Examination of Witnesses (Questions 320-339)
THE INDIA
GROUP
14 MARCH 2006
Q320 Mr Wright: On the other side
of the coin, Indian companies setting up in the UK, again with
the skills and so on, do you consider that is a problem? How big
a problem is it?
Mr Singh: It is a problem, especially
in areas such as where we are operating in Wrexham. What I have
seen is that operating level skills is the first area where you
get this shortage of skills the moment you invest more and more
into very high end technologies, that is the area where you find
shortages. Managerial skills are not short, but managerial skills
need to be refined because the world is changing at a very fast
pace, so what I feel is that within the United Kingdom we all
definitely need to refine the skills of our managers to become
more entrepreneurship oriented rather than being simple managers.
Q321 Mr Wright: Do you see that as
holding Indian companies back from investing in the UK then?
Mr Singh: We found that shortage
but we are addressing it internally by more and more coaching
and mentoring of our managers, taking them through different kinds
of management development programmes. What I have to say is managers
are supposed to take risks sometimes when they are working: some
element of risk is involved in everybody's job. That is where
normally I found that managers are very defensive and if you are
absolutely running a business on a defensive mode, it does not
work like that. So we are tutoring and coaching our managers here
as to how they should become more entrepreneurship oriented rather
than being simple managers.
Mr Chatterjee: In financial services,
to put it very bluntly, the difference that we see in terms of
manpower in the City and what we are trying to achieve in this
market is the desire and the hunger to achieve a lot more in a
reasonably short space of time. That is really something which,
in the average talent that one sees, is completely missing, which
is why we have had some success as a bank here. I have had clients
who have come and told me that they would not find somebody in
the office at 7.00 pm or 6.00 pm on a Friday evening in the UK
banks, and I know that the way we work around deliverables, if
somebody has to stay in the office for 48 hours over the weekend
and deliver something to a client for Monday morning, they will
do that. The instances of getting local skills to offer the same
amount of delivery, the same hunger to deliver, the same desire
to achieve a lot more in a reasonably short space of time, that
is one big gap that we see, which is why sometimes a mix of talent
is required at the business head level, and when you have that
mix you give the scope to one half of that mix to really see how
the other half is functioning and then grow up that curve. Initially,
you do go through a bit of a painful process where you try to
make this work and it does not work, and the environment here
is where there is a big contrast to India in terms of litigation.
You cannot terminate somebody's contract without necessarily getting
into litigation of some sort, which is a big contrast with India
where you do not have litigation linked to every employee termination.
That we see as a gap.
Chairman: We have two or three questions
on skills and education and other colleagues might like to follow
up. Mick Clapham.
Q322 Mr Clapham: Could I pick up
on the comment made by Mr Hasan regarding the level of talent,
because the number of engineering graduates that India turns out
is extremely impressive, but a recent report by McKinsey suggests
that some of the multinationals who employed them were not impressed
by some of the talent that they expressed. Would you agree with
that, and coming back to the point that Mr Chatterjee made about
education, is there an area there, perhaps, for an input by British
universities on the engineering side?
Mr Hasan: Absolutely, to a certain
extent that is correct, and that is really because of the tremendous
demand for such talent. There has also been quite a considerable
movement of graduate engineers out of the country; they found
it easy to perhaps come to the UK or go for further studies into
the US and they feel that perhaps that is where they want to end
up. All of these things have definitely put pressure on, and I
think that definitely has made an impact on the number of first
division students, as it were, but like I say you can back that
up with a good training regime in the company—and companies
have learned that—you can come up to speed quite easily.
