for encroachment.” That’s when they get caught. When they don’t, it costs the country thousands of crores. Ask the Shah Commission, which is investigating rampant illegal mining across states.

In spite of the mess, which has led to the industry being portrayed as “lawless” and “out of control”, mine owners have had it good. Labour is dirt cheap. Prices were on steroids. “Most of them would be happy to spend millions on earth-moving machines rather than efficiency-enhancing software,” says Chowdhury. But then came the crash in prices and the slowdown in China. Suddenly, everyone is chasing efficiency. Dassault has just the thing: 3D, of course.

“Someday our programmers will model the planet.” – Chandan Chowdhury, MD, Dassault Systemes India

“Imagine if you could make a mine completely transparent. You could see exactly how much coal you have, and of what quality. You could predict safety issues—before you build the mine. You could avoid breaking laws. Imagine how that could transform the industry.” The pitch is working. The who’s who of the trade, from Tata Steel, NTPC, and Reliance, to Lafarge, ACC, and UltraTech, are clients of Dassault’s mining software, Surpac for iron ore and Minex for coal. The company’s Indian R&D team, which forms the majority of its 2,000 employees here, plays a key role in such projects, cutting through one of our last dark industries. “Modelling mines is the start. Someday our programmers will model the planet,” Chowdhury tells us. “Imagine that.

(First published in the October 2015 issue of Fortune India; co-authored with Nirmal John; illustrations by Nilanjan Das; graphic source: Government of India, Aspiring Minds)

The Spin: How a disparate set of individuals, NRIs, entrepreneurs, who-have-you, is changing the India narrative.

the spin coverTHE YEAR: 2007. Hari Kiran Vadlamani, then 45, had secured a big exit from his energy business KSK Energy Ventures (then called KSK Power Ventur). That was when he began to seriously contemplate his Indian identity. “I saw that every successful nation had a sense of its civilisational greatness—from American exceptionalism to Chinese economic power—but India,” he says. “There was some blip about a rising GDP, but absolutely no sense of where we came from and what we had achieved.”

By the end of 2010, even the rising GDP part was in trouble, with a series of financial scandals and internal squabbles plaguing Prime Minister Manmohan Singh’s government. Sanjaya Baru, who served as media advisor to Singh, says 2009 was Singh’s poll victory, but everyone in the Congress party pretended it was Congress vice president Rahul Gandhi’s. When Singh realised that the party was not with him, he let go of the India story. There was a void for someone else to fill. Led by Narendra Modi, scores of Indians like Vadlamani sought to do exactly that, giving the story what British economist and Labour Party peer Lord Meghnad Desai calls “the new-old spin”.

“I remember being on a panel with Montek Singh Ahluwalia (the last deputy chairman of the now-defunct Planning Commission and a close confidant of Singh), where I said the British didn’t open India for global trade. India had been trading successfully with the world for hundreds of years. But he didn’t want to hear that,” says  Desai. “Oddly, the Congress felt that talking about Indian achievements was somehow ‘Hindu’ and ‘communal’. All of this fed into the ecosystem that found Modi as its head, and he harnessed it to tell a new story of India, which wasn’t new per se but was being retold in a vigorous way for the first time in decades.”

What exactly is this new story—the spin if you will? Desai breaks it down to one simple but powerful idea: India was a rich country and could be rich again. The Congress with its socialist leanings wasn’t interested in pushing this idea, he claims, but that’s what people wanted to hear. To be sure, every political dispensation has brought its own spin to the India story—for instance, late Prime Minister P.V. Narasimha Rao (of the Congress) had, in the afterglow of liberalisation, proclaimed “India Means Business”—but sweeping discontent with the previous government and deft exploitation of mass-media platforms that simply did not exist in such potent form earlier turned Modi’s pitch into a tidal wave. It created, as Vadlamani says, “a palpable sense among Indians around the world that here’s a man speaking our language”.

That’s the take-off point of the dominant narrative of 2014, by all accounts the most momentous year for India since the economy opened up two decades ago. In this version, armed with the spin, Modi proceeds to deliver a hysterical bump-up in “sentiment” (possibly the year’s most overused term) around all things Indian. Its most visible manifestation: the 42% spike in the Sensex between September 2013, when the Bharatiya Janata Party (BJP) announced him its prime ministerial nominee, and December 2014, roughly into his first six months in power.

Latent in any spin is the idea of excess, and it is so here too. “[The market is Modi-fied, defying] the growing chorus that nothing on the ground can change overnight from the bleak economic realities of the United Progressive Alliance (UPA) rule,” Rajiv Bhuva warned in ‘The Birth of a Bull Run’ in Fortune India’s July 2014 issue. But as the spin—first around Modi’s $100 million campaign, then his spectacularly choreographed global roadshows—gathered momentum, such nuances became trivial. (As we write this, the Sensex is up nearly 40%, and some project the bull run to continue till 2030.)

To put things in perspective, this was also the year when India reached (and tweeted from) the Mars orbit, the first country to do so at the first attempt, invoking awe worldwide. (Modi didn’t make it to Time’s Person of the Year shortlist, but Mangalyaan came second on its list of 2014’s greatest inventions, beating wireless electricity, nuclear fusion, and 3D printing.) Bellwethers of modern media—Quartz, BuzzFeed, and The Huffington Post—opened shop here, underlining the India story’s growing cachet. Facebook’s Mark Zuckerberg came bearing drone-beamed broadband, while Amazon’s Jeff Bezos visited with a $2 billion cheque, apparently to counter rambunctious desi e-commerce upstarts. And finally, manufacturing indicators hit a two-year high in December, even as, fatefully, China stuttered for the first time in a decade. Most commentaries on the year’s milestones, however, converged on one image: that of Modi, the teaseller-turned-PM, pulling the strings as sutradhaar (narrator), with ‘Swachh Bharat’, ‘Digital India’, and ‘Make in India’ his chosen epiphanies.

It is a compelling image, except it glosses over the complex constellation of forces in a year when, as Twitter’s India and Southeast Asia market director Rishi Jaitly puts it, “something about India changed permanently”. Hindsight might yet prove that assessment disproportionate, but there is a feeling that in this India, spin—or, to put it differently, raucous exuberance after a period of sterility—is valid proxy for real change. The means, in other words, is the end.


Modi is a prime catalyst in this, but to call him the only one does disservice to three much larger factors—each breaking away from the usual narrative of India and adding to the spin—even as they are strengthened by it. First, the emergence of a distinct right-of-centre idea of India, born out of disenchantment with the country’s self-image in the Congress years. Then, a dramatic power shift in the business community, with a new breed of first-generation entrepreneurs upstaging the elite establishment. And finally, the unfettering of public opinion brought about by social media, Twitter in particular.

SHASHI SHEKHAR, CEO OF NITI DIGITAL, a digital information company, understands the power of ideas. Niti Central, the flagship of Niti Digital with the tagline ‘Bold and Right’, was funded by serial entrepreneur Rajesh Jain (himself a Modi votary) and became a key online resource for the Modi campaign, including its now famous Mission 272+ platform. An IIT-Bombay and Infosys alumnus (the typical profile of Modi’s backroom managers), Shekhar says he first began to think about a different idea of India when, in 1993, authorities at IIT-Bombay refused to let a cut-out of Swami Vivekananda appear in saffron clothes, which the monk wore for most of his adult life. “We finally had to show Vivekananda wearing blue clothes,” says Shekhar.

“I was clear that one day one would have to do something about this.” Niti’s pitch is simple—a different India is possible. “Before the elections, we were clear that only Modi could deliver what we wanted,” says Shekhar. “Now that he has won, we are not looking only to be cheerleaders. Our commitment is to anyone who will create a prosperous India and speaks the language of prosperity.” That has created for Modi what Baru calls the clarity of agenda that Indian parties rarely have—economics, economics, economics. “Without that, all talk of the glory of India is futile.”

Sanjay Anandram, serial investor, was looking to back a vehicle that would speak this language. In 2013, he chanced upon two techies, Prasanna Vishwanathan and Amar Govindarajan, who had been running a blog called Centre Right India, and had bought the rights to the Swarajya magazine for Rs 40,000. Swarajya was started by C.Rajagopalachari, who fell out with the first Prime Minister Jawaharlal Nehru and his Soviet Union-inspired economics. (Rajaji, as he was called, also started the Swatantra Party, promoting free-market economics, in 1959.) The revived edition has roped in veteran journalist Sandipan Deb, economists Bibek Debroy and Surjit Bhalla, and entrepreneur Jerry Rao on its editorial board.

Anandram says: “We realised that in order to change politics and the discourse, entrepreneurial capital must come  in.” This had happened with companies like the Birlas that supported Gandhi. But over the years, private money only came into politics to fix the system. “We did not want that. We believed that first-generation entrepreneurial money must come into the political discourse to alter it.”

Vadlamani, for instance, is an investor in Swarajya and has funded the Creative India Foundation, which has several verticals on arts and culture, and patron of India  Facts, a Right-leaning portal to promote research and opinion “countering the common socialist narrative of India”. He has also funded works by 25 Indian visual artists, and is the founder of the Advaita Academy, which promotes Vedanta. Vadlamani says he sees his work as he would any other start-up, asking what is the opportunity, what is the market.

“The idea is to support a bit of India wherever we can,” he explains. “Is there a literary festival happening somewhere in the world where we can place an Indian writer? Let’s then pay for their travel and stay. Is there a food show happening? Can we put Indian food in it? Let’s pay for that. As we do this, we are tracking incremental gains on the impact of Indian soft power.”

Each of these platforms has found its niche. India Facts publishes pugnacious rebuttals of Left-leaning opinion (‘Charlie Hebdo or the nuanced intolerance of our liberals’),  while Swarajya is more sober (‘When will the NDA government reform the aviation sector?’). Niti Central, meanwhile, is everyday politics-focussed (‘Kiran Bedi joins BJP —will hurt Kejriwal’). All this, says Meghnad Desai, changes the way the world looks at India, at least temporarily. “It also changes the way India looks at itself,” he says. At least temporarily.

FAR FROM POLITICS, another bunch of entrepreneurs is  using the spin to wrest control of the India story from an exclusive set.

Take Shradha Sharma, the hyper-animated 34-year-old founder of Bangalore-based YourStory, a leading media platform for startups. To our point that despite all the feelgood around the new government, India’s elite corporations failed to produce a single breakthrough moment last year, Sharma asks us to reorient our vision. “Look at what entrepreneurs achieved, and you’ll realise [that there wasn’t one but several] breakthroughs.”

In fact, if Modi permanently changed the course of India’s politics in 2014, there is a feeling that startups and entrepreneurs did the same to business. That’s the theme reverberating from the Financial Times (‘India’s startups are pulling in Silicon Valley’s big hitters’) to HuffPo (‘India On The Verge of a Tech ‘Gold Rush’’)—fuelled by Flipkart’s $11 billion valuation, JustDial’s Rs 950 crore IPO, SoftBank’s $837 million investments in Snapdeal and Ola, and Zomato’s overseas acquisition spree.

While the stars of the new economy derive their power from the sheer heft of the Indian market rather than coziness with the day’s political masters, Sharma acknowledges that the Modi effect has helped. “When I started YourStory six years ago, people said, ‘Nobody will come to a website that only glorifies startups.’” Now, with the Prime Minister rooting for entrepreneurs on Twitter (Sharma calls it the “startup-ism in the government’s lingo”), the game has changed. Last year, YourStory’s social following grew by over 400% from under a lakh in 2013. Sharma says people often accuse her of romanticising the new India. “I tell them, look around. This is real.”

