India sits on human capital goldmine, says Parekh

Deepak Parekh, chairman of India's first housing finance company, HDFC, was the recipient of FinanceAsia's first Lifetime Achievement Award at our awards dinner on January 24. This is his keynote address.

 

Global markets have been fraught with uncertainty as the world ponders the fate of the US economy. A slowdown of the US economy was inevitable but the prolonged credit crunch, oil at over $100 per barrel and collapsing house prices have sent fresh fears as economists debate the dreaded “R-word” - will the US economy slip into a recession or manage to skid over?

 

Clearly, there are tough times ahead and amidst pandemonium in the global markets, India demonstrated resilience in its ability to meet new global challenges. To my mind, three key events of last week best demonstrate this:

- the overwhelming response to a mega IPO that re-affirmed investor confidence,

- India’s successful testimony of its manufacturing prowess as it unveiled the world’s cheapest car at $2,500 and

- the Indian prime minister’s visit to China, which re-emphasised to the world that the 21st century belongs to the two Asian giants as they seek greater economic co-operation.

 

But that was last week and this week came with a fresh set of shocks, collapses and rebounds. Markets are now so volatile that one has to learn to expect the unexpected. The Indian stock markets were no exception in the global meltdown earlier this week but like most markets, managed to clamour back up as sentiments improved following the Fed rate cut.

 

The Indian market had been enjoying a bull run over the last four years. An analyst aptly summarised the current market scenario and I quote, “India is now in a corrective phase in a bull market.”

Though market sentiment may keep shifting, it is important to note that in the Indian context, the real economy is driven by its own investment and domestic consumption and this continues to remain robust. The long-term fundamentals of the India story remain intact.

So setting aside the recent frenzy let me return to the core of the India story which dates back to over 60 years ago when, on the eve of India’s Independence, our first prime minister, Jawaharlal Nehru said: “India has made a tryst with destiny”.

It has really been over the past few years that India has begun to see that destiny come true.

From a country that was once considered a weak nation and had to convince investors of its growth prospects, India has now become a force to reckon with. Over the past four years, GDP growth has averaged 8.6% and over the last two years, growth rates have crossed the 9% mark.

Financial year 2007 was a remarkably good year with GDP clocking 9.4%. In line with expectations, the industry and services sector grew at 10.9% and 11% respectively, though agricultural growth continued to remain slack at 2.7%.

The oft-posed question for this trillion-dollar economy is whether the growth rate will slow down in line with global trends or whether India will be able to attain the much-targeted 10% growth rate?

Conservative estimates have trimmed India’s GDP forecast to 8.5%, citing the overall slowdown in global GDP growth. In the first half of the current financial year, India’s growth rate stood at 9.1%, giving little indication of an impending slowdown. The key issue is that the economy is on firm ground and the growth rate is sustainable and well-calibrated.

The breed of ‘India optimists’ continues to multiply. Today, there are over 1,250 foreign institutional investors with a cumulative investment of $67 billion. Contrary to some opinions, the restrictions on P-Notes by the regulator did not have a significant impact on FIIs investing in the Indian stock markets. Long term India players understand that it is the prerogative of a regulator to know the source and identity of money flowing into the country. The Indian stock markets have been greatly influenced by FIIs and the markets have benefited by their presence, especially in terms of improving governance standards, investor relations and valuation processes.

However, what is gratifying to note is that the Indian stock markets are no longer dominated by or heavily dependent on FIIs. Last year, FIIs pumped in an estimated $17 billion while domestic insurance companies, mutual funds and retail investors collectively invested close to $30 billion. Domestic money from insurance companies and pension funds is expected to pick up further.

Markets tend to work well when there is a diversified investor base and investors have different investment objectives and perspectives. With the mix of FIIs and domestic investors which is increasingly gaining ground, the investor base in India is becoming broadbased.

Admittedly, with the Sensex trading at a price to earnings ratio of around 20 times 2009 earnings, valuations of certain stocks may appear high, but this is a reflection of the strong growth potential. India Inc’s performance has been impressive. According to the RBI, corporate India continues to show an impressive performance with over 2,300 non-government, non-financial companies posting a growth in net profits of 34% in the first half of financial year 2008.

India has now become a magnet for foreign direct investment – a sea change from the time when FDI would only come in trickles. FDI flows have tripled from $6 billion in 2005 to $19 billion in 2007. The government has now confidently set a target of $25-$30 billion for next year. According to the World Investment Report of UNCTAD, India has emerged as the second most attractive location after China for FDI.