Mr Chatterjee: When I mentioned
education, a lot of the leavers in education have typically gone
to the US. If you see the US system and if you see the Indian
system, you see the top tier of the business schools—if
we take business schools as an example—and maybe the top
tier of the engineering institutes, the Indian institutes of technology
(IITs) there will be virtually no difference in terms of the talent
that is coming out or the skills set coming out. Where India today
lags behind a bit—and maybe that is relevant to what you
just asked Anwar—is that the quality in terms of turning
out a huge number of engineering graduates today seems to be falling
short of expectations. What does one do, therefore, to really
bolster that set of institutes which are operating at the tier
two or the tier three level? That, to my mind, when I mentioned
education in the first instance, is really a huge opportunity
for universities, for medical institutions, in the United Kingdom
who are already operating at a very high level and certainly there
is no doubt in terms of any discussion, let us say in the area
of medical science, about the strides that Britain has made; India
has a lot to learn from that and it is constantly learning from
that. If you do a marriage of these two practices there is a huge
opportunity for British institutions to set up a joint venture
or in certain instances where the brand is very strong, like Oxford
or somebody, to set up their own institutions there. You see the
parallel happening today, the same IIMs that I mentioned are today
being called on by other international governments to come and
set up a similar institution in their own country. The institute
that I went to for recruitments this week, the Institute of Management
in Bangalore, is setting up an IIM in Singapore because the Singapore
Government believes that there are best practices to be taken
from an IIM in India, we do not have an institute like that and
therefore we set up something like that. I would say that both
things apply here; there would be a lot of sense for an Oxford
or somebody else, or even a UCL, to say I am going to set up an
institution in India, and vice versa: would the British
Government say that we need more business schools here, would
we like an IIM to set up here or the IITs to set up an IIT in
Britain? Education, if I can term it this way, is largely a virgin
area, there is so much that can be done in education.
Mr Singh: Taking further what
Sonjoy has mentioned, I would fully agree that in India today
the number of people who are seeking further education is so large
and many of them are not able to get admissions into good schools
or good colleges. Of course, because the demand has been very
high there has been a proliferation of the institutes along with,
to some degree, the privatisation of the education institutes,
so if there is a good educational institution which is moving
across to India to set up a business model, there will not be
a shortage of people who would be willing to join that. The very
fact that so many people are willing to come over to the United
Kingdom to study, and the other way also, because that cost may
be relatively lower.
Chairman: You are moving into an area
that I was going to take a little later on, but as we are there
I will bring Roger Berry in and then bring Claire Curtis-Thomas
in after that to explore some supplementary points, so we will
just slightly re-order our questions. Roger Berry.
Q323 Roger Berry: I would like to
pursue the point you have just made about the attractiveness of
the UK to Indian students in comparison with, for example, the
United States or Australia. Some evidence we have had has suggested
that these days the US and possibly Australia are more attractive
for Indian students than the UK; do you feel that that is the
case?
Mr Chatterjee: Yes.
Q324 Roger Berry: If so, why?
Mr Chatterjee: I would make just
one related point on anything to do with education, and that is
that in terms of the dynamism of Indian society, Indian parents
have always spent the maximum amount of their disposable income
on education. When you discuss education and anything to do with
collaboration in education, one needs to remember that. I have
seen that in my own case; my father would pay whatever amount
of fees that would come up, even if it meant I had no pocket money.
There is, therefore, a strong commercial aspect to that. Why Indian
students have historically gone to the US and not come to Britain
(a) has a lot to do with marketing in the home country and also,
(b) the alumni that have been created of Indians having gone to
the US, therefore the next set of people—let us say when
I did my engineering I went to the IIT at Delhi, I saw my seniors
all going to the US so my natural aspiration was yes, why should
I not also go to the US? Even now if you open any newspaper in
India you will see a whole host of advertisements where US institutions,
whether business schools or otherwise, are inviting students to
come and have one-day sessions, two-day sessions, trying to talk
a lot more about what is happening in their country. So there
is a pillar which is linked to marketing and communication, which
has been missing from the British context and which, surprisingly,
Australia has also picked up and managed: I would imagine that
the number of students in Australia must be four or five times
the number that comes to Britain. The second big thing which as
an employer here I feel—because I see a lot of these situations
coming up—is how easy it is to work post-education in this
country. To my mind, as I see it now it does not look easy because
the kind of processes an employer needs to run to convert a student
visa into a work visa are very, very cumbersome. I can tell you
that ICICI Bank, despite the fact that there are Indian students
who are approaching us for, I would say, entry level jobs in this
market, has steadfastly stayed away from having a very cumbersome
home office process to demonstrate as to why we should recruit
somebody with a student visa. That, I would say, would weigh a
lot on somebody's mind, given that education in this country would
cost a lot of money, particularly when you convert and look at
the aggregate, and then what are the prospects beyond that when
people take a loan to come and study in this country? How would
they ever hope to repay that loan if they do not work in this
country? I would say these are some issues which lead to a situation
where Britain has fallen back.
