Friday, 28 October 2011

Macro Level Trends – India Autos (Part 1) – Mid-Term Re-Assessment of the 2016 Plan

With the stagnancy previously witnessed in US markets and emergence of the Eurozone crisis , institutional investors, investment banking divisions and long-term individual retail investors have been scouring those late-industrialised (notionally EM) countries for good news growth stories.

The beyond BRICs story is well understood, many of the investment pioneers for some time looking to the 'Next 11' countries across S.America, MENA and CIS regions, with the vanguard of the pioneers evaluating the long-term pictures of those still largely closed sections of Asia, such as Myanmar (old Burma), Sri Lanka, and even North Korea given its commercial exportation of its labour into neighbouring areas such as Mongolia.

Whilst off of the mainstream radar, the 'Next 11' have seen ever increasing levels of both FDI and where possible company stock purchases from foreign sources, yet the now well established BRICS whose economies have softened in recent times given the diminished export reliance upon the West, because of their innate size, still pose alluring interest for western investors.

China has undoubtedly seen contraction, but growth rates are still impressive compared to a stagnant West, with a massive internal demand being policy-moulded to shift from savings and property investment toward and expansion of private consumption. Russia's boom and bust record may well repeat itself as with boom-times what with Putin re-appearing increasingly front and centre on the political stage and seemingly set for a come-back when a much needed global recovery may come into being, itself assisted by Russian commodities exportation. Brazil is mimicking China's policy approach of internalised demand given the natural decrease in its own China-led exports of various commodities , political focus now upon a reduction of the livings standards gap between the 'haves' and 'have-nots', where budget surpluses can be transformed into new infrastructure, housing, shovel-ready jobs and and a broader, deeper consumer class.

But what of India?

India Overview -

India by contrast appears 'dynamically positioned' somewhat between Brazil and Russia, sat in a sphere where the socio-economic base for improvement is immense given its 1.21bn population and the theoretical room for commercial opportunity equally large. Yet the political and bureaucratic fragmentation of the 3.3m square mile landmass, the historically entrenched hierarchies and arguably impeded monetary flows have arguably simultaneously undermined and yet paradoxically structurally supported economic growth and social well-being.

Since its Independence in 1947 it operated a largely socialist orientated 'mixed' economic policy, its technological advances largely based upon imported and licensed 1950s/60s technologies from the British, Italians and Germans, many of those products in the form of scooters, motorcycles, three-wheelers still manufactured (with periodic modifications) to this day, whilst the iconic Hindustan Motor Ambassador car has only recently been discontinued, though still very visible around the country.

The recent edition of The Economist (22-28 Oct) provides a very insightful overview regards the present state of affairs inside India.

Given the turbulence in the western world, it notes the seeming paradox that the heavily regulated country has yet been able to create and maintain growth. That done so thanks to a mix of often family-led conglomerate enterprise, internally malleable yet perfectly legal accounting practices, the ongoing new middle-class desire for 'prosperity-goods', an adaptation of that mid-stream consumer culture for adoption by the 'bottom of the pyramid' by way of discreet 'single-shot' packaging (extending the cigarette sales method) and modification of products to suit necessarily price sensitive user needs. These functional and emotional consumer needs met by both entrenched conglomerates, state-owned businesses and a mix of 'public-private' companies.

Interestingly, though there are a few big-name exceptions in IT and e-commerce, the general rule appears to be that the true entrepreneurial class has been very much conspicuous by its absence over the last decade. This then apparently in stark contrast to the new business trend which emerged in the 1990s after the decreed 1991 “official” abandonment of the 'Raj Licences' in operation since 1947.

That very fact seems to suggest that those previous entrepreneurial engagements typically within the IT enabled sphere of software development, BPO and corporate call-centres may have been somehow intentionally promoted or possibly subtly sponsored, given the pressing need for India to quickly enter the various realms of the expanding service sector, thus able to simultaneously broaden its commercial activities, climb onto higher rungs of the value-ladder (especially regards software) , put large sections of its massive young labour force to work in more educationally useful arenas and simultaneously quickly join the ranks of the developed world, albeit still with a 'developing' bulk to administer.