For India to remain a conducive FDI destination, the government will need to focus on reducing the number of sectors that require government approval, provide a level playing field in sectors with public sector dominance, open up more sectors for FDI and ensure long-term, consistent policies.

In terms of foreign investment flows, the year 2007 belonged to private equity as it emerged as the most preferred route for raising funds, with over $17 billion being invested in India Inc. These were mainly in sectors like real estate, infrastructure, financial services and information technology/IT enabled services.

With over 500 private equity firms investing or preparing to invest in India, there are concerns of overcrowding, but what this also means is that the funds will need to look at diverse sectors and new investment strategies.

While the India story is on a roll, it is imperative to prioritise certain issues that will help the country attain its growth potential.

Agricultural growth in India has been a laggard. An increase in agricultural growth will guarantee India a 10% GDP growth rate. The agricultural sector has been plagued with low investment, vagaries of weather, imbalance in fertilizer use and a distorted incentive system.

Lack of focus on the agriculture sector has serious implications – we cannot talk about inclusive growth when more than 50% of India still derives their livelihood from this sector. Further, poor and volatile performance of the agricultural sector has repercussions on the maintenance of price stability owing to supply side constraints of primary commodities. Clearly, the way forward is increased investments in food processing technologies and improving integration of the supply chain from the farm gate to the consumer’s plate.

Secondly, and an issue that is rather evident is the need to improve the country’s infrastructure. Many of you may have been witnesses to the inadequacies of infrastructure: cities bursting at their seams, power shortages, delayed flights and potholed roads/traffic jams.

The good news is that things are changing, the bad news is that it is probably not changing as fast as it should.

Over the next five years, the government has envisaged that investment in infrastructure needs to rise from 5% of GDP to at least 9%. This translates to an investment requirement of $492 billion. For instance, investment requirements in power is $161 billion, railways is $82 billion and national highways is $61 billion and telecom, state highways, rural roads require a combined amount of $150 billion.

These amounts appear intimidating owing to the sheer vastness, but to quote India’s finance minister, P. Chidambaram who said, “I can say with confidence that no country than India needs and no country than India can absorb so much funds for the infrastructure sector.”

It is ironic that a country that has a strong institutional infrastructure is grappling with physical infrastructure. The bulk of investment for infrastructure needs to be channeled into power, roads and urban infrastructure and the challenge in these sectors particularly, is that the levy and collection of adequate user charges has proved difficult. But given fiscal constraints, it is apparent that going forward, infrastructure will have to be increasingly financed through user charges and by the private sector.

The crucial issue is that the private sector will step in to fund infrastructure only if it is sufficiently incentivised. So how can this best be done? At a policy level, there needs to be an overhaul in the way some of these sectors are governed. Take the example of power – a sector that continues to be mired in regulatory turmoil. The country currently faces a 15% peak power deficit. There is a need for full-fledged reforms in distribution of power but realistically, before that happens, the state governments need to be more amenable to the privatisation process. With the government’s goal of providing “Power to All” by 2012 and with more IPOs lined up, the power sector is expected to receive large amounts of investments.

On the flip side, market-oriented reforms in the telecom sector have paid off with India now adding 7 -8 million mobile subscribers each month. Tariffs are also among the lowest in the world. Total telephone subscribers have reached over 250 million and most of this growth has happened over the last 2-3 years. Tele-density has risen from 3% in 2002 to 13% in 2006 and currently stands at 23%.

Private investments in national highways, ports, airports and railways have begun to flow, but this flow has to be a deluge, not a trickle.

But then there are the soft infrastructure issues that also pose a challenge –there is a need to increase investments in primary education and health care. Currently less than 3% of GDP is spent on education and 1% on health care. There are investment opportunities in these sectors as well but to improve soft infrastructure across the country, the government will need to undertake systemic reforms.

So far, the Indian economy has withstood the test of political coalitions, rising oil prices, spikes in inflation, appreciation in the currency and stock market corrections – still the economy has enough steam left to catapult it into the big league. This is ample testimony that India’s economic fundamentals are well entrenched.

Today, action has decisively shifted towards emerging markets with the BRIC economies alone accounting for over 10% of world GDP. For India, the change in the business environment is not entirely captured in macroeconomic numbers.

The mood of Indian business has been anything but sombre – it is almost defiant. The ambition and confidence of corporate India has grown dramatically. Indian M&A has been swelling, both inbound and outbound. Last year, M&A activity in India stood at over $50 billion with over 660 deals. Seven of these deals were over $1 billion in size.

This growth momentum is expected to continue in 2008. Besides wanting to be a part of the India story, the more pertinent question today is whether your business can afford not to be in India?