Mr Hasan: There is this aspect
also about the universities from New Zealand and Australia, for
instance. They are very proactive in coming to India for a fixed
period of time and telling them what courses are there and they
do a lot of marketing there. Quite a lot of Indian students are
now heading down under, if I can put it like that, which I think
is also an important point.
Q325 Roger Berry: In terms of what
you think the Committee might recommend in this area, the two
areas you have mentioned so far are obviously marketing and visa
arrangements. Are there any other areas that you think the UK
Government ought to address? For example, are the fees uncompetitive
and is that a significant consideration, or are there any other
points?
Mr Hasan: The first aspect is
to get admission. Fees could be expensive but, like I said, there
is a passion that we have as fathers to make sure that your children
get educated: you will put your property in hock to see that happen.
It is not that much of an issue now, but it could become an issue
if you find you have options of going to America or going to Australia
or New Zealand and there is nothing much to choose between the
kind of education that you get.
Mr Chatterjee: For the first time
I have seen local institutions waking up to that knowledge gap.
We are currently in very active dialogue with both the London
School of Economics and Oxford to offer loans to Indian students
coming here, and I must confess that even on the visa side there
has been a lot of progress because of the HSMP programme that
has happened and there are, I believe, certain business schools
which automatically give you HSMP if you pass out from that school.
It is a question of where you want to spread that tool because
HSMP is a fantastic tool to offer to these students.
Chairman: That is very helpful, thank
you. Claire Curtis-Thomas.
Q326 Mrs Curtis-Thomas: Can you just
tell me, what is HSMP?
Mr Chatterjee: It is the Highly
Skilled Migrant Programme where the Home Office basically has
a points system based on your experience and education. If you
qualify for that points system then your employer does not need
to sponsor you.
Mrs Curtis-Thomas: Can I just ask another
question and ask for a brief response, are you happy, sir, with
the basic educational requirements? Are you convinced that your
young people coming out of schools are numerate and literate to
a standard which you are comfortable with? Secondly, have you
provided professional opportunities for your workforce to join
Indian institutions so that they have some continuing professional
development, not only inside work but outside work as well?
Chairman: Can I be clear, are you talking
about in India or in the UK?
Q327 Mrs Curtis-Thomas: Yes, your
employees in India, yes.
Mr Chatterjee: You are talking
about our employees in India are they allowed to do, let us say,
a one year programme or something?
Q328 Mrs Curtis-Thomas: Yes.
Mr Chatterjee: We actively follow
that.
Q329 Mrs Curtis-Thomas: And they
are numerate and literate to a standard that you are happy with
in India?
Mr Chatterjee: Yes, we are absolutely
happy with that.
Q330 Chairman: Before we go on to
the next question, can we go back to this point about whether
there is overheating in some sections of the Indian economy? We
did hear evidence of skills shortages in specific big towns—for
example, there are companies in Chennai who are investing elsewhere
in Tamil Nadu because they could not get the people they needed—not
necessarily the people straight from college, but the people with
experience who are moving elsewhere. Do you think British businesses,
looking at India, could go to a place like Bangalore, which is
a pretty crowded, frenetic city these days, lacking infrastructure
with, I suspect, skill shortages in key areas. Do you think they
would be well advised to look perhaps somewhere else in India
rather than just concentrating on the well-known names?
Mr Chatterjee: Even the Indian
private sector has to be following the same model, because no
doubt the crying need for infrastructure in places like Bangalore
is felt by the Indian private sector also. You see large companies
like Infosys, for example, which are trying to move away from
Bangalore towards other parts of Karnataka. You see places like
Hyderabad which has come up as a very strong destination, and
next to Mumbai you see places like Pune which has come up, and
the transition that people in these towns in terms of their own
education and their own income profile and how their own standard
of living is changing also has been a phenomenon. You see once
again this demographic trend, you see the transition of people
moving from poor to mass afluent to rich, moving at roughly 48%
year on year and the maximum impact of that is to be seen in the
small towns, so there is absolutely no reason why one should not
look again from the ease of cost, because the infrastructure is
very severely curtailed, the cost of real estate in some of these
cities like Bangalore and Mumbai as you know are becoming quite
prohibitive. So it does make sense to look at these smaller locations.