The 1990s was indeed a period of rapid technological and social change for many advanced countries, but the greatest 'value-gap' leap to be gained was undoubtedly by India. The emergence of software and IT consulting divisions amongst old-name conglomerates - themselves able to internally leverage and so develop such knowledge – plus the new crop of start-ups and 'new-age' publicly listed companies on the Delhi & Mumbai Exchanges stand as a testament to the era.

In contrast, whilst the 1990s were a phase of very obvious progressive new industry commercial transition, the 2000s appears to have been a phase of seemingly slower but potentially as powerful metamorphosis of its smoke-stack industries. Automotive perhaps the most obvious, with a national recognition to leverage its labour-force and geographic position and once again reach outward (as it did in the 1950s) to absorb global best practice. The prompter for this being the Indian Auto-Sector's 10 year plan.

The Automotive Sector -

The raised levels of personal wealth, amongst the 'old money' industrialists, the 'new money' entrepreneurs and a much inflated new middle-class within metro and urban areas, have been plain to see. With a far less powerful 'ripple effect' wave expanding outward from 1st, 2nd & 3rd tier cities into countryside towns and villages by way of 'repatriated' presents and earned incomes for grand-parents, parents, siblings and children.

The last 20 years of economic expansion, educational improvement and consumer aspiration – itself formed by Bollywood and Western 'lifestyle' depiction – has dramatically altered urban and suburban life, whilst partially doing so at least perceptionally via the satellite TV in the broad rural 'hinterlands'. And of course there is no greater symbol, of that upward rise in social mobility than the motor vehicle itself both metaphoric and physical. This the case whether scooter, motorcycle, car, and specifically in recent recent the desire amongst the upper middle classes for the SUV.

Whilst the proliferation of HGV, MCV and LCV trucks and commercial 'pygmy' 3/4-wheelers visibly highlight the ongoing expansion of trade across suburbs, cities and the country at large. The once rickety aged long-distance bus – once little different to the local route bus – is undergoing a technological transformation (often with foreign input) thanks to a mix of drivers; namely inter-city route competition, a still uncomfortable '1930s' train service and the emergence of low cost airlines. And similarly, a drive for improved economies of scale, delivery reliability & speed aswell as market share growth ambitions has led to truck manufacturers seeking to better serve road-haulier companies with ever better trucks, larger payloads, containerisation and better ergonomics assisting the process.

Yet it has been the car industry, given its scale and so economic impact as a new value provider, that led to India's realisation that it must re-align and modernise its auto-industry and the players therein.

India's Automotive Mission Plan (2006-2016) -

The ten-year plan was presented in 2006 by the Ministry of Heavy Industries and Public Enterprises, at the time noting that since 1991's de-regulation of the sector, FDI had indeed flowed into India from foreign VMs and production figures had increased from 2m units to 9.7m units over the preceding 15 years.

Even more poignantly today, the report's preface noted that “the increasing pull of India on the one hand and the near stagnation in markets such as USA, EU & Japan on the other, have worked as a push factor for shifting new capacities and FDI to India.” Moreover the preface noted that by 2006 “increasing competition in auto companies has not only resulted in multiple choices for Indian consumers at competitive costs, it has also ensured an improvement in productivity by almost 20% a year in the auto industry, which is one of the highest in Indian manufacturing”.

In order for this transformation to continue the Development Council on Automotive & Allied Industries selected various stakeholders from industry, state planning and academia to form a task force that could plot a 10 year plan. Itself to noted that the obstacles of future growth were to be identified and removed, that infrastructure development was key, and that a 'flat playing field' be created so that all new investors – domestic and foreign – could undertake far more transparent investment decision analysis.

The Automotive Mission Plan (AMP) was the outcome: “to map challenges, set targets and evolve mission mode for implementation of agreed milestones”...”examining policy parameters as well as manufacturing infrastructure, addressing issues ranging from induction of technology to labour law reforms to R&D needs, fiscal and policy parameters, HR development, growth of domestic demand and exports and environmental and safety concerns”.