India is sitting on a human capital goldmine. It has one of the world’s youngest skilled work force. India generates over 11 million jobs annually, higher than any other emerging country. It is no wonder that India accounts for 65% of the global industry in offshore IT and 46% of the global BPO industry.

One of India’s greatest strengths is that it holds the dual advantage of a low cost, English speaking and highly skilled workforce. Every year, India produces around 2.5 million university graduates, including 400,000 engineers and 200,000 IT professionals.

Unfortunately, not all of them are directly employable. A recent study revealed that only 25% of engineering graduates and 10 to 15% of general college graduates are suitable for direct employment in the outsourcing industry. This means that the need for additional training is imperative. It is, however, ironic that in a country of over 1.1 billion people, we are increasingly struggling with skills shortage. The shortage of the talent pool gets further skewed when wage wars spiral just to attract or retain talent. So how India manages and effectively trains its human resources will determine its course of competitiveness in the global markets.

The opportunities in India are aplenty and the returns are there for all to see. Yes, investing in India requires patience and time. The reform process is irreversible, though the pace needs to increase. As the world’s largest and possibly noisiest and most opinionated democracy, consensus building is a must for change. This has its own trials and tribulations but it is a small price to pay for a free market. Nonetheless, with India’s need and capacity to absorb investments, newer opportunities will keep emerging and we are confident that global investors will continue to view India favourably in the years to come.

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Indian firms still big in IT services, says survey

Indian firms came first in four out of 10 information technology service categories in a global survey that selects the 100 best IT services providers. US-headquartered IT firms topped in four other categories and one firm each from Mexico and China took the other prizes in the 4th Cybermedia Global IT Services Survey.

Overall, the survey affirmed India’s standing as a major outsourcing centre. India also led the way as the global delivery centre for IT service companies, with many non-Indian firms clearly favouring India. However, the survey also revealed that the rising rupee was the number one concern for many such firms.

Tata Consultancy Services was rated the best performing IT services company. HCL Technologies was rated the best performing infrastructure service provider. Genpact was rated the best performing BPO provider and WNS Global Services was the rated the best performing FAO provider.

The US firms were EDS, Sitel, EPAM Systems and Computer Sciences Corporation – all of whom have a footprint in India as well. Mexican and Chinese firms won in categories that were region specific. India is rated the number one hub for global delivery of IT services. Fifty-seven per cent of IT service employees working in delivery centres, says the survey, were located in India. Only 18 per cent were based in the US. This reflects how many non-Indian firms keep their delivery centres in India.

In the listing of the 100 best IT services firms, Indian companies trailed those in the US but were well ahead of any other country. Forty-three US-headquartered firms dominated the 100 best firms. There were 29 firms in the list. There were four Chinese companies, four from Malaysia, three from Russia and three from Brazil. There a scattering of other firms in countries ranging from Argentina to the Ukraine. The survey said these “were a gentle reminder” of the presence of other countries that could become outsourcing rivals to India.

Two years ago the same survey listed 36 Indian firms and 32 US firms in the top 100. This shift to US-headquartered firms may reflect both the fact many Indian firms are being bought up by US firms and a consolidation in the upper end of the Indian IT services industry.

However, 47 per cent of the respondents, including many from India, said a falling dollar and rising local currency was their “most critical business concern.” The survey says “Indian service providers who derive between two-thirds to three-fourths of their revenues from the US are back to the drawing board to consider non-US avenues.” Firms in the Philippines and Canada also listed currency problems as their main business headache.

 

 

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Global financial crisis not to affect India's growth: Chidambaram

 

India will grow at a fast clip of 8.5 per cent despite the global financial crisis and may consider interest rate cuts if capital inflows surge, Finance Minister P Chidambaram said here Thursday in what is seen as a statement aimed at calming the jittery markets.

"India's growth rate is cruising along at 8.5-8.6 per cent in the financial year 2007-08. The expectation for the next year is about 8.5 per cent," Chidambaram told journalists at the annual meeting of the World Economic Forum (WEF).

The finance minister, a member of a power-packed Indian delegation at this Swiss ski resort, said his figures had factored in the turmoil in the global financial markets and added that if it deepened "we will have to revise our numbers."

India, he said, was affected by the turbulence but was responding appropriately.

"We are concerned that it might dampen growth but I am sure we will find ways - both monetary and fiscal - to stimulate growth and keep it at where we are now."

Chidambaram's statement also came in the midst of mounting speculation in Davos about the role of India and China - the two relatively stable economies set on a high-growth trajectory - in cushioning the effects of the global turbulence.