Q331 Chairman: Any particular tips
for the British investor? What are the tier two cities in India?
The tier one cities we have seen.
Mr Chatterjee: Pune is an outstanding
location that really one should look at, Kolkata has been largely
untouched and Kolkata has made a lot of strides in its infrastructure
and like Maharashta there is no power shortage. There is a whole
new separate town coming up—
Q332 Chairman: They export power,
I believe, from Bengal, which is unusual for India.
Mr Chatterjee: There is now a
separate town coming up next to the airport, that is a place called
Rajarhat, where a huge amount of development is taking place.
On the skills side, given the affinity that people from Bengal
have towards education—I come from there myself—you
would see a large number of educational institutes and a huge
amount of talent coming out every year from there, so Kolkata
certainly.
Chairman: It is amazing how enterprising
Communists can be, is it not? Mike Weir?
Q333 Mike Weir: In answer to an earlier
question Mr Hasan mentioned the difference in level of foreign
investment in China and in India. I realise there has been a relaxation
in recent years, but in many sectors of the Indian economy, overseas
companies are restricted in the amount of direct foreign investment
they can make. However, in the UK there are no such restrictions:
do you think this situation is fair?
Mr Hasan: Actually what is happening
now is that the Government has set up a commission and my group
chairman, Mr Tata, is heading that. This panel has suggested to
the Government to remove all foreign investment caps and quite
a lot have got 100% investments. Whether they take the automatic
route or whether they go through a process of procedures and approval
it is something that needs to be done. Insurance is 26%, that
is the one that is the lowest, but I think you will now see a
regime of more and more liberalisation of foreign direct investment
because you cannot on the one hand say that India needs so many
hundreds of billions of dollars to come in and then you put down
these kinds of restrictions, unless there is some strategic importance
to the country. I definitely think that everyone in business is
waiting with bated breath to see what the Government does on this
kind of recommendation, but definitely there is going to be a
relaxation of this. As to how much, do you do 100% and how much
is it with the automatic route where you just set up shop in India
and do what the business world requires and not have so many of
these procedural rules to go through.
Q334 Mike Weir: What do you think
is the timescale for the Government taking action on this?
Mr Hasan: If it is left to business
then you will get certain decisions, but if you have a coalition
government at the centre where you have as your partners people
who are more left of centre, it will take a bit of time. I keep
saying that in India you have really got to be patient, you have
got to not sort of rush things too much because it could end up
with taking one step forward and three steps back. I definitely
see that there is a marked change in the Government's policies
over the last four or five years because I think one realises
now that this is really the time for India to come centre stage.
Q335 Mike Weir: One of the areas
where there was concern about this was in retail, where some of
the big international retailers want to get into India and feel
they are being prevented from doing so because of fears for small
shops and small businesses in India, which is something we probably
all know about in this country as well. Is it the case that the
Government perhaps is delaying it to allow Indian companies to
grow up in the retail sector, or is it genuinely because of small
shop concerns?
Mr Hasan: I think it is a bit
of both. I remember when the first phase of liberalisation went
through there was a big furore saying that these foreign multinationals
will come and swamp India and everybody will lose and an Indian-owned
company will lose jobs, everything will shut down and stuff like
that. There were very few people who said those things and perhaps
they had vested interests anyway. How you see India today after
these 10 years of liberalisation, we have become competitive the
world over: as a matter of fact when you look at the number of
companies from India that are making acquisitions into the UK
and making acquisitions abroad, it can only happen if you have
the wherewithal to do it and it is cost-effective, or you have
some unique selling point in your company's profile that makes
it. That has happened, thanks to liberalisation.
Mr Chatterjee: I just want to
add another perspective to this. You see these segments which
are today left out in terms of the FDI opening up, largely it
has been defence and to some extent banking and insurance, but
when I say to some extent banking and insurance one needs to be
conscious of the fact that these were sectors which were opened
to the private sector also at around the same time as they were
opened to the foreign sector. Therefore, when the insurance sector
opened up in 1998 it was also opened up to the private sector,
albeit with a cap in terms of how much they could invest. I can
specifically talk about the joint venture that we have with Prudential
of UK, which is India's largest private sector life insurance
business today and it is slowly eating away into the monolith
Life Insurance Corporation of India's market share fairly impressively.