The primary conclusions were:

1. To improve previous rapid manufacturing growth, so as to move beyond the 'lowly' 2.37% share of world production (66.5m vehicles in 2005) and rise well above the 0.3% of global international automotive trade that India then held.

2. Recognition that to attract the higher-value, correlated technical & IPR activities of R&D, NPD, Testing etc. a level of manufacturing competitiveness was necessary which derived from measurable efficiencies in the deployment of plant capital and labour (the basics of CapExp & ROI).

3. Recognition that the Indian business model to date – depending upon an abundance of cheap labour, weak currency, low interest rates and concessional duty structure, were in the long-run, untenable. [As has come to pass]. Thus a need for expansion via vertical and horizontal integration into auto-associated business areas – from metals to petroleum products to vehicle aftersales - that were viewed by another government agency as offering high potential. Also recognising an outcome effect to assist the agricultural sector via greater mechanisation

4. Recognition that expansion of the new middle class (est 450m in 2006) would be sustained only via leveraging India's innate advantages: a trained workforce at competitive cost, improving credit facility conditions and local availability of raw materials. These to be used to attain 2 prime ambitions of producing “best quality products at lowest cost to consumers” and “developing & assimilating latest sector technology”.

5. Recognition that an improvement in trained manpower and infrastructure improvement was necessary, with the use of “specialised and industry specific initiatives”. To this end National Automotive Resting and R&D Infrastructure Project (NATRIP) introduced for testing, certification and homologation needs. A similar effort required for education, training, development, market analysis and formulation and dissemination of courses.

6. Noted that the auto-industry has organically grown in cluster formations, “linked by commonalities and complimentaries” primarily in Manesar in the North, Pune in the West and Chennai in the South, Jamshedpur-Kolkata in the East and Indore in the Centre. These areas to be of special development activities for education and infrastructure (transportation & communication), streamlining of government institutions to assist the process.

7. “The Automotive Mission Plan intends to double the contribution of the automotive sector in GDP terms by 2016, taking turnover to $145m through the special emphasis of exporting small cars, MUVs (utility vehicles), 3-wheelers, 2-wheelers and auto components”.

2006 to Date -

The period after the release of the plan has shown itself to be positive indeed, the figures below – provided by the Society of Indian Automobile Manufacturers (SIAM) - highlighting the maintained traction of the indigenous sector.

Sector Turnover:
2004-5: $20,896m
2005-6: $27,011m
2006-7: $34,285m
2007-8: $36,612m
2008-9: $38,238m

Domestic Production (units)
Comm.Vehicles vs Cars vs 3-wheelers vs 2-wheelers:
2004-5: 353,703 vs 1,209,876 vs 374,445 vs 6,529,829
2005-6: 391,083 vs 1,309,300 vs 434,423 vs 7,608,697
2006-7: 519,982 vs 1,545,223 vs 556,126 vs 8,466,666
2007-8: 549,006 vs 1,777,583 vs 500,660 vs 8,026,681
2008-9: 416,870 vs 1,838,593 vs 497,020 vs 8,419,792
2009-10: 567,556 vs 2,357,411 vs 619,194 vs 10,512,903
2010-11: 752,735 vs 2,987,296 vs 799,553 vs 13,376,451

Domestic Sales (units)
Comm.Vehicles vs Cars vs 3-wheelers vs 2-wheelers:
2004-5: 318,430 vs 1,061,572 vs 307,862 vs 6,209,765
2005-6: 351,041 vs 1,143,076 vs 359,920 vs 7,052,391
2006-7: 467,765 vs 1,379,979 vs 403,910 vs 7,872,334
2007-8: 490,494 vs 1,549,882 vs 364,781 vs 7,249,278
2008-9: 384,194 vs 1,552,703 vs 349,727 vs 7,437,619
2009-10: 532,721 vs 1,951,333 vs 440,392 vs 9,370,951
2010-11: 676,408 vs 2,520,421 vs 526,022 vs 11,790,305