The finance minister said India could see greater capital inflows following the aggressive interest cut of 75 basis points by the US Federal Reserve but added that the country did not want to impose capital controls.

"Our interest rates are set in order to contain inflation but if it's a dampener to growth, I suppose we will respond both through monetary measures and fiscal measures. I can't speak of the measures now," he said.

"We are not in favour of imposing capital controls but will take some measures to moderate the inflows of capital. The capital market is returning very high growth rates and perhaps that's a magnet for capital inflows."

Drawing a distinction between different types of capital inflows, Chidambaram said that there was no need to regulate "good" inflows such as foreign direct investment, remittances by non-resident Indians and revenues from tourism.

He expected the crisis to continue to unfold for the next few months until all banks and financial institutions reveal the extent of losses they have suffered.

"It's coming out in bits and pieces."

Chidambaram said India has no plans to launch a sovereign wealth fund, because India does not have a fiscal surplus - a textbook economics requirement for launching funds of that size.

 

 

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partnership of Equals

 

 

January 21, 2008

British Prime Minister Gordon Brown, who is on a two-day official visit to India, has stated that India and the United Kingdom need to work together to build a better world.

"I am happy to be here to celebrate, what I call, the partnership of equals with the modern, confident 21st century India," he told reporters in New Delhi after being accorded an impressive ceremonial welcome at Rashtrapati Bhawan.

"The oldest democracy and the largest democracy should work for a stronger economy and prosperity of our societies and for a better world," he said.

Brown hailed the relationship between the two countries as a partnership of equals and said that he aimed to further boost bilateral ties.

Brown said he was keen to use the two-day visit to build on existing economic, cultural and educational ties and forge closer partnerships on tackling climate change and global extremism.

Image: British Prime Minister Gordon Brown and Prime Minister Manmohan Singh at an official reception ceremony at the Presidential Palace in New Delhi

Oxford wants to learn from India's growth story

---

New Delhi: Oxford University, one of the world's most venerable educational institutions, wants to "learn" from India's growth story, its Vice Chancellor John A. Hood has said.

"Oxford University wants to learn the finer nuances of India's growth, its vibrant economy, the growing innovations and knowledge society," Hood told IANS in an interview.

"We want to learn lessons of India and tell the whole world and our students from across the globe how you guys have made it to the top," said the 56-year-old professor.

Hood is currently in India as part of British Prime Minister Gordon Brown's high-level delegation.

"The spectacular economic growth and the new generation's inclination towards innovation and success are things to be analysed, recorded and taught in classrooms," he said, adding that currently 260 Indian students are pursuing various courses at Oxford.

"Business developments like the Tata Steel-Corus and Vodafone-Hutch are very impressive. Tata Motors' new car Nano is a wonderful innovation not just for India but also for the whole world," Hood said.

India's economy is growing at nine percent per annum, second only to China.

Hood said the association of India and Britain is historic and Oxford has many things related to India.

"We have a lot of valuable manuscripts, collection of art and artefacts and certainly the scholars from India are of immense importance to us," said Hood, a cricket enthusiast.

The professor said Oxford scholars would carry out research on various aspects of Indian economy and prepare case studies.

Advocating joint research between Indian varsities and their counterparts in Britain, Hood said the angel investment network unveiled by Brown would address some of the key issues in this front.

"Innovations and ideas will see a better light and am sure both countries can do a lot better in the fields of education and research. We are going to meet India's education minister and hope many things will spring from there as well," he said.

He said Oxford University would shortly enter the Indian market with short-term executive programmes.

"The atmosphere is conducive and the economic scenario is interesting here now," Hood said.IANS

 

 

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By listing day, Anil may be world's richest man

With his wealth estimated at more than $57 billion, Anil Dhirubhai Ambani has emerged as India’s wealthiest citizen after the blockbuster IPO of his Reliance Power, and all indications are that he may jump to the top of the global rich list as well.

The value of Anil’s holdings in seven listed entities will be around Rs 229,363 crore  or $57.3 billion at last Friday’s closing price, taking into account the price of a Reliance Power share at Rs 450 per share, the cut-off price of the public issue which closed on Friday.

Market experts expect Reliance Power to list at a much higher value. If the stock lists at Rs 900, Ambani will jump over Carlos Slim Helu, the Mexican telecom tycoon who topped last year’s rich list with an estimated $67.8 billion to his account according to Forbes magazine.