Bangalore, India’s startup central and, some say, the challenger to Mumbai’s position as business capital, crackles with this feeling. Sitting in his office that also doubles as a godown for products under development, Rajiv Srivatsa, COO and co- founder of online furniture retailer Urban Ladder, sums it up: “Success breeds confidence, and confidence just spreads.” He says thanks to a blowout year for the Internet and mobile in general and e-commerce in particular (sales reportedly crossed Rs 1 trillion), entrepreneurs can now take bolder bets at a bigger scale.

Srivatsa reacts sharply when we bring up  the suspicion in some quarters that all this is one gigantic bubble. “This isn’t the dotcom era when people invested blindly without real demand,” he says. “We now have actual data that points in one direction: crazy growth.” He does, however, concede that there’s a sudden, unforeseen glamorisation of the entrepreneurial journey, denting the country’s obsession with “success”.

Mukesh Bansal, who sold his fashion retail site Myntra to Flipkart in the most high-profile deal of last year, puts it more earthily. “Until now, people would look at the same guys and say, ‘taxi chalata hai (drives a taxi), kapde bechta hai (sells clothes), travel agent hai.’” Technology and exponential growth, says Bansal, have given these careers a new spin. It is hard to miss the echo of Modi’s chaiwallah persona, first used as a pejorative by the Congress, only to be spun by the BJP’s propaganda machine into a badge of honour.

Startups like Team Indus that are in geekier businesses—it is best known for building a lunar lander for the Google LunarX Prize (see ‘India’s Unknown Moon Mission’ in Fortune India’s August 2014 issue)—don’t see the buzz as a post-2014 phenomenon. There’s always been a belief simmering in India’s entrepreneurial ecosystem, argues Rahul Narayan, the team’s founder, which has nothing to do with the highs and lows of the Sensex. He bats for the need to preserve a sense of continuity. “We, for example, were inspired by what the Indian Space Research Organisation (ISRO) had already achieved.” Bansal too points out that while market sentiment ebbed in the past few years, consumer sentiment, especially in e-commerce, has been consistently on the rise.

There’s also consensus that the roots of the startup boom lie in the IT revolution long before Modi. (More than one entrepreneur says startups mushroomed in Bangalore because software engineers working in the city’s big IT companies were disgruntled with their day jobs.) That said, most are happy to play along with any kind of spin that keeps the current euphoria going. Srivatsa admits that the media has made the startup story look bigger than it is, so that old-fashioned corporate results no longer monopolise the news.

The media’s love of course has its own loaded context. “There’s a lot of you-scratch-my-back-I-scratch-yours that goes in reporting on big companies,” says Anant Goenka, the 29-year-old director of new media at The Indian Express Group. “I’m not suggesting paid news, but ‘If you cover my launch on page 1, I’ll give you an exclusive with my CEO’-type conversations are increasingly rampant in the business news space.” Goenka says writing about startups is an easy route to humanise and be less dependent on corporate India’s mighty public relations companies.

To a smaller set, the likes of Rohin Dharmakumar, an early-stage entrepreneur and ex-Forbes India (competitor to Fortune India) journalist, the constant race to stay in the limelight is reason for worry. Somehow spinning a catchy story has become the primary goal for many, he says. “There’s this concept of hustling, that anything goes, so long as you are able to sell your story. Ethics and solid numbers have suffered.”

HUSTLE IS ONE OF THE words Twitter’s Rishi Jaitly invokes to describe his impression of India in 2014. “I remember sitting on a conference call in 2012 (the year he took the job) and telling my colleagues, ‘2014 will be big’.” With 56 million election-related tweets in the five months to the polls, that prophecy came alive.

Technology was a key part of Atal Bihari Vajpayee’s 2004 campaign (‘India Shining’) too, with pre-recorded voice calls and the promise of holding online rallies of 100,000 people every day. But in 2014, the message morphed into the medium: Modi’s campaign accused mainstream media of jettisoning his voice; Twitter embraced that voice and amplified it. The PM’s three Twitter handles (@narendramodi, @PMOIndia, and @narendramodi_in) have a few times the readership of the largest newspaper in the country,” says Raheel Khursheed, Twitter India’s head of news, politics, and government. That’s why eight months into the job, he hasn’t felt the need to appoint a press advisor.”

Does Modi’s inescapable clout on the platform—@narendramodi has the second-largest following (9.6 million) among politicians worldwide, second only to @BarackObama (53.5 million)—give his narrative an unfair edge? “We do not take a moral stand on what kind of content becomes big on Twitter,” says Jaitly. The audience will gravitate towards you if you can offer highly personal, authentic, interactive storytelling. “Whether you are an election candidate or a brand, the formula remains the same.”

Khursheed suggests that one of the reasons the Congress was swept away in the elections was that it failed to use that formula (read: juice the social web as effectively as Modi). He insists that rather than centralising power, Twitter’s two- way microphone allows everyone ownership over what ought to be the agenda in public conversations. That also means while you can craft a clever message, you cannot predict or control what spin it will end up acquiring. A big part of Khursheed’s job is to help users like Modi deal with the constant public demand for new content. This is the meme culture, where the importance of a message is decided by how quickly it spirals into a #trend, and how long it stays there.

Modi can learn a thing or two from Obama about shouldering this burden. “He’s done Reddit AMAs; he’s appeared on web comedies; he’s smiled for a slew of behind-the- scenes photos and GIFs, all tastefully filtered and posted to Instagram. The Obama White House is on literally every mainstream social network except Myspace; there are people employed at said White House who are paid to turn Obama’s policies into ‘shareable’ memes”, the Washington Post wrote days before the President’s India visit.

The pressures on Modi are not yet so severe, but that looks temporary given the legacy he has built for himself. It’s now a fading footnote that the BJP’s ideological parent, the Rashtriya Swayamsevak Sangh (RSS), was far from certain about Modi for PM to begin with. Some argued that the momentum was already with the party, and even if a different name
(L.K. Advani or Shivraj Singh Chouhan)—or no name—was announced, it would still win. But the famed booth-level network of the BJP and the RSS, the panna pramukhs, refused to work without Modi. “His image management,” a senior BJP leader told Fortune India, “was always grassroots-focussed. It was so for 10 years, but no one really got it until before the polls.”

Khursheed shares a story. On Modi’s birthday, as he acknowledged the wishes of the hoi polloi on Twitter, one follower went unnoticed. “Why are you ignoring me? Have you blocked me?” he demanded of the PM. In another India this guy wouldn’t stand a chance, says Khursheed. But Modi, whose image as a grassroots Prime Minister is at stake, placated him with a smiley face.

M.G. Parameswaran, advisor to Mumbai-based ad firm Draft FCB+Ulka (which created the ‘India Means Business’ campaign for P.V. Narasimha Rao), spells out the obvious risk: confusing Modi’s relentless PR for the real deal. “That’s merely the scaffolding,” he says. “It will have to come off when he starts the real action, whether it’s tax reforms,  and reforms, or stronger anti-corruption measures.”

Modi of course knows the perils of overdoing a spiel courtesy BJP’s disastrous ‘India Shining’ campaign in 2004, which Chintamani Rao, a strategic marketing expert and former CEO of Times Global Broadcasting, describes as a hollow manufacturer’s claim. In contrast, ‘Make in India’ is a proposition. It provokes the question, “Why?” If that is answered effectively, it will work. If not, it will be another vacuous slogan, Rao says.

FOR NOW, CONTRADICTIONS are swirling. December 2014’s Fortune India 500 analysis revealed that revenue growth of India’s elite corporations fell to 9.5% levels from 11.5% in 2013, while profit growth dropped to 4.5% compared with 5.85%. The same month, a report from financial advisory firm Grant Thornton painted a far rosier picture. It said Indian companies closed merger and acquisition and private-equity deals—a barometer for business appetite and optimism—worth $50.5 billion in 2014, a 32% jump over the previous year. Staggering returns by any measure, more so compared with the 11% fall in 2013—except that view obscures another crucial nuance. Many of these deals were already on their last legs in 2013. They were held up because good economic data had dried up, says Prashant Mehra, partner at Grant Thornton. “The money started flowing as Modi brought the hope of change … though in terms of fundamentals, nothing really changed.”

At this year’s Vibrant Gujarat, a business summit started by Modi himself in 2003 and played up these days as the Davos of the East, CEOs seem cautious. Piyush Gupta, CEO of Singapore-based DBS Bank, says all that the spin has done is to  change “the real disillusionment about India under the last government. Everyone woke up to the fact that the Indian reality had little to do with the India story,” he says, adding that the new government won’t have forever to start executing. “Ordinances to push reform show resolve, but that’s just the beginning,” Gupta says. Where things go from here will determine whether DBS goes ahead with its plan of opening 80 branches in India in the next five years from its current six.

Richard Lancaster, CEO of China Light and Power, says even though his company is committing $2 billion to build new coal-based power plants in Gujarat, it is in wait and watch mode. Walmart India CEO Krish Iyer is hoping to have 70 stores by 2020. That means a lot of investment (he will not say how much). “Investment needs momentum and goodwill,” says Iyer. “The climate needs to support it.” Has the climate changed? “The move towards administrative reforms is useful; we are hopeful,” is all he says.

Don’t such middle-of-the-road statements signal a comedown from the frenzy a few months back? Diane Farrell, acting president of the powerful U.S.-India Business Council, in India as part of Obama’s visit, argues that’s an unfair way of looking at things. “This government is clear that it will not make flashy, big-bang decisions that grab the headlines. It is going about its work quietly,” she says.

She finds support in a JP Morgan report, aptly titled ‘India and Mr Modi: After the honeymoon’. “So far, the majority of policy measures tabled are neither surprising nor breathtaking,” it reads. “But unlike his critics, we see this as a major strength of the government’s approach, not a weakness.” What of the expectations of a miracle that 2014 engendered? “That’s a real challenge,” Farrell admits, “but [hopefully people understand that] it’s actually incremental change rather than an earthquake that leads to tectonic shifts.”

Meanwhile, Farrell  would have you believe there’s little fear of Modi getting carried away by his own spin. “He doesn’t allow himself distractions,” she says.

(First published as the cover story of Fortune India‘s Feb 2015 issue; coauthored with Hindol Sengupta; photograph by Bandeep Singh; illustration by Nilanjan Das.)

Brilliant Ideas Are Not Enough

Debjani Ghosh, vice president, sales and marketing group, and managing director, South Asia, Intel, reflects on the zeitgeist in Indian tech. 


Debjani Ghosh says coming back to India in 2012 unsettled her, since she had just built Intel’s Southeast Asia operations into one of the company’s best-performing assets. “We were having a magical time,” she says. “So I asked my bosses, why India?”

Three years on, Ghosh has established herself as one of India’s most committed technology evangelists, championing programmes like the National Digital Literacy Mission (NDLM), and now, Innovate for Digital India, to build awareness of technology and its applications ground up. Last month, she was named the first woman president of the Manufacturers’ Association for Information Technology, the apex body for hardware, training, R&D, hardware design, and other associated service segments of the Indian IT industry. Along the way, she has found powerful allies in the government as well as the private sector, which she says is the only way to scale any change initiative in India. “I also had to convince the Intel HQ that they cannot tie us down to quarterly sales targets,” she says. “I cannot project return on investment for market-creation programmes because there are no tangible metrics available.”