Exports (units)
Comm.Vehicles vs Cars vs 3-wheelers vs 2-wheelers:
2004-5: 29,940 vs 166,402 vs 66,795 vs 366,407
2005-6: 40,600 vs 175,572 vs 76,881 vs 513,169
2006-7: 49,537 vs 198,452 vs 143,896 vs 619,644
2007-8: 58,994 vs 218,401 vs 141,225 vs 819,713
2008-9: 42,625 vs 335,729 vs 148,066 vs 1,004,174
2009-10: 45,009 vs 446,145 vs 173,214 vs 1,140,058
2010-11: 76,279 vs 453,479 vs 269,967 vs 1,539,590

These figures then show:
A near doubling of the sector's value in monetary turnover between the accounting years 2005-6 to 2008-9.
Production statistics show a 160% increase for trucks between 2005-6 and 2010-11, a 195% rise in car production, 165% rise in 3-wheeler manufacture and 161% rise in 2-wheeler assembly.
Sales-wise, a 212% rise in commercial vehicle sales over the 7 year period, a 237% increase in cars, a 171% in 3-wheelers and a 190% in 2-wheelers.
Export-wise, a 254% rise in truck exports, 272% for cars (demonstrating its ambition as small car export hub), an impressive 404% in 3-wheelers and mighty 420% rise in the exportation of scooters and motorcycles.

Volume unit statistics of course do tell the full investment-reward story, but are able to depict the trend toward far greater road-based mobilisation for individuals and the masses. A more than doubling of new car use illustrates the size and consumer power of the new upper-middle class. The quadrupling of new motorcycle sales not only shows the consumption habits of the the new lower-middle class but implicitly suggests that the used 2-wheeler market is being made more accessable to those previously nearer to the 'bottom of the pyramid'.

Importantly during this period, whilst the impact of the western financial crisis was marked in 2008-9, a rampant rebound in production, sales and export levels was indeed experienced, which may have led to many in the country's industry becoming over-optimistic about the immediate and mid-term outlook. The emergence of the recent global economic slow-down, in which China's “heavy or soft landing” holds so much sway, will have done much to rein-in overt enthusiam.

To assign the dramatic scale-up and investment rewards seen between 2004-2010 to the 2006 plan would be an obvious folly, since such results are directly related to the industrial planning, FDI reasoning and infrastructure building of the previous 'paper-based' era. The positive and negative outcomes of the 2006-2016 plan – and importantly if not the ability to forecast events, the in-built flexibility to react to events - may only start to be judged from 2012 onwards.

India's Major Players -
(Passenger Cars)

The seemingly innately entrenched famous Indian brands stemmed from either pre-1947 typically family enterprises, from formation in the 'Socialist Era' between typically 1947 to its depletion in 1980 and thereafter from the formation of joint ventures with foreign manufactures. These companies were typically charged by the state to satisfy and develop variously different automotive sectors, typically in a chronological manner as the country's economy expanded, so offering better and more costly transport choices, from trucks and 2/3-wheelers to cars and premium vehicles.

The Car and SUV main players and their respective models today are:

Maruti-Suzuki –
800, Alto, Alto K10, Omni, Gypsy, Estilo, Wagon R, Eeco, A-Star, Ritz, Swift, SX4, Dzire, Grande Vitara, Kizashi

Tata Motors -
Nano, Indica, Vista, Indigo (CS & XL), Manza, Sumo, Grande, Venture, Safari, Xenon, Aria
(this excludes Jaguar Land Rover vehicles and those offered via Tata dealers in co-operation with FIAT)

Mahindra & Mahindra -
Major, Xylo, Scorpio, Bolero, Thar, Verito, Genio, XUV500.

ICML (Sonalika Group) -
Rhino Rx (variants of same basic model)

Premier Automobiles Limited -
RiO (Kia)

Hindustan Motors -
servicing discontinued Ambassador and retail channel for Japan's Mitsubishi Motor products

Present Market Conditions -

Recently released figures from SIAM indicate that cumulative (all segment)YoY production growth has been maintained through 2011, the April – September figures showing a 16.6% rise YoY, with a September production rate 19% above the previous year's monthly output.
Cumulative (all segment) sales growth appears to continue to be impressive rated at 14.4% across the April-Sept period, and at near 20% for September specifically.