While it has been set up with equity capital of 36% from Prudential's
side, the joint venture is completely a partnership of equals,
the board is equally divided, so it is a question of who do you
really, I would say, engage with, decide how you will enter into
a partnership and then you realise from this example—and
you would also be aware that Prudential earns most of its revenues
out of Asia today, and we have two franchises with them, the one
on the asset management side and the other on the life insurance
side. Once you have set up a partnership of equals, whether you
hold 26 or whether you hold 49 or 50, frankly, to my mind, it
is a secondary issue. Retailers are crying out in the sense of
I do not want a Tesco or Sainsbury, they might have aspirations,
but again I would like to point out an example of the largest
South African retailer, Shoprite, which has decided to go ahead
and set up a franchise in India: they have franchises in Mumbai.
Today when you open a Mumbai newspaper you see the same kind of
advertisements which you see in a local UK newspaper, showing
this one's price and that one's price and this is slashed, which
you did not see earlier in India because you went to the regular
store where very little was offered to you. There is, therefore,
a need for British businesses to step into it and explore what
they can do in terms of what is already there, rather than sitting
back and feeling that, you know, this is something that we cannot
achieve or it is not already there, these kinds of situations.
Chairman: That probably leads on to Rob
Marris's question.
Q336 Rob Marris: If the relaxations
come off in certain sectors, the opportunities for foreign direct
investment from the UK into India—and obviously from other
countries into India—would increase. There are long-standing
imperialist, economic and cultural ties between our country and
India.
Mr Chatterjee: Of course.
Q337 Rob Marris: To what extent are
those ties a benefit to UK companies and to what extent are they
a hindrance, because some UK companies may think they know all
about India because of those ties and because it is apparently
similar with a similar legal system, and therefore misread what
is going on in India?
Mr Chatterjee: The strength that
this style offers I would say is huge. The comfort that Indians
would have interacting with British companies is no doubt much
more than they would have interacting with a variety of other
countries. Language is of course one of them, but I do not think
the same would apply to the US in terms of its introduction. On
the reverse, again it is coming up the curve. How much has India
changed? There is no doubt, as Peter mentioned, it is changing
rapidly and when I go back to Mumbai once a fortnight, I think
it has changed, so the pace of change has been enormous. How does
one stay in line with the change, which is one of the objectives
that this Group really was—
Q338 Rob Marris: That is what I was
going to ask you. What is the India Group doing to educate UK
companies?
Mr Chatterjee: If you see the
objectives that we kind of set ourselves up with, one was: is
there a body with mainstream Indian interests in this country?
We believe not. There are a lot of groups which are using the
word "India", but these are largely Indian businesses
here in some form or another, non-resident Indians, which in terms
of scale and scope are nowhere near in comparison to what we are
talking about, purely Indian corporations which comprise the top
market capitalisations of India, of which a lot are represented
in this Group. Our first intention was to say, "Let us form
a group which truly can pass on what is India". The second
was really what we were discussing earlier: how do we actively
help British businesses engage with India and can we offer ourselves
as a platform where members of British industry can feel free
either to engage with one of us or a group of us? Frankly, why
we are engaged a lot, I would say, on the Indian end of the issues
is because we have not found an opportunity to offer our advice
to British trade groups, which is one of the objectives we set
this Group up with. In fact I had a small dinner meeting with
Bryan Sanderson who was co-chairing the Asia Task Force to reinforce
that we would really like to contribute to that effort of how
to engage better with India and China. Coincidentally, his meeting
was this morning and he did invite me to come and sit in on that.
Those are the kinds of opportunities which really this Group would
be very actively able to contribute to. If I look at some other
situations, like I am a member of YPO, in YPO we offer a lot of
business opportunities to co-members, so, "Is there any platform
in this?" is the question I am asking the Committee, where
we can offer our services, given that we are representing all
the names that Indian corporations can offer, where people can
actually key in or log in or seek out help or particular opportunities,
funding, a variety of things. We want to do that, that is an objective,
but we have not made many strides in terms of offering services
to British companies.
Q339 Rob Marris: Can I ask you about
one small particular interest of mine. Do you seek to educate
the UK companies which are thinking of investing in India about
casteism?
Mr Chatterjee: No.
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