What then does she make of India’s frenetic tech startups, which also insist on freedom from RoI, albeit for very different reasons? She spoke to me on this, Intel’s ground-up innovation push, and the value of partnership-driven problem-solving. Edited excerpts:

“In India, we have had a history of sitting back and commenting on whatever is wrong, and placing the onus of change on someone else. But the country is really changing. What our ongoing Innovate for Digital India challenge has shown us is that people have the confidence to speak up and share ideas; they are not worried whether the ideas are good or bad.

The first phase of the challenge, which invited innovators to submit ideas that address ground-level problems, has been fantastic. We got 1,900 submissions; our goal was 1,000. We were pleasantly surprised that the participants did not come from any one predominant group. It’s a healthy mix, though we are yet to crunch all the data. All our partners, from to the Department of Electronics and Information Technology (DeitY), have played a stellar role in spreading awareness about the challenge. Now comes the difficult part: selecting the top 50 ideas. The Centre for Innovation, Incubation and Entrepreneurship (CIIE) at IIM Ahmedabad is working on that. Following that, the participants will go through an elaborate pitching process, where they will present their ideas to an expert panel. The top 20 from there will go through a three-month mentorship programme in Pune.

I am excited that many of the best ideas are targeted at people who do not speak English, and maybe aren’t even literate. If we can pull it off, these ideas can make a big difference. Most innovation challenges in India end with identifying great ideas. They don’t take the ideas right up to the product stage. We are looking at not just how good an idea is but how solid the productisation plan is. We will make sure that the products are tested and are market-ready before we announce them to the world.

We have taken a lot of learnings from NDLM. From a technology-adoption perspective, India has been a laggard compared to even Indonesia or Vietnam. My bosses told me, “go and figure out why”. One of the things that stood out to me was that if you move out of cities like Delhi and Mumbai, the use of technology becomes more and more superficial. Forget computers, that’s the case even with phones, which everyone in India is so crazy about. If I ask a lady in Indore what she uses her phone for, the maximum she might talk about is watching cooking videos on YouTube. Even the teenagers are restricted mostly to Facebook and WhatsApp. Everyone says IT will transform education and healthcare. But how many people are really using IT for all that? If I am a lower-middle class family, is there a compelling enough case for me to spend money on technology beyond such superficial use? The answer is a big ‘No’.

NDLM’s goal was to create awareness about [what technology can do for you]. The biggest learning was, forget sales, this is about market creation. It is not about brand building and marketing, because then you would want to do it alone. And alone you cannot even begin to make a dent.

That’s why with NDLM, we didn’t even use the Intel name. It was a painful decision, because the company was spending a lot of money on the programme. But I managed to convince my bosses. I also told them that we cannot predict RoI for such programmes, because there’s no existing data to prove it will work. It’s all in good faith. In hindsight, it was the right approach to take. The government took it up in a big way because it didn’t threaten anyone.

It also helped us win the trust of industry partners. For the innovation challenge, for instance, we have partners like TCS, Capgemini, Lenovo, and Micromax. These are all innovation leaders in their respective industries. Top leaders from these companies have committed their personal time to mentor our participants.

A second, and related, learning was the importance of choosing the right partners. The government is the best example. A lot of people say public-private partnerships don’t work in India, but we have had a mostly positive experience. There’s no way to scale in India without involving the government. The challenge is to find the right departments to partner. For instance, the Department of Science and Technology (DST) is chartered with innovation. It has great industry partnership models and is a very professional outfit.

[People also say decisions in this government are all driven from the top,] but I think the bureaucrats, at least in DST and DeitY, are quite empowered. They are equipped to react quickly to  new ideas. Innovate for Digital India was a new idea, and DeitY already had its set priorities. But it agreed to come on board and was ready [with the rollout plan] pretty much at the same time as us. DeitY secretary R.S. Sharma has been working on projects like this since his Aadhaar days. Gaurav Dwivedi, the CEO of MyGov, is another extremely tech-savvy leader. I don’t see these people saying no to a good idea.

Yes, the vision is set at the top, but that’s how it is in any corporate setup as well. And you need that: The kind of stature the Prime Minister has, he is the only one who can articulate big goals like ‘Digital India’. Having set the goals he also has to keep talking about them, become its biggest champion. And credit to him, he has been doing that.

There is a lot of buzz about technology in India these days, which is great to see. If you wait for things to happen sequentially, nothing will ever take off. You have to take a leap of faith. But you need to follow certain foundation-building processes. You need to have standards, security, interoperability. This is the conversation I have the most with the government: You have built tonnes of platforms, what if they don’t talk to each other? It’ll be a nightmare. I think the government gets it. The Prime Minister also spoke about these challenges in his Digital India inauguration speech.

An exciting development is, of course, the rise of so many tech startups. But today too many people seem to be talking only about “brilliant ideas”. No one seems to care whether these ideas will ever give returns. It’s all about pushing that next app out into the market. That’s a scary model. I get that this kind of push was needed to stimulate startup growth, but it looks like that stimulus has been going on for far too long. Investment discipline must come back to India.

For companies like us, the challenge is to resist the temptation to do everything, since these days every company is in every business. India is like a toy shop, it is actually some 30 different countries. How do you prioritise where you want to play? That’s going to be one of the toughest questions.”

(Photograph by Bandeep Singh; first published in the August 2015 issue of Fortune India)

Bhavish Aggarwal Learns to Fly

He is hard at work pushing Ola, India’s third most valuable tech startup, beyond its flagship cab business. If he succeeds, he could end up creating India’s first mobile conglomerate. If not, this could be a cautionary tale for our gung-ho startups.


“That was just too damn hard!” says Bhavish Aggarwal, co-founder and CEO of Ola, India’s largest cab aggregator. He isn’t talking about Ola’s angel funding round—Rs 1 crore in 2011—though he concedes that’s right up there as hard things go. He has since tackled a few chunkier ones: for starters, jetting around to raise another $675 million (Rs 4,264 crore)—$610 million of it between September 2014 and March 2015—pushing Ola into the rarefied world of billion-dollar startups built out of India. Along the way, there’s been the battle with Uber, the world’s most valuable startup and the Big Daddy of cab gigs; testy civic administrators suspicious of the idea of cabs on tap; the  tense $200 million buyout of the No. 2 aggregator TaxiForSure (TFS); a recent allegation of obscenity against a TFS driver in Delhi; and, for good measure, a messy legal tangle containing the threat of a ban.

No, the memory that brings a grimace to Aggarwal’s face is from 2007, long before any of this. That’s when he and Ankit Bhati, just students at the Indian Institute of Technology (IIT) Bombay, set out on a bicycle tour from their campus in Powai to hilly Ratnagiri in coastal Maharashtra—a good 335 km away. They planned the trip with a rigour only geeks are capable of, trained for weeks. And around Diwali, they hit the road.

The two lads were not even 25, and hadn’t yet dreamt of starting up together one day. Bhati, who is from Jodhpur, studied mechanical engineering and is now chief technology officer at Ola. Aggarwal spent his early years in Afghanistan and Britain—his parents are doctors who were based in the two countries—did his schooling in Ludhiana third standard onwards, and came to IIT to study computer science. They met on day one, shared a mentor, teamed up at tech fests, and worked on freelance coding projects to earn some money. But both think back to that cycling tour as pivotal to where they are.

On the first day of the tour, they crossed Alibaug, 100 km away. Then, they touched Kashid, another 30 km away along the North Konkan coast, and Murud-Janjira in Raigad district, shaving off nearly half the target distance. And then they stopped. “We just came back,” says Aggarwal. A day later, they were on a bus back instead of their bicycles, “but we never tell anyone that”, says Bhati, laughing.

The episode is a reminder for the two: Turning back isn’t an option this time. Not after ‘Ola’ became a byword for urban transportation in India; opened up a whole new world of choice in one-horse towns like Bokaro and Dindigul; built a team of over 6,000; and rose to be the country’s most valued tech startup after Flipkart and Snapdeal—all in the space of five years.

Much of this can be credited to Aggarwal’s product nous and, more important, his instinct for scale. Ask startup watchers anywhere in India to name the digital entrepreneurs they think will remain standing amid the inevitable detritus of also-rans. The first two names are easy: Sachin Bansal, Kunal Bahl. Aggarwal, who is 30 this month, is firmly nudging that list.

Shradha Sharma, founder of the startup news platform YourStory and one of the most sought-after mentors in Bengaluru’s startup circuit, has known Aggarwal from the time he was just another zealous product guy pitching his idea. “He would stand in my office all day, showing the early version of the Ola app to anyone who cared,” she says. “He chose a business that is not for the fainthearted, and never gives in to pressure. I’d say he is among the five most driven entrepreneurs in India, any day.”

Sharma says Aggarwal’s standout qualities are “ambition, aggression, and focus”. Investors love those traits. Startup scouts from Tokyo-based SoftBank and New York-based Tiger Global have locked horns in hot sectors like e-retail (Flipkart vs. Snapdeal) and online house search (CommonFloor vs. Housing). But they seem happily agreed on Ola, and are investors
in the company. (They are also co-investors in Kuaidi Dache, a leading Chinese cab aggregator.) In May, Ola also became a part of Ratan Tata’s Internet investments, joining the likes of Snapdeal, Chinese mobile sensation Xiaomi, and payments leader Paytm.

So far, Ola is repaying the love in spades, if you believe a SoftBank earnings report. It says Ola’s share “based on available or estimated data of registered vehicles” is 80%, with Uber’s a paltry 4%. (The report also says radio taxi pioneer Meru Cabs holds 12%, but most think it will be a sideshow in the war between Ola and Uber.)

You could, of course, argue that every such estimate comes with an equally imposing counter. For instance, to Ola’s claim that it does 750,000 rides a day, Uber says it is set to hit a million rides in the next six to nine months. (Ola’s view of Uber, those latest funders include India’s Times Internet, is standard: “India is a very different market and a templated approach won’t work here, be it in transportation or anything else to do with logistics.”) Then again, you could point out that “rides” is a rather vague proxy for a company’s real health to begin with. A bit like the opaque “gross merchandise value” quoted by e-retailers, which has raised a lot of eyebrows recently.

However, on this there is no debate: With a network of over 200,000 cabs in 100-plus cities, Ola has a handy lead in the cab aggregation business. If all Aggarwal wants to do here on is build a cab empire for the ages, he has to put his head down, keep doing whatever he has done to get here, do it better, and pray—SoftBank’s hulking claims notwithstanding—that he can keep Uber at bay. The big assumption, as it is with all tech startups, is that at some stage his company will actually start making money.

But that’s not Aggarwal’s style. “Bhavish is pure aggression,” says Bhati, echoing an increasingly common description of his cofounder. “He is always dreaming of where next Ola can be, and how fast we can get there. He is impatient at all the right times.”

Ola turns five in September. In startup years that’s plenty old, and sure enough, Aggarwal is getting impatient. His next mission: swiftly launch a series of new businesses, each piggybacking on Ola’s well-oiled technology platform. Think of a consumer goods giant, say ITC, which uses the distribution muscle of its cigarettes business to push soaps and biscuits.

If the plan works, Ola could metamorphose into India’s first mobile conglomerate; in fact, it has quietly dropped “Cabs” from its name. But if it backfires, it will be a cautionary tale for India’s bullish venture-backed private companies, accused by naysayers of chasing high valuations rather than building solid businesses.