However, in reality the recorded sales have been a 'mixed bag' dependent upon segment type. 'All Passenger Vehicles' showing 6-month growth levels at 1.84% YoY. An exact breakdown of figures is unavailable, but SIAM's report states that Passenger Cars declined by -1.36% in the period, whilst MUVs climbed nearly 10% and Vans climbed nearly 20%. All products categorised in Commercial Vehicles (thus LCVs, MCVs and HGVs) saw a YoY increase of 17.5%, LCVs at 29%, MCVs & HGVs at 6%. Three-wheeler sales were mixed, goods versions up 16.5% whilst passenger verisons declined by 3.7%. Two-wheelers saw growth of 17.4%, mopeds by 13.5%, scooters by 23% and motorcycles by 16.5%.

In the export realm, all vehicle groups amalgamated saw a rise of 32% YoY for the similar period,
Passenger Vehicles up 21%, Commercial Vehicles up 36%, Three-Wheelers up 50% and Two -wheelers up 32%.

This then indicates that as a general trend much of the industry, its production base and demand base appears fundamentally sound, indeed in rude health given the expansion rates in some sectors, especially those B2B related.

However, the general trend drop to 2% in domestic passenger cars sales should be a cause for concern, no doubt a result of the nation's inflation rate deterring credit-enabled sales amongst inhabitants of the new middle-class, and the increasing likelihood of global conditions slowing national growth and optimism.

Interestingly, the SIAM report appeared not to mention a full breakdown of manufacturing, segment by segment, just providing an overall multi-segment impression of all being good. This, investment-auto-motives believes, is an intentional ploy by the Indian authorities to hide the real state of affairs presently inflicted on the nations car market.

Maruti-Suzuki, the well respected and largest manufacturer of small & compact vehicles (cars,4x4s and CVs) has seen a major decline in its sales over September, down 21% for all vehicles, the drop attributed to production capacity issues restricted by labour-issues at the Manesar plant.

Web reports state that “Maruti-Suzuki saw a decline of -23.5% in its best-selling compact class brands such as Maruti 800, Alto, A-Star and WagonR, with the total sales at 37,324 as against 48,780 in the same (September) period last year. The mid-size compact car segment, which includes brands such as Swift, Estilo and Ritz, fell by 9.3% at 19,722 units as compared to 21,749. The.Dzire model dropped 9.9% in sales at 9,411 units from 8,566 units reported in September, 2010. Sales of sedan segment cars including SX4 (mini SUV) declined dramatically by 90% in the month under-review and stood at 196 units as compared to 1,965 units in the same period in 2010”.

It is believed that the very well market and policy attuned Maruti-Suzuki may have actually welcomed the production problems, recognising that any such precursor to an Indian economic slow-down would help slim production levels and so deplete any sizeable factory and dealer inventories that may exist after the ongoing previous production and demand boom.

Other manufacturers may be enjoying the Maruiti-Suzuki partial absence from the market, and may be maintaining their own output levels relatively high tt actual demand to enable per unit ex-factory cost efficiencies which may be translated into vehicle discounts within the marketplace. Or possibly seeking to sell the vehicles at greater 'scale-discount' levels to dealer groups who will in turn be required to hold those vehicles on their own inventories (instead of those of the manufacturer) seeking to possibly maintain forecourt levels over the mid-term and their own maintain margins as a safeguard against similar labour problems spreading to hit other VMs.

Thus the domestic demand in passenger cars may be faltering as consumer's own confidence starts to wane in the face of greater purchase headwinds. This s not to say the general mid and long-term growth trend is under any threat of being de-stabalised – almost an impossibility given the massive potential still to be gained form the burgeoning upper and lower new middle classes.