The first push beyond cabs came in March, with Ola Café, a food delivery service. (Uber started testing a similar service, UberEats, in the U.S., Canada, and Spain last year.) This is a massive market, estimated at $15 billion, featuring cash-rich players like Foodpanda, TinyOwl, and Zomato. Ola is partnering 100 restaurants across some 30 localities in Bengaluru, Mumbai, Delhi, and Hyderabad, and to differentiate itself, it will only offer a restaurant’s most popular dish, say Spaghetti Kitchen’s chicken penne pasta. At any given time, the menu will have five items, each sourced from a different restaurant, and the options will change every 20 minutes between 12 noon and 10.30 p.m. Ola will charge a commission for every order.

In early June came the second launch: Ola Store, a grocery delivery app covering 16,000 stock keeping units, in partnership with local kirana stores and chains like Namdhari’s Fresh. (Again, Uber started Uber Essentials in the U.S. for essential household supplies last year.) This is another sizzling market, slated to be worth $5 billion by 2030, and Ola’s competition include early mover BigBasket, newbies like Grofers and PepperTap, and, slowly, Amazon. Ola is training
drivers and delivery boys for these two businesses, although the exact modalities are still on the drawing board.

Then in July, reports surfaced about a shuttle bus service that would aggregate tourist and chartered buses. There was also chatter that the company is considering carpooling, logistics, and e-commerce, but it denies anything concrete in these areas.

Finally there’s Ola Money—a closed mobile wallet that accounts for bill payments for 40% of all Ola rides, and counts Sachin Bansal among its fans—which can potentially become a full-fledged payment platform underpinning all the different ventures.

Things are still very fuzzy, and it is hazardous to guess how any of these will pan out, but an early pattern is emerging: while Ola Café is just another button in the main Ola app, Ola Store, which has the potential to morph into a full-fledged e-retail platform, gets a separate app and logo. The company says that the new businesses will have separate operations, but the technology platform will remain centralised.

On the face of it, Ola has no choice but to offer more services and increase wallet share, given the small pool of Internet users in India who spend money online: a mere 39 million out of the total Internet user population of 300 million, according to Barclays Equity Research. No one will discuss this on record, but an investor tells Fortune India that while Flipkart may have 84 million web visitors, “I go with the 50 million to 60 million range, assuming not all visits are unique.” A serial entrepreneur adds that while many buyers are lured by heavy discounts, “conversion for convenience”—the holy grail for consumer Internet companies—“is still negligible in India”.

In the cab business in particular, breakout growth is almost impossible: Goldman Sachs says India’s car rental market will reach $1.4 billion by 2030, a pittance compared with $16 billion for air bookings and $18.6 billion for railway bookings. Even if you believe that the market estimate is conservative, the ticket size of a cab ride is obviously the lowest across these categories. Ergo, Ola, with a valuation of $2.5 billion, cannot be content with just cabs.

While the revenue from new launches will be incremental, there’s a far more urgent reason for Ola to do more: keeping drivers happy. Till now, the battle to acquire drivers between Ola and Uber has been all about throwing more and more incentives. (Ola acquired TFS as a hedge.) At the peak of competition last September, incentives were rampant: Uber $10 a ride, Ola $7 a ride, and TFS $2.5 a ride. But as the party winds down—fleet operators in Bengaluru and Delhi say Ola is discontinuing or cutting incentives while Uber isn’t—the only way to hold on to drivers is to help them get more trips and reduce idle time. “For us, it is a great way to solve utilisation,” says Pranay Jivrajka, chief operating office and senior vice president of operations at Ola.

Aggarwal says Ola is in a “network-effects” business. The more customers it signs up, the more it can reduce fares, in turn bringing in more customers. But without loyal and engaged drivers, this virtuous cycle, and indeed Ola’s ambitious expansion plans, will come to nought.

Not everyone is convinced that the time is right. Rishikesha Krishnan, professor of strategy and director at Indian Institute of Management, Indore, says investors in Silicon Valley still reward focus on the principal idea. “It will be interesting to see whether the thinking among investors is changing in India.” There’s also the view that if Ola’s strategy is to outmanoeuvre Uber by spreading out wide, it’s not a particularly wise one. “It is better for a well-capitalised company to build dominance in its core business first,” says a consultant with a leading global advisory, especially if it has Uber as competition”.

But Aggarwal says he was clear from the very beginning that Ola’s core business is not cabs: It is mobility. “We didn’t see this as a taxi business at all,” he explains. “We started with the idea of a customer who thinks ‘I will never buy a car.’ What do we need to build for someone like that? We need cars to be made available in 5-10 minutes.” Now that Ola has ticked that box, he says it can become “the largest company in the business of on-demand consumption”—or instant gratification. “People want their food delivered in half an hour—can we give it to them in 15 minutes?” Aggarwal’s benchmark is Domino’s Pizza. “They have solved hunger [through fast, hyperlocal delivery],” he says. “That’s why they are the country’s No. 1 food-tech company.”

Aggarwal’s choice of food and grocery delivery is a no-brainer; both are large markets built around the idea of transport. He has also experimented with movie tickets, IPL tickets, and Diwali gift deliveries. But it’s an experiment days before we went to press that offers a sharper clue into just how wide he is planning to fan out: From 11 a.m. to 4.30 p.m. on a Sunday, Ola ran a first-of-its-kind fashion-delivery tie-up with Myntra, allowing users in five cities to book a makeover by a personal stylist through the Ola app.

The big opportunity is to replicate that template and become a last-mile partner to all kinds of services, such as in-home medical care, a booming market that can reach $15 billion in India by some estimates. Or hyper-local home services, a sector that caught fire last year with over 70 startups opening shop, per research portal Traxcn.

Many like Raja Hussain, the ex-Silicon Valley co-founder of Chennai-based mobile app marketing startup Airloyal, see a clear imprint of Valley-style aggression in Ola’s moves. “You want to send out a strong signal to the market, and then focus your best resources to grow your user base,” he says.

Raghunandan G., who sold TFS to Ola, echoes that. “If you try to sell a standalone service in India, it takes time to generate volumes,” he says. “But imagine all the services you can get into once you have a captive audience. Merchants will work with anyone who gives them reach.” Equally, entrepreneurs like Bansal, Bahl, and Aggarwal want to be ready before a disruptive force like 4G opens up all kinds of markets. Being unprepared is not an option in the face of competition from Amazon or Uber, known for conquering new markets at lightning speed.

Affinity for speed is the reason why sectors like online retail, search, community content, and messaging have been the dominant investment themes in the U.S. and China, with transport and payment rapidly emerging in recent quarters, says a Bengaluru-based venture capital investor. “The valuation frenzy in India is driven by the race to find the four or five leaders in each of these themes,” he adds. So  while Amazon and Flipkart battle it out in e-commerce, Paytm tops payment, and Ola is seen as the leader in transport.

Ola’s grip over mobile gives it a big edge in this race. Aggarwal and Bhati sniffed the opportunity early, in 2011, when they built a mobile website over a weekend to see if users would book taxis on the phone. The response was encouraging, and in July 2011, it was ready with a consumer app, which it branded aggressively. In contrast, Flipkart was busy building its marketplace model; it started focussing on mobile only in the latter half of 2013.

The early start means Ola is one of India’s few high-scale mobile Internet businesses, a list that includes Zomato and entertainment ticketing company BookMyShow. It claims that 99% of its bookings now come from the mobile app, and it will accept bookings only on the app from September. That’s a vital step in a country where mobile Internet users account for 65% of the online population, against 30% in China and 22% in the U.S.

Ankit Bhati, Ola’s CTO, says the inherent value of Ola’s platform is that it supports experimentation.

The mobile bet will yield bigger returns as and when Ola expands its fleet in the non-metro hinterlands. Currently, such regions account for only 10% of its cabs. But with mobile commerce expected to be a $19 billion bounty by 2019 according to market research firm Zinnov, predicated on a consumption boom in tier II and tier III towns, that number might change.

Phanindra Sama, who founded India’s first online ticketing company redBus in the presmartphone era, says mobile is also a game changer in managing productivity. “We had to hire a 20-member team to convince bus operators to come to our platform. There was an elaborate backend to deal with customers.” But with smartphones, inventory procurement and customer care can happen with much less resources, and in real time. Sama adds that Ola can launch multiple services because “it has the distribution”—and the routing algorithms—to predict and optimise the use of its cabs.

If Ola can master this model, it would have created a whole new kind of company. Think of it as a conglomerate tailored for the burgeoning on-demand economy, which can rapidly expand into scalable businesses off an agile technology platform. The inherent value of Ola is that platform,” says Bhati. “If it cannot support experimentation, then it’s not much of a platform.”

A caveat is necessary here. A classic conglomerate is often made up of businesses that are unrelated but feed off the parent brand. Take TCS, Tata Chemicals, Tata Motors, and the Indian Hotels Company, which are part of the Tata group and took decades to build. “In the digital world, Amazon is a great example,” says Krishnan of IIM Indore. It started with
e-retail and moved into videos (Amazon Prime), devices (Kindle, Fire), and cloud computing (Amazon Web Services). Seen through this lens, Ola would appear to be merely diversifying, that is, extending into related businesses.

But Krishnan points out that this homogeneity is true of even a pioneering, listed Internet business like Info Edge (flagship: launched in 1997), which is recognised as a bona fide conglomerate with interests in education (, executive search (, matrimony (, and real estate ( Most of these businesses were built on the same core domain: classified ads. This holds good for other early starters, including People Group (, which built real estate portal (sold to PropTiger), and Consim (, which started IndiaProperty (hived off as a separate business in which founder Murugavel Janakiraman has a small stake). Krishnan says this is where Internet companies are different from, say, the Tatas, and closer to ITC’s model of building a conglomerate of contiguous businesses.

There’s another, unobvious parallel rooted in history. Many of India’s bellwether conglomerates were born as the only way to outgrow the production caps imposed across industries during the licence raj. Dwijendra Tripathi, retired professor of business history at the Indian Institute of Management, Ahmedabad, writes in The Oxford History of Indian Business that the Birla group, for instance, steeped in textiles and composed of 13 major companies in 1947, had swelled to 200 companies by 1985. Similarly, the licence raj saw the Bajaj group grow from sugar mills to electrical appliances and two- and three-wheelers. The limitations on growth that Ola is facing with India’s small base of online buyers—and the pressures on it to break free—resemble those odds. With Ratan Tata on board, it is tempting to assume that Ola is getting a crash course in conglomerate building. But Anand Subramanian, senior director for marketing communications at Ola, says most of the company’s discussions with Tata have revolved around “the future of mobility, and how Ola can impact it. We also delved into the kind of socio-economic impact this would have on driver entrepreneurs.”

The trouble is, Ola’s grand plans have coincided with big challenges in its bread-and-butter cab business. First: tackling a regulatory can of worms that has lain open since the alleged rape of a female passenger by an Uber driver last year. The incident, which ended up revealing that cab aggregators cannot be regulated using the existing frameworks for radio taxis, led to the spectre of a blanket ban on aggregators. While Uber has been hit the hardest, Ola too is battling a possible ban in Delhi for running diesel cars in contravention of rules.

Subramanian says as a self-regulatory move, the company is investing in driver training, verification, and extra layers of GPS tracking in its cabs. It also engages regularly with road transport officials and state transport ministries. “We want to be proactive in industry practices as regulations for the digital economy take shape,” says Subramanian.

The digital economy is currently a blind spot for the government, as evidenced by its reported troubles in even locating the Uber office in the National Capital Region after the rape. “The government shouldn’t notice Ola for the first time because of a bad incident,” says Pallav Singh, CEO of TaxiForSure and senior vice president (operations) at Ola.

Then there’s the question of retaining drivers without incentives. An independent fleet operator in Bengaluru says, “Both Uber and Ola have brought in customer convenience, but drivers joined them only for the incentives. The moment that stops, drivers leave.” To compensate, Ola is helping drivers with medical and accident insurance and has tied up with State Bank of India to offer them car loans, but “many drivers are moving to Uber because it is giving better deals,” says the operator. Uber also offers lower fares than Ola in many cities. However, Subramanian says Ola has at least a two-year advantage because of its headstart over Uber.
When Singh discussed the new ventures with drivers in January, they were surprised. “Their questions ranged from ‘Why are you doing this? Ola is a taxi service, isn’t it?’ to ‘What’s in it for me?’” Ola’s effort is to get drivers more engaged and loyal to the brand. But that might be a tall order, given old habits. It also has to find a way to deal with hostile taxi unions that see cab aggregators as a threat. In July, taximen in Mangaluru protested before the city administration, alleging Ola was trying to monopolise the business. In fact this is one thing that unites it with Uber, which has been flayed by angry cabbies across the world, from London to Paris to Mexico.

In the near term, Ola faces another daunting ask: filling a slew of new management roles. It can learn from Wipro, one of India’s early conglomerates, which transitioned from making vegetable oil (in the ’40s) to consumer products and industrial hydraulics (’70s), before entering the personal computers market—eventually growing it into the IT services flagship—in the ’80s. “We had to explain to everyone what we wanted Wipro to be,” recalls Pratik Kumar, CEO of Wipro Infrastructure engineering and former group HR head for Wipro. “The top managers had to chase a new breed of talent—entrepreneurial persons who could take ownership and run. Chairman Azim Premji himself spent a lot of time hiring managers across levels,” recalls Kumar, who finishes 25 years at Wipro next year.

Ola’s journey to build a management team beyond its founders has just begun. In February Aggarwal poached Sunit Singh, head of design at ClearTrip, a company he admires for its user experience. He also snagged Amit Mathur as head of talent acquisition from VMWare to focus on tech hires, separating it from business staffing under Rohit Munjal who came from GE Healthcare. Both Mathur and Munjal report to Yugantar Saikia, an experienced hand from software analytics firm FICO. Then there’s Arvind Singhatiya, formerly of Metro Cash & Carry, who joined as head of public policy, government relations, and legal. Another star hire is Sundeep Sahni, former managing director of Lazada Indonesia, Southeast Asia’s top e-retailer.

But luring talent is a relentless, high-stakes game where Flipkart and Snapdeal have proven hard to beat. And unless Ola can build a continuous stream of leaders for the new services, things will slow down. Already, the rollout has been fraught with delays. In parts of Delhi, for instance, the Café button on the app has been promising delivery in “15 minutes” since its launch, but upon clicking, you are told that the service is still not operational.

These concerns segue into the core competence vs. diversification debate. In the startup world, the sacred norm is going after a niche rather than spreading too wide. That’s why Internet pioneers like Info Edge launched new businesses years after strengthening their main business. In an unrelated interview, Intel’s South Asia managing director Debjani Ghosh sums up the risks. “India is like a toy shop” for tech companies given the sheer number of addressable challenges, says Ghosh. “How do you prioritise where you want to play? That’s going to be one of the toughest questions.”

To be sure, Ola is not the only startup on an expansion spree. Far smaller ones, like grocery-delivery players BigBasket and Grofers, have started dipping into niches such as electronics and personal care. The closest comparison for Ola is possibly Paytm, another five-year-old unicorn. Founded by Vijay Shekhar Sharma and backed by Alibaba, it claims 80,000 users in its mobile wallet business, and forayed into m-commerce last year. Sharma says as of June, users bought goods and services worth $1.5 billion in gross value from 9,000 active merchants.

“All this was not possible in 2011-12 when investors were not pumping in money at the same pace,” says an investor who doesn’t have a stake in either Ola or Paytm. “While Paytm has been dominant in payment, its attempt to crack e-commerce was seen as a crazy move less than a year ago, but not any more. Similarly, over the next few years, one successful experiment could give a quantum boost to Ola’s growth.”

In fact investors in mature public companies seem to appreciate the idea of cross-pollinating businesses. The philosophy: It’s better to re-invest money than let it idle in times of growth. For instance, last July, when Info Edge announced that its board had approved a qualified institutional placement (QIP) worth Rs 750 crore to invest in, the share price closed at Rs 697. A month later, when an extraordinary general meeting of shareholders approved the QIP, the share price had inched up by 12.24%, Rs 782.51. And finally, on the date of the QIP announcement, the share price closed at Rs 888.11—a juicy 27.39% higher than July and 20.02% higher than the QIP issue price.

What does Aggarwal make of all the frenzied attempts to predict the future of his unicorn? From his boyish countenance, it is difficult to say if he takes any of it seriously. “We are still a startup,” he says matter-of-factly, “we need to do many more things.” The memory of the aborted cycling trip should keep him in line.

(First published as the Fortune India August 2015 cover story; coauthored with Kunal N Talgeri and Rajiv Bhuva; photos by Bandeep Singh.)

How Much Do You Spend on Technology Every Month?


Is all that money spent on fancy new tech going down the drain? (To know more about this picture, read till the end.)

This post is inspired by a TIME Money poll that asks people how much they spend on technology every month. About 37% of the participants so far say they spend over $200, including their cellphones, Internet plans, streaming services, etc.

It got me to calculate my tech spend, and to this post. In fact LinkedIn is one of the first purely technological entries in my monthly expenditure spreadsheet. I have a “Premium” account here, and have been paying Rs 1,400 for it the past couple of years.

Then I have an Airtel 8 Mbps/80 GB connection, for which I pay Rs 2,299. (Well actually my wife pays that bill, but it’s part of the same spreadsheet).

My mobile bills are actually pretty low, thanks to a sucky Vodafone service that mostly keeps 3G down to a very anaemic 2G. I spend about Rs 800 a month for that. I seldom download paid apps, games, or content.

We recently upgraded to a TATA Sky HD set-top box and have a channel package that costs Rs 924. (I am not including the EMIs I was paying till last month for our new Sony Bravia HD LED TV.)

On average, I use Ola or TaxiForSure to book cabs at least 3-4 times. The tab is anything between Rs 1,500-Rs 2,000. (These are trips that I would have otherwise made on the Metro, costing me a fraction.)

A small but regular technology premium I end up paying is for booking movies on BookMyShow. In “convenience charges” alone I pay an average Rs 200-Rs 300 a month.

Finally, I have a Maruti Alto K10, for which I shell out an EMI of about Rs 9,000. (It maybe a bit old-fashioned to include a car on a tech list, but for whatever it is worth, it is a gadget all right.)

Put together, I spend about Rs 17,000 on tech every month. These are more or less fixed spends; I am not including things like the hyper-inflated electricity bills we pay during the summer months thanks to non-stop AC use.

I have not included e-retail either because it’s a non-regular category for me. I also don’t have data to prove whether I spend more on Flipkart etc than what I would have spent at physical stores.

Now the question is: What’s the RoI from this sizable spend?

LinkedIn: No perceptible change in my status before other LinkedIn users, just because I am a “premium” member. InMails, one of the key attractions of the paid subscription, have had at best a lukewarm reception. In fact their periodic mails telling me I have been “unstoppable this week!” are a great annoyance, because they have nothing to do with my actual usage of the site – which is not deserving of such encomiums.

Airtel: Generally trouble-free, but I have experienced agonising throttling with a new video-streaming service. Now, this has become a subplot in the larger Net Neutrality debate in the country.

Vodafone: Pathetic experience. Constant call drops, barely any 3G coverage at home.

TATA Sky: Mostly OK.

Ola/TaxiForSure: I used to be a big fan of these services, but since relocating to Delhi from Mumbai, there’s been a sharp drop in the quality levels. My last four rides on Ola have been pretty bad, and I noticed that now the company doesn’t even reply to my complaints on Twitter. It is quite possible that as users like me form a habit of booking cabs using their apps, they will stop feeling the need to give us good service – which was their key differentiator against local taxi services when they started out.

BookMyShow: Pretty flawless experience.

Maruti: Nothing against the car, except I am not much of a lover of cars and don’t enjoy driving on the manic roads of Delhi and Noida, where I live and work. In hindsight, the EMI for the car is a pretty pointless drain, because I hardly ever use it except to drive to work and the rare weekend eating-out trip.

So there you have it. On a monthly spend of Rs 17,000, I’d say my RoI is not more than Rs 5,000. That’s less than 30%.

The math is pretty eye-opening. But the biggest thing I learnt from this experience: It is unlikely I will stop any of these wasteful expenditures. I am caught in a tech-spend inflation bubble, and even if my money fetches less and less, my addiction/need to spend on tech will only increase.

What’s your experience? Does this pattern fit your tech life too?

The photo attached to this post shows a Japanese commode that recycles waste water, if I remember right. I shot it during a Japan trip four or five years back. I have no doubt I will snap it up in a heartbeat if it ever comes to India. Even better if it’s available on a subscription model. 

Chinese Whispers

New-age mobile and Internet companies are trying to change the narrative of Chinese businesses. Will a government intent on control let them?

chinese whispers


ARVIND VOHRA, 44, loves telling stories in his warm, throaty voice. We are discussing what the Chinese think of doing business in India, and Vohra has just the right story. “We recently had some visitors from our head office in Shenzhen,” he says, mellowing a notch. “After a couple of days, they said, ‘Arvind, we want to work with you. We like it better here than in China.’” Ordinarily, that would be an ego boost for an outfit that is barely 18 months old and employs all of 63 people. But for Vohra, managing director of leading Chinese mobile-phone maker Gionee’s (founded in 2002) India operations, it was a double-edged compliment: He is after all fast friends of 15 years with Gionee’s president William Lu Weibing.

The two first met while working for the Chinese electronics company Konka in Delhi, and got along famously. Lu eventually moved back to China, but they took great pains to nurture the friendship, flying down to share meals when either was in the other’s country. It was Vohra who convinced Gionee to take the plunge in India. “At that time, the company was making $10 million a month (Rs 61.6 crore at current rates) as an original device manufacturer (ODM) for Indian companies,” he says. “I told them they should stop building others’ brands and focus on their own.”

Vohra’s first move was to launch a marketing blitz expected to cost Rs 300 crore by the next fiscal, attacking the poor quality perception of Chinese products. He also shed the “cheap” tag by gradually pushing the prices of his phones 10% above local competitors’. In a more daring bet, he shunned the discount-driven craze for online retail.

There’s a different story that he likes telling to describe the organisation he is trying to build. He once gave a blank letterhead with his signature to an executive who was hesitant to take some strong decisions. “I told him he could write whatever he wanted and put the blame on me if things went wrong.”  People working closely with him credit the open, startup-like culture for the fact that Gionee India has lost only one employee so far. Vohra himself believes that the mobile business is highly entrepreneurial and needs to empower people to make gut-based decisions, while admitting that this culture shocks his Chinese visitors who are used to things being far more uptight. (The Chinese expression for it is “Jun jun, chen chen, fu fu, zi zi”: There is harmony when the king is king, and the minister is minister; when the father is father, and the son is son.) He doesn’t explicitly say so, but it’s also the reason some of them don’t want to go back.