Simply that the global economic headwind troubles appear to be strengthening, and with it a realisation amongst the generally well informed Indian populace that belt-tightening measures in family budgets are necessary.

This belt-tightening will very probably be seen by corporate India, which will in turn start to diminish sales of Cvs at the higher and lower ends of the segment spectrum, ie HGVs and commercial 3-wheelers.

The EM Slow-Down -

As seen, India's auto-sector did not escape the B2B and B2C consumption contraction created by the 2008 financial crisis, however it did re-rise over the following 2 years with traction that saw it surpass the previous record production, sales and export levels This then showed the strength of the then EM economies that had, for a period, ostensibly decoupled from reliance upon the West. An 'economic circularity' had indeed grown, especially between Brazil and China and Africa and China. But the more western-facing and politically western-entwined India, with its own historic frictions and competitiveness concerns with China, was not so able to distance itself from the Triad regions, indeed its close industrial links such as with Japan's Suzuki and more recently Britain's Jaguar Land Rover arguably prohibit – in the near and mid-term at least - any effort to do so.

However, although investment-auto-motives believes that large sections of broader EM economies have indeed de-coupled, the problem facing India – like so many other progressive nations – has been a slow degradation of intrinsic international commercial competitiveness. Its own successful growth story has driven up input-price pressures (esp so regards qualified labour), pushed up domestic inflation rates with a 2010 CPI peak of 10% (showing 9% today) which in turn affected the upward re-valuation of the Rupee on FX currency markets, and critically for some time hindered the investment compulsion for Indian companies without access to lower cost foreign capital markets.

In summary, the previously ever reliable 'value-gap' that boosted Indian commerce across global markets had been diminished and yet a credit-financing trap had emerged (as admitted by TATA Motors) for many. A similar story was being run in China and Brazil, but perhaps not to the same extend as India, with seemingly more fluid internal capital markets available and the previously mentioned lower level of reliance upon the West.

Moreover, the socio-political events that have over the last year come to pass in the Middle East may have added greater discomfort for India.

Exports to the GCC region and across MENA countries will have contracted given the political and socio-economic upheaval across the region, whether in 'new' countries such as Libya and Egypt to steady sovereign states such as Saudi Arabia and the UEA. So trade initiatives such as the truck CKD trade agreement with Oman – itself small and intra-regionally GCC trade dependent and keen to enlarge its own truck-assembly centre - will have in some way been affected; whether relative to numbers of units imported and assembled, to the rate of plant expansion, itself key for Oman's economic development.

Seeking New Export Hopes -

This and other aspects may be behind the recent softening of India's stance with Pakistan, specifically regards WTO rules pertaining to Pakistan's exporting to the EU, but perhaps more tellingly the fact that visa requirements for Pakistani business people in India will be relaxed, so as to nurture increasing trade.

This then necessary to help lower Indian ex-factory costs through alternative or relocated supply chain companies, a seeming political move to demonstrate a greater willingness to deal with Islamic countries (now that the terrorist threat has abated) and perhaps an effort to be seen to unhinge India from its historic and overt western reliance. If indeed so, probably undertaken for internal and popularist reasons so as to try and better unite the country. What ever the reasons, any emergent new trade agreement with Pakistan would serve as seemingly much needed alternative export route for the Indian auto-sector. The mutuality between the two countries being specifically the respective production and demand for more rudimentary yet robust 2-wheeler, 3-wheeler, truck and bus offerings, which have been adapted and devised as personal and mass transport solutions for 'developing' areas with poor roads, only basic infrastructure and unreliable public transport networks.

Thus expansion into this market (and similar) would allow India to leverage far more secure relations, its own FDI efforts toward a bridging supply base and perhaps high-labour content assembly base, in turn allowing homeland company's own workforces to be moulded around focus upon higher value activities within up-stream R&D and down-stream Retail.

[NB Any outsourcing of work to Pakistani sub-contractors must avoid any temptation by Indian middle management to “show who is boss” in face to face roles with Pakistan suppliers. Corporate policy diktat created and used as necessary for all Hindus, Sikhs, Muslims etc interacting over the border or indeed within company offices in India].