So far, Shenzhen isn’t complaining: Gionee India is on target to hit sales of Rs 3,000 crore by the end of this fiscal, giving it a 4% share of the Indian mobile-phone market (estimated at 63.21 million units as of the second quarter of 2014 by market intelligence firm IDC), and making it the company’s most important play outside China. (It is also present in Vietnam, the Philippines, and Nigeria; Fortune India could not independently verify the financials.) Remember, this is a market where barring the top three (Samsung, Micromax, and Nokia), all others have single-digit share. “People said I’d be finished working with an unknown Chinese company. Now, I feel the new guys [rival Chinese mobile-phone companies Oppo and Xiaomi, which entered India this year] should pay me royalty for showing the way,” Vohra says, only half in jest.

Vohra is trying to rewrite two canons: One, the more obvious, is about cheap Chinese labels. The other is more subtle, and has to do with the Chinese “way”.

HISTORICALLY, THE CHINESE WAY in India has been a murky one, shaped by a handful of state-owned industrial behemoths with little love of brands: the antithesis of the intensely consumer-facing mobile business. (Lenovo, ranked 20 on the Fortune China 500, is a rare example of a successful Chinese consumer brand, but that is generally attributed to its 2005 acquisition of IBM’s PC business.)

According to the Indian government, the biggest Chinese investors here are from old-economy sectors such as mining, energy, and heavy engineering (see graphic ‘Old Money’); my attempts to contact several of them went nowhere. In terms of attention, two companies have had a disproportionate share: telecom equipment suppliers Huawei (private sector) and ZTE (state-owned but privately run; 71 on the Fortune China 500), which dominate large parts of the global market, including India. (They also sell mobile phones here, but that’s a side show.) In 2012, a U.S. Congressional committee warned against the use of their products on suspicions of government-commissioned espionage, leading to extensive coverage of Huawei’s founder Ren Zhengfei, who once served in the People’s Liberation Army. ZTE has come under a cloud in several other markets, including the Philippines and parts of Africa. Earlier this year, Huawei allegedly hacked into India’s state-run operator BSNL’s network. It won’t respond to my questions, but a former telecom executive who has worked with these firms tells me on condition of anonymity that they survive “thanks to powerful friends in the telecom industry”.

In the absence of transparent communication, stories on these companies have droned on with the same stereotypes: a culture that is soullessly transactional, with a deep lack of trust between the all-powerful headquarters and Chinese expats running the show on the one hand, and local employees treated as operational cogs on the other. “There is a low trust quotient attached to most Chinese companies, not only in India but also in many Western countries,” says Anupama Rao, former Indian ambassador to China. Fortune India has also written about the shady image: “To Indians, accustomed to the British, European, and American ways of doing business, the Chinese way is often incomprehensible,” Mansi Kapur observed in ‘The Way They Work’ exactly two years ago.

It is this stubborn narrative that Vohra is up against. His effort is ballsy, not least because the Chinese government is known to tightly herd its trophy corporations to keep them from straying. Even e-commerce sensation Alibaba, which recently went public in New York with a $21.8 billion IPO—the largest in U.S. history—was reportedly put under the cosh to list in Hong Kong instead. Insidious ownership is also common in China’s “private sector” (see graphic ‘The Great Wall’).

On his part, Vohra says there’s no problem “if your business is doing well and you maintain transparent financial records”. “But none of this would have worked out without my friendship with William,” he adds.

Arvind Vohra

ARVIND VOHRA, INDIA MANAGING DIRECTOR, GIONEE: “As a businessman, you can correct biases about your product, but not the political situation.”

That disclaimer makes it tempting to dismiss Gionee India as an aberration. As it happens, it is just one in a series of upstarts, all in the mobile and Internet space, which are making a bold push to make Chinese businesses “cool” in India. Take Oppo, another ODM, which brought its own smartphones here in January after launching them successfully in more than a dozen other markets. The company straightaway signed sponsorship deals with the blockbuster reality show Bigg Boss and the Champions League T20, and hired Bollywood A-listers Hrithik Roshan and Sonam Kapoor as brand ambassadors. Though it won’t reveal revenues, India CEO Tom Lu indicates the expectations by saying that the company already has 600 employees here.

Then there’s UC Web, a browser company acquired by Alibaba in June. When it came to India three years ago, it operated out of an apartment in Gurgaon, and local candidates put off by its obscurity abandoned it en masse during the recruitment process. Now, it is India’s top mobile browser with 37% market share, beating the popular Opera and Android browsers, per analytics site StatCounter.

There’s also WeChat, the world’s fastest-growing messaging service with 438 million active users (leader WhatsApp has 500 million) owned by Internet services company Tencent (93 on the Fortune China 500), which launched in India last year with ads featuring Bollywood stars. According to its PR partners, Nilay Arora, its India head, declined to speak to us because “WeChat considers itself international, not Chinese”.

THE BIGGEST DENT in perceptions came six months ago, when Beijing-based Xiaomi launched its smartphones in India. Founded as a software firm four years ago, Xiaomi didn’t sell its first phones until August 2011. Today, it is China’s No. 1 smartphone brand, and in October, briefly became the third largest in the world, trailing only Samsung and Apple. In India, it expected to sell 10,000 phones a week, but has ended up selling 10 times as many—based completely on word of mouth and social-media evangelism by its devout fans. Its other scarcely believable feats include a 4.2-second sell-out (100,000 phones) on e-commerce site Flipkart, indicating mass hysteria of the kind no other tech company—let alone a Chinese one with an unpronounceable name—has ever triggered in India.

In October, Xiaomi got an early reality check as the cyber-security hoodoo caught up with it: The media dug up an Indian Air Force advisory that its servers back in China could be leaking sensitive user data. The company acknowledged the concerns while denying any wrongdoing, and announced that it would build local data centres tentatively by 2015. “These allegations are by no means our biggest headache,” says Manu Jain, the soft-spoken 33-year-old head of Xiaomi India, with a confidence that would  e arrogant if it weren’t earnest. “For every naysayer, we have 10 fans defending us on Facebook. We’d rather concentrate on bringing our next model to them.”

manu and michael

MANU JAIN, INDIA HEAD, XIAOMI (L): “For every naysayer, we have 10 fans defending us on Facebook. We’d rather concentrate on bringing our next model to them.” MICHAEL ADNANI, VP & HEAD – BRAND ALLIANCES, FLIPKART: “Manu ran a one-man show when Xiaomi launched. We solve a lot of problems locally, through relentless communication.”

Some like Amar Babu, managing director of Lenovo India, want more time before calling this an inflection point. “It takes years to build durable brands,” Babu says. “These companies have done something right, but it’s too early to comment on the future.”

University of Maryland professor and China expert Anil Gupta is more direct. He calls the “international” claims of Chinese companies “mostly hogwash”. “Even for companies such as Unilever or PepsiCo, it has taken a long time to become truly international, and they’re not yet there,” says Gupta. “In the case of Chinese firms, [government interference] will make things even harder.”

To others, the sudden burst of these companies suggests a neat formula. “It is no accident that they are mostly from the mobile space,” says Jayanth Kolla, founder and partner at Bangalore-based telecom consultancy Convergence Catalyst. “The Chinese are masters of the fast product development cycles associated with the business. It helps that this is the sector with the lowest entry barrier at the moment,” he adds, referring to India’s smartphone boom (it is the world’s third-largest smartphone market after China and the U.S.), fuelled by a customer base that is no longer loyal to the same old brands. The preponderance of the Android operating system has further levelled the playing field. Vineet Durani, director at the Windows phone group at Microsoft—which has hardware partnerships with Gionee, Lenovo, and ZTE—invokes the well-oiled, low-cost manufacturing ecosystem back in China. “ODMs in the Shenzhen area already account for some 40% of global production” with constantly improving quality standards, Durani points out, while echoing Babu’s reservations about the current hype.

Vohra says it simply: “If Indian companies [like Micromax] can have global ambitions using Chinese manufacturing, why can’t the Chinese themselves?” Except, as with most Chinese ambitions, this one’s not free of the spectre of geopolitical muscle flexing. The rise of these companies has coincided with an unforeseen crackdown against Western multinationals in China: Since August 2013, the government has imposed corporate fines potentially adding up to almost $2 billion on a who’s who of Fortune 500 companies. This includes a $489 million levy against Glaxo-SmithKline (GSK) on account of bribery—the harshest corporate fine ever in China (see ‘Beijing Pulls Back the Welcome Mat’, page 146)—and potentially $1 billion against Qualcomm for alleged antitrust practices. The Brookings Institution says the air for foreign businesses is thick with “fear and loathing”; The Telegraph (Britain) says the golden age of foreign companies is over; while a Forbes blogger simply describes China’s attitude as “mugging”.

The Chinese government is playing a two-pronged game,” says  Gupta. “One, they are making China less welcoming to Western companies. Two, as part of explicit national policy, they are supporting Chinese companies to go global and emerge as major players in as many industries as possible.”

Despite its diplomatic notoriety—which has been the dominant theme in its relationship with India too—China is known for its ability to keep aside dogma while doing business. India’s vast, hungry consuming class is lending a critical helping hand. Gupta says for many Chinese companies, especially in the technology sector, “India is emerging as mission-critical to realise their global ambitions,” because its bigger than any other market outside China.

Vohra confirms that “a company’s performance in India is a fair indicator of its global potential”. India’s newfound economic impetus after the formation of the BJP government in New Delhi also makes it a vital pitstop for Chinese businesses looking to make meaningful investments. The two economies have followed sharply contrasting trajectories in the recent past: While sentiment and growth forecasts have rebounded in India, China has experienced a prolonged slump. During President Xi Jinping’s recent visit to India, the buzz centred on China’s comedown from a promised $100 billion investment in India to only $20 billion. Working India’s high-profile mobile phone sector can mask some of that mood, and serve as a playbook for other Chinese businesses, which could use India not just a market but also as a tactical destination for their capital.


37%: SHARE OF UC BROWSER in India’s mobile browser market. That’s nearly 15% more than nearest rival Opera. Seen here are Chinese staff on deputation to its Gurgaon office.

TO DEMYSTIFY THE CHINESE government’s business stakes, Gupta classifies Chinese firms into three categories. First, there are the small and medium-sized ones that are mostly left to their own means and often resort to corruption to get work done. Perhaps they really don’t matter that much. Then, there are the large private-sector companies, such as automakers Geely and BYD, which often need formal government help in exchange for supporting its policies.

For instance, Geely used low-cost loans from state-owned banks to acquire Volvo Cars. In the third category, Gupta puts “the very large and high-flying” private- sector tech companies—including Huawei, ZTE, Alibaba, Baidu (a search and social media giant), Tencent, Lenovo, and Xiaomi—which receive “massive policy help”. For instance, Huawei and ZTE “get large, low-cost loans, subsidised R&D assistance from government labs, and preference in purchases from stateowned mobile operators (all of them state-owned)”. Baidu has benefited from the government’s decision to throw out Google and ban Facebook and Twitter. “These companies know that they owe their success heavily to the government,” says Gupta. “Thus, they can be expected to follow government diktat if asked to.”

With their growing global visibility, this last set of companies is in fact central to Beijing’s nationalistic surge. Consider that Alibaba’s block buster IPO took place amid global frenzy on the same day GSK was handed the fine.

Soon after, Alibaba’s charismatic founder Jack Ma was in India, reportedly mulling a partnership with e-commerce marketplace Snapdeal to enter India. In fact both Indian e-commerce leaders—Snapdeal and Flipkart—have repeatedly cited Ma’s company as an inspiration.) “[The IPO and the fine] are perfect examples to showcase the rise of China on both the economic and political fronts,” writes George Chen in the South China Morning Post. “Such a huge fine would have been unlikely 10 or 20 years ago when Beijing wasn’t economically or politically powerful enough to afford to get tough,” he adds. (Raveendra Chittoor, assistant professor of strategy at the Indian School of Business [ISB], Hyderabad, points out that China is not the only country to use such strong-arm tactics: “The U.S. humiliated Ranbaxy in much the same way.”)

Predictably, all the companies I spoke to deny any pressure to preserve the national character, or play a part in Beijing’s show of strength. However, things are hardly ever that black-and-white, if you believe the former telecom executive. “Until very recently, the Chinese government used to flaunt the international success of Huawei. But since it was thwarted in the prized U.S. market, the government’s affections have shifted to the new breed of consumer technology companies,” he tells me. Trouble is, in the muddy waters of China’s state-controlled capitalism, it’s often impossible to sieve fact from fiction. In February, Huawei opened up its books to the Financial Times, but the shadow of the past has proved difficult to shake off.

China graphic

TO BE FAIR, there’s more to the success of these “high-flying” companies than government backing. “The country’s domestic  firms are more sophisticated and  competitive,” writes Ian Bremmer, president of political risk consultancy Eurasia Group (‘The New Cold War on Business’, Gupta concedes that they have managed to cultivate strong leaders, giving them a “double-barrelled advantage”. Often, a preference for leaders with international and entrepreneurial experience runs through them. Xiaomi, for instance, pivots on Hugo Barra, its Brazilian head of global businesses, formerly a Google star in charge of Android product management. Cofounder Bin Lin built Google China’s mobile search team, while founder, chairman, and CEO Jun Lei is a serial entrepreneur and angel investor.

In India, the accent is increasingly on empowering locals with startup chops. Xiaomi India head Jain was CEO of e-commerce startup Jabong. His crack team: Myshkin Ingawale (chief of staff), founder of life-sciences startup Biosense, and Alpesh Ashar (head of after-sales service), who earlier grew Lakme’s salon business. Gionee’s Vohra too ran a gig as an independent consultant.

Earlier, the absence of locals in the frontline added to prejudices. “The average Chinese still has very low awareness  of India,” says ambassador Rao. “They see a dichotomy between the international success of some of India’s private sector companies and its slow infrastructure development, which they attribute to poor governance and democracy,” she adds.

The secretary of a Delhi-based trade and cultural advisory who didn’t want to be named says many Chinese companies still don’t see India as a long-term investment destination for those reasons. (China contributed a piddly $396.13 million to India’s $214.05 billion foreign direct investment receipts from Apr. 2000 to Feb. 2014, despite dominating the $65 billion bilateral trade relationship.) “Now, the allure of the Indian market has grown. The Chinese realise that they need to trust locals if they want a bigger share,” he says. Gionee’s Lu concurs that “the India business should be run by Indians”.

Michael Adnani, Flipkart’s vice president of retail and head of brand alliances, who was instrumental in bringing Xiaomi to India, has also noticed the increased trust. “Manu ran a one-man show when Xiaomi launched,” Adnani points out. (The team is now 50.) “These days, we solve a lot of problems locally, through relentless communication.”

To my charge that the Chinese are transactional, Adnani says Xiaomi never placed any demands when the partnership was being worked out. “The talk was all about complementing each other’s strengths.” However, there’s still a strong feeling that Chinese companies are only interested in squeezing India, unlike Western companies like GE and Philips, which have used India as a source of reverse innovation for their global practices. “Chinese companies may not feel the need to learn anything from India, because China itself is the world’s biggest laboratory for emerging markets,” says Chittoor of ISB. Vohra disagrees. “I am off to China to speak to our Chinese distributors about how business is done in India,” he says. “As the India business grows, so will our impact.”

Xiaomi’s Jain adds that the specific needs of India are increasingly at the centre of the company’s long-term thinking. “We now have customers from over 1,000 Indian cities, so our reach is well and truly local,” he says. “Our next plan is to identify mobile-services startups from across India to mentor and invest in. We are also thinking of building manufacturing and R&D setups in India.” Days before we went to press, Xiaomi launched its first made-for-India phone: a sub-Rs 10,000 4G device in partnership with Airtel; Apple’s iPhone 6 Plus, with which it claims to share several features, costs over six times more. (In another utterly un-Chinese gesture, Hugo Barra personally called journalists to attend the launch in Gurgaon.) Srini Gopalan, director of Airtel’s consumer business, calls it the first big step in making 4G a mass-market proposition, giving a fillip to the Internet ecosystem in India.

UC Browser has risen to the top on the back of similar localisation: Its interface is loaded with widgets of popular Indian portals, making it stickier than rival standard-issue browsers. More important, its data compression technology is tailored to offset the slow Net speeds in much of India.

AT BANGALORE’S POPULAR Techsparks entrepreneurship summit a couple of months ago, Jain was invited to share his Xiaomi experience, following speakers like Nandan Nilekani (former CEO, Infosys), Ravi Venkatesan (former chairman, Microsoft India), and Bikram Bedi (head, India region, Amazon Web Services). Jain got the reception of a rockstar, until a young ethical hacker from Pune asked him about “the server problem”. “How do you plan to get back the trust?” the lad sternly demanded, even as Jain tried calmly explaining how nothing Xiaomi does violates standard industry practice.

“The cyber world is a nasty, brutish one,” ambassador Rao reminds me. “Every equipment supplier or developer has the ability to access networks, and a scenario where such a company gives in to pressure from its government to use cyber warfare techniques … cannot be ruled out.” Rao adds that “everybody spies on everybody” is a reality in international affairs. “The Chinese have acquired a reputation in this game.”

That sums up the somewhat unfair burden on Jain’s ilk: For the first time in decades, the sniggering attitude towards Chinese companies seems to be changing. But given China’s “reputation”, and a government intent on using business for political leverage, the process might be a plod rather than a canter. Expensive marketing or virality on social media can deliver an instant spike in sales or market share, but to overcome the mental blocks in India, these companies will have to dig deep. “As they mature, they will realise that the typically Chinese approach of throwing money at a problem doesn’t work,” says Chittoor of ISB. “Earning legitimacy is a key test for truly global firms.”

Vohra is pragmatic: Don’t crib about things that are not in your control. “As a businessman, you can correct biases about your product, but not the political situation.” Friend Lu is more cheerful: “We have the right people, good culture, good business model, a great product and brand. God will acknowledge our effort and bring us good luck!”

(First published in the Fortune India 500 issue, Dec. 2014; illustration by Nilanjan Das, photos by Reuben Singh and Deepak G. Pawar)

How Politics Destroyed India’s Biggest Ever Science Project

The hills of southern Tamil Nadu will soon shelter India’s biggest basic-science hub. Unless canards bury it first.


Artist’s impression of India’s largest science lab – the Neutrino Observatory coming up near Madurai. Illustration by Nilanjan Das, based on actual site photograph.

THENI is one of those spots in Tamil Nadu that come comfortingly suffused with temples and lush scenery and the lingering echo of the Western Ghats. “Spicy green ornaments” is how the local administration’s website describes its key attractions. But the lyricism is under threat as the district, which is home to some 12 lakh people and has Madurai (100-odd km away) as its nearest urban callout, is put through seismic churn: It has been chosen as the site of a contentious Rs 1,500 crore neutrino observatory, which will come up under 1,200 metres of rock cover in the Bodi West Hills region.

Neutrinos, one of the most abundant and least interactive particles present in nature (the sun produces over 200 trillion trillion trillion of them every second), are often described as ghost particles for their elusive quality. Mumbai-based Tata Institute of Fundamental Research (TIFR), which is hosting the project, explains that the background of cosmic rays and natural radioactivity make it almost impossible to detect neutrinos on the surface of the earth. Though not nearly as fabled as the God Particle chased by physicists at Geneva-based CERN, the world’s preeminent science lab, TIFR says neutrinos hold the key to several fundamental questions on the origin of the universe, energy production in stars, and the structure of the earth. But that’s hardly the point. The observatory, unmatched in its scale, is a muscular statement of India’s arrival in the comity of Big Science, dominated by the West and feverishly courted by China.

For all that, it has raised the hackles of Vaiko, general secretary of Tamil political party MDMK. Claiming that the observatory will spell disaster for the people and environment at Theni and the neighbouring district of Idukki in Kerala, Vaiko moved the Madurai bench of the Madras High Court, prompting it to issue notices to the central and state governments. At the time of going to press, government lawyers were busy formulating their response.

“When we proposed to build the laboratory (the Cabinet signed off on the funding in January), local people were fearful as they did not know anything about neutrinos and why we need a big underground [setup],” says Naba Kumar Mondal, professor at TIFR and spokesperson for the project. “On top of that, some people, for whatever reason, started a campaign to mislead the locals by saying neutrinos are dangerous for human beings.” There were canards that the underground site will be used for dumping nuclear waste (fact: there will be no such thing), that agriculture will suffer because of the heat from the project (no heat will escape), and that the facility’s 2 km access tunnel will damage a dam which Mondal says is at least 50 km from the site. And then there were questions bordering on the ridiculous. Sample this from the project’s website: “If you are building a world-class lab, all the world’s eyes will be on it. What if an atom bomb is dropped on us?”

The project team enlisted a group of scientists to quell these fears. Locals were also told about the jobs the project would create and the benefits that students in the region could expect from the observatory’s outreach activities. But none of that has been enough to convince Vaiko, who is now persuading the people of Kerala to join his tirade. The day Fortune India visited the site, the road leading up to it was being laid. Initial orders for material have also been issued to Saint-Gobain (for the glass to be used in detectors) and Essar Steel, but the litigation has thrown a huge spanner in the works.

THE IMPASSE DISMAYS people like Mondal all the more because this project was seen as a salve after India lost out to relative minnow Pakistan in the race to become Associate Member at CERN (in December)—thanks to inordinate indecision on the part of the previous government. With it went the opportunity for Indian companies to access CERN’s annual Rs 2,000 crore component-order ecosystem, to speak nothing of the priceless learning that comes along (see ‘Business and the Big Bang’ in Fortune India’s January 2014 issue).

“Science cannot wait for government policy to fall in place,” says Bikash Sinha, former director of Kolkata’s Saha Institute of Nuclear Physics. Beyond its esoteric goals, particle physics is big business, with multibillion-dollar applications in everything from archaeology to nuclear medicine. Missing the CERN seat could well have set Indian science and allied industry back by at least a decade. India can hardly afford an encore.

Few know that neutrino research in this country has already traversed a circuitous path. The first underground laboratory to study the particles was set up at Karnataka’s Kolar Gold Fields (KGF) in the 1960s. The lab carried out several pioneering experiments in the area of cosmic rays and particle physics. In fact, atmospheric neutrino was first detected at KGF way back in 1965. The facility was shuttered in 1992, and serious discussion and preliminary work to identify a new location started in 2001.