Conclusion -

Like its EM counterparts, the Indian vehicle market saw monumental growth throughout the last decade, a doubling of vehicle manufacturing output regards cars and trucks and a quadrupling of output regards scooters, mopeds and motorcycles.

[NB it was the latter segment's dynamics, not that of conventional cars', that led TATA Motor to seek out consumer segment migration opportunities (from bikes to cars) with its previoulsy notional “1 Lakh” Nano model].

This has been the understandable levl of optimism throughout the recent past, where a supercharged Indian economy, build on the back of global B2B and B2C demand across all spheres from commodities mining to west-to-east BPO activities, all of which were captured by India's longstanding conglomerates and underpinned a massive expansion of what had been the previous decade's new Start-Ups.

That in turn added not just ongoing confidence in the burgeoning middle classes, but a true sense of personal wealth (at long last) generated by earnings that could be tangibly touched in their pockets, viewed in their bank accounts and provided a sense of economic, personal and social well being; those funds, much of which was saved given natural instict, to service the country's investment needs through both governmental and private enterprise schemes.

1991 onward has shown itself to be very probably the most transformative period in India since colonial times; this time to the benefit of those who were willing to be trained, educated and work hard in the ever 'pseudo-american' corporate arena or through private effort. The mix of IT empowerment, closely allied conglomerate structures, youthful enthusiasm and an increasing attitude toward free-marketeering – even if not actually state enabled - was the mingled bed-rock for the growth seen across all vehicle groups.

Whilst undoubtedly Indian auto-manufacturing did not escape the reverberations of the 2008 financial crisis, the EM propulsion story made it but an temporary aberration.

However, today the global slowdown looks to create very real headwinds for the Indian manufacturing success story.

Headwinds which look all the more severe and all the more likely to see a 'hard-landing' (unlike China's ability to manage a soft-landing) when the dis-connect between India's high internal inflation rate and a markedly risen Rupee is set into the context of a not so subtle global devaluation war.

[NB the Rupee's high value cannot even be exploited in FX markets given that India, being resource rich, typically buys-in/imports little in the way of commodities, and even of that which it does, the present picture would discourage such actions, so unable to leverage the currency strength].

That Indian slowdown has started to appear increasingly worse, especially versus other BRIC nations which can arguably better sustain a necessary model of internal investment-led policies from SWF and similar monies & higher levels of consumption demand so recycled into indigenous investment. As growth contracts in those old BRIC nations growth contract, little Indian assistance is given by a stagnating EU stagnates.

The rare glimmer of hope may be the US, where its (possibly over-stated) 2.5% growth rate of late offers hope of economic traction and a corporate led slow slow recovery. But of those US corporates, far less BPO and similar will be fed to India given the internal requirement to provide American jobs. Right now, the US looks to its home advantage.

This then serves up India's business leaders with a very challenging menu to address; the auto-sector perhaps with one of the greatest economic exposures, and one which perhaps only striong balance sheets will be able to deftly deal with.

This will be reviewed in a following web-log, which looks to the business positioning of the various main players, but before that assessment, the next web-log provides an outline of how the India looked to the future, and perhaps realised that overt radical strategic change of its sector - as explored - would be both untenable and indeed a false panacea.

In the meantime, given the arisen picture, the not so subtle 'India Interest' template that sees the milieu-mix of closely knit historic families, senior business leaders and administrative 'governors', looks like it could well be about to be subtly re-activated to ensure as smoother a path as posible into the near term rocky future.

The next few years then may well be ones of auto-sector change, whence any surplus fat will need to be stripped away from company operations, corporate business models re-honed, and whereby the very characteristics of the country's internal demand, export ideals, and very probably manufacturing structures are re-assessed.

2012 may well indeed then be seen as a very necessary re-evaluation point relative to the 2006-16 plan, a time when the ambitions of the latter 4 years – especially regards higher value activities – are re-examined, plotted and quickly implemented.

“अच्छे दुर-दुर भारत "...”Good Luck, India”.