In 2006, scientists submitted a detailed report to the funding agencies (Department of Atomic Energy and Department of Science and Technology) about an alternate location. “By 2009, we were almost ready with a site and received environmental and forest clearance,” Mondal says. “However, the government later declared that site as a tiger reserve, and the clearance was withdrawn. We were asked to look for a new site.” The team zeroed in on Theni in 2011 and received all the statutory clearances that same year. From then, it took four years to complete the process of funding approval. Apart from the funding agencies, the process involved a set of international referees, the Scientific Advisory Council of the Prime Minister, and the (recently scrapped) Planning Commission.

Meanwhile, China is galloping ahead with its own neutrino programme. Work started last year on the Jiangmen Underground Neutrino Observatory, located 700 metres underground in the Guangdong province, and reportedly costing $300 million (Rs 2,084.6 crore). The project has attracted 30 international partners and a fair amount of gung-ho press. When we last checked, there was no talk of armageddon.

(First published in the February 2015 issue of Fortune India.)

Lessons in Crisis Management: Keep Calm and Tell Your Story

Interview with Manu Jain, head, Xiaomi India, on how he managed the crisis after the Ericsson IP lawsuit that led to a temporary ban on Xiaomi’s sales in India.


“Do the right thing. Believe in your story.”

Job Experience
An IIT Delhi, IIM Calcutta, and ESCP Europe
alumnus, Jain co-founded e-commerce portal and co-created DINK Couple,
an urban-lifestyle cartoon series. He has also
worked at McKinsey and Company.

Xiaomi’s Beijing-based bosses trusted Jain with running the show singlehandedly in the world’s third-largest smartphone market, when the little-known company came here in July 2014. He has since grown the team, built the brand, and delivered spectacular results: In December Xiaomi India’s sales crossed a million devices, contributing handsomely to the $45 billion (Rs 2.8 lakh crore) valuation that makes Xiaomi the world’s most-valued startup—taking the sting off potentially damning speculation that the company’s Chinese servers were leaking sensitive user data. Jain was also central to the launch of an India-specific, sub-Rs 10,000 4G device, in association with Airtel. In 2015, he will look to expand the product line beyond phones, beef up aftersales service and R&D, and build a local data centre to allay cyber-security fears. More critically, the bosses will lean on him to overcome tricky hurdles that threaten to derail the company’s dream run—chiefly the patent-infringement lawsuit by chipmaker Ericsson that forced temporary suspension of Xiaomi’s sales in India.

“The Delhi High Court’s ex-parte injunction [prohibiting Xiaomi from importing and selling its devices in India, following allegations of patent breach lodged by Ericsson] came on December 8. It was a Monday. We had just come to our office in Bangalore, and Tuesday being our sale day, things were a lot crazy. A lawyer friend of mine came to know of the order from some of his colleagues at the court, and he immediately called to tell me about it.

At first, I was frankly taken aback; I never thought something like this could happen to us, neither had I faced a similar situation in my career before. After that initial feeling blew over, all I wanted to do was to find out more about the case rather than send out an emotional reaction. I wanted to know exactly what had gone wrong, and what its implications were for our operations.

It took us till Friday to get a copy of the court order. Till then we were a bit blindsided, although various people, including the media, were filling us in on the details.

After going through the order, we set our own response in motion in consultation with our legal team. I had, of course, spoken with the headquarters in Beijing and with Hugo [Barra, Xiaomi’s international business head], in order to understand if there was any history in the company of dealing with such a case. To my knowledge, there’s no precedent. But at no point was there any kind of anxiety or unnecessary pressure on us from the founders or the senior management. We were only worried that till we were able to seek legal recourse, the ban would disappoint the huge number of Xiaomi fans in India. We wanted to address their concerns in whatever way we could, without doing anything that might lead to contempt of court.

One of the first things I did was to gather my team and tell them that we are very confident about restarting sales soon. With our call centre agents, things were a bit trickier since worried customers had started calling them with all sorts of questions: “Will Xiaomi continue in India? What will happen to service now?” and the like.

We tackled information flow to the call centre in three phases: Till we got the court order, we instructed all our agents to be honest with customers and tell them that we didn’t have all the answers just yet, but were doing everything possible to get more clarity. Then, towards the end of the week, we published a Facebook post informing all our fans about the temporary suspension of sales and told the call centre to communicate likewise with customers. We told our agents to let customers know that the December 16 sale for Redmi Note [Xiaomi’s latest model in India] wouldn’t happen. Finally, when on the 16th afternoon we were allowed to resume sales [for our Qualcomm chipset-based products] after an appeal hearing, we conveyed the development to the call centre pronto.

The episode had two big lessons for me: First, during a crisis, it is critical that the leader keep everybody aligned through crystal-clear communication. It is particularly important to empower the front-facing people—the call centre, the social media crew, and the service centres—because those are the guys the customers come to when they are apprehensive.

Second, all the channels should then send out consistent messages to the customers. These two lessons were underpinned by my belief that when the chips are down, a leader must resist the urge to react impulsively. You must first collect all the information needed to form an educated response, and take everyone on board.

Another key lesson was the organisation’s belief in doing the right thing. All through, I was consistently told, “We believe we are on the right path, and we should transparently tell our own story to the court.” We got only three days to present our case before the court the first time. We were able to demonstrate that we already have some of the licences, and the interim relief has been a great confidence builder. Now that we have had more time we are confident of putting together a stronger argument. We have also said from day one that we are open to out-of-court discussions.

Meanwhile, we are working towards putting together a risk-mitigation plan so that such issues don’t take us by surprise in the future. Hugo and I have also been thinking about helping the government and regulators better understand us and our business model.

The support that we have received from our fans has redoubled our resolve to be a long-term player in India, and proved that we have made the right choices. Within hours of a Facebook post announcing that we were resuming sales, we got 2,500 likes, 500 cheery comments, and 400 shares. Our registration numbers didn’t get hit either. In four days after the pro-tem order, we got about 2,200 registrations for the next sale.

Our time and energy are now fully dedicated to our 2015 plans. Any consumer tech company today faces the spectre of commoditisation, and the only way to survive is through rapid innovation and high-quality service. In line with that, we will bring many more products—notably the Mi Band, and my personal favourite the Mi TV—to India much faster after their launch in China; scale up our exclusive service centres; develop R&D; help build the mobile services startup ecosystem; and establish our own e-commerce platform. Avoiding litigation will be a concern, but we have much bigger things to worry about.”

Photo courtesy: Reuben Singh; first published in Fortune India January 2015 issue

Prize Catch: The world’s most powerful teenager just won the world’s biggest prize. Here’s why an ex-techie from Bangalore is kicked about it.

Malala Lead

With looks like Hagrid the gamekeeper from Potterverse, 31-year-old D.N. Guruprasad is of a piece with the heaving shelves at Aakruti Books in Bangalore’s Rajajinagar area. He started the basement store in 2010 after dumping a career in software engineering, and soon turned a passionate publisher of Kannada books. Aakruti has brought out 17 of them till date. But passion aside, Guruprasad says this is a cruel business. “We struggle to sell even a thousand copies of a book.” Of late though, Guruprasad has found fresh reason to be excited: Partnering with Malayalam,Tamil, and Marathi publishers, he has acquired the rights to produce a local edition of Little, Brown and Company’s global phenomenon I Am Malala.

“The news of Malala’s Nobel Peace Prize has created a lot of buzz around an already terrific product,” he tells me, as he hands out invites to the launch scheduled for the following weekend. (The Kannada translation by journalist Jayprakash Narayan is the first of the four editions to be published.) “I am expecting to do at least 5,000 copies in a year.”

In my one hour at the store, several customers walk in enquiring about Naanu Malala. A few days later, Guru messages me: “The launch was a blast. Close to 400 copies sold in a couple of days!”

malala 2

D.N. Guruprasad with Naanu Malala at Aakruti Books, Bangalore.

Every year, the announcement of major international awards triggers frenzied commentary on the windfall for publishers. The Guardian, for instance, says Indian author Aravind Adiga’s The White Tiger—published by Atlantic Books in Britain and HarperCollins in India—sold over 1,600% more after winning the 2008 Booker Prize (pre-award week sales: 463; prize week sales: 8,033), citing data from industry monitor Nielsen Bookscan. Last year’s literature Nobel for Canadian author Alice Munro delivered similar returns, with sales of her titles reportedly spiking by anything between 4,424% (for English versions in Canada) to 4,213% (Italian translations). But such analysis is rare in India—despite boasting the world’s largest English publishing industry after the U.S. and Britain, and darlings of the award circuit like Adiga, Arundhati Roy (Booker, 1997), Jhumpa Lahiri (Pulitzer, 1999), Kiran Desai (Booker, 2006), and Siddhartha Mukherjee (Pulitzer, 2011). Nielsen Bookscan is present in India too, but it did not respond to my questions.

Thomas Abraham, managing director of the Indian arm of Hachette Book Group, which owns Little, Brown, attributes the lack of interest to the fact that publishing is not often viewed as a business in India. “The truth also is that awards, with certain set exceptions, affect sales very little.” No major Indian award for works in English—the Crossword Book Award, the Hindu Fiction Prize, or the DSC Prize for South Asian Literature—has any significant impact on sales. Among international prizes too, only the Booker really matters. “It can take sales from zero to 20,000 to 25,000 levels,” says Abraham. “If there’s an Indian connection, you’re talking about sales hitting 200,000-plus. The Nobel and Pulitzer matter only if there’s a strong Indian subcontinent connect, or if the author were a big brand anyway.”

Malala ticks both boxes, even though she hasn’t won the Nobel for her writing. Abraham expects sales of I Am Malala to double post the prize, reaching the 100,000 league. (In contrast, he says the obscure French author Jean Patrick Modiano, who won the literature Nobel this year, wouldn’t find much love.) The book has led the HT-Nielsen Bookscan bestsellers list in India the past few weeks, and Abraham says there are plans for a children’s edition “which we’ll push hard to schools. We’re hoping she’ll come over, but that depends on her school schedule.”

Malala’s unsung contribution could be putting people like Guru on the map. V.C. Thomas, publishing director at Thiruvananthapuram-based Olive T—which specialises in Malayalam translations of foreign titles—played a key role in bringing together the four regional publishers. He says, “Even the names of some of our languages are alien to foreign publishers and agents.” That was the main hurdle, since at $500 to $600 (Rs 30,000 to Rs 36,000) for an initial print run of 2,000 copies, the rights didn’t cost the earth (they were negotiated before the Nobel). Luckily, Thomas managed a recommendation from an editor at Little, Brown’s U.S. office, who had attended the Frankfurt Book Fair Fellowship with him. The group then discussed price-sensitiveness, typical to the vernacular markets: The translations will be priced at about
Rs 250, compared to Rs 399 for the original. “Finally, Little, Brown was happy to deal with four language territories at one go,” says Thomas.

Thomas believes that success for the translations will attract global attention to India’s regional publishing scene. At the same time, he says the hype around the Nobel is fanning demand for spurious versions of the book, at least one of which is already doing roaring business in Kerala.

Guru meanwhile is grappling with a more philosophical question: Translating a hit may be good business, but it takes away from the focus on promoting homegrown talent. For the moment though, he has made peace. “People have rejected Kannada books because they aren’t happy with what’s generally sold,” he says. “We need strong content [like Malala] to bring them back.