At Rs 900 per share, Anil Ambani’s personal wealth would be estimated at Rs 2,75,000 crore or $68.7 billion.  Microsoft chairman Bill Gates followed Carlos Slim last year with an estimated wealth of $59.2 billion.

Anil’s elder brother Mukesh Ambani,  who runs the largest corporation in the country, Reliance Industries Ltd, which has a market cap of Rs 434,170 crore,  will now slip to number two in the rich list. The value of his personal wealth is estimated at Rs 218,860 crore or $54.7 billion as per the last closing price.

Although much depends upon the market dynamics, experts feel that at least three Indians — the Ambani Brothers and steel baron Lakshmi Mittal —  are expected to make in the top 10 richest.

 

 

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India has an increasingly important role in global affairs: Brown

Gordon Brown

“We should be working together for the benefit of each other, and, in partnership, taking a leadership role in the world”

British Prime Minister Gordon Brown

The U.K. and India already have a strong relationship. We have bilateral ties covering a huge number of areas and we work closely in the many international organisations of which we are both members. India’s largest overseas investment is in the U.K. — Tata Corus — and one of the very largest investments in to India is Vodafone’s from the U.K. My visit to India this week will be an opportunity to build on these links and to take our relationship to a new level.

The world is no longer a place divided into developed and developing countries; east and west; rich and poor. Our challenges and opportunities are becoming increasingly shared. India, for example, now has more billionaires than we do, and we have more than a million people of Indian origin living in the U.K. Governments around the world face more and more of the same issues; and relationships between countries have to change in response.

India is a beacon of democracy and the rule of law in a region that has more than its fair share of problems. But its strengths go beyond the region. India has an increasingly important role in global affairs. Both India and the U.K. agree that the global institutions established in the 1940s and 1950s are now outdated and are not fit for purpose. During my visit, I will give a speech in which I will outline how global institutions must adapt to meet the new global challenges. At the heart of any changes should be an India with a seat at the top table. And I will propose to Prime Minister Singh that we appoint two special representatives to report back to us on how best to take forward the reform agenda.

Part of any global leadership role involves dealing with terrorism. At the last U.K./India summit, we signed up to greater counter-terrorism cooperation. This has already borne fruit. This week I will discuss with Prime Minister Singh how we can take this cooperation forward still further. Neither of our countries are strangers to terrorism, and by sharing our experiences, we can help each other tackle the root causes of terrorism, and, ideally, stop it from happening in the first place.

On my visit, I will be bringing a delegation of senior business leaders, and the heads of some of the U.K.’s top universities. I am keen that we build on the strong ties that already exist in business and education. Although we are one of the top investors in India, I want to see more U.K. companies doing business here, and more Indian companies choosing the U.K. as their global headquarters. There are plenty of success stories: JCB now sells more excavators in India than it does in the U.K. — but I want these success stories to keep on growing in number. This will require partnership. For example, a British bank is keen to set up 100 rural branches in India.

The English language is a huge shared asset and one I believe we can do more to exploit. English language proficiency opens the door to educational and employment opportunity, and we must work increasingly closely together in this area. I welcome the British Council’s new commitments to develop teacher-training capacity with Indian partners, aiming to train 750,000 teachers across India in the next five years.

On education, over 20,000 Indians are currently studying in the U.K. But I believe that by forming links between some of the best institutions in our two countries, we can have far more than that number benefiting from the U.K. education system, we can encourage more U.K. students to come to India to study, and we can increase research collaboration particularly in those subjects like nanotechnology where our countries excel. It is for this reason that both Oxford University and Imperial College London will be coming to India to sign agreements with Indian institutions during the summit.

One urgent challenge facing all countries in the world is climate change. We are facing a catastrophe unless the world acts together. The impacts of rising temperatures and more extreme weather are already being felt in the U.K.; but India faces disastrous consequences. In my discussions with Prime Minister Singh, I will lay out the U.K.’s point of view: climate change is a global problem that requires a global solution, this problem was caused by developed countries, and the weight of responsibility to solve it lies with us. I will also discuss how we can cooperate to build consensus for a global climate deal in 2009. The Bali conference was a good start because all countries agreed to mitigate emissions in varying degrees. The U.K. is doing its bit. We are the first country to put carbon reductions into law — up to 32% by 2020, and 60% by 2050. We are also committed to helping countries like India ensure their growth is climate resilient through building capacity, financing, and technology transfer.

Another very important issue for me is that of development. It has become a cliché that the Millennium Development Goals (MDGs) will not be met globally unless they are met in India. It is for this simple reason that I am determined that the U.K. Government will do what it can to work in partnership with the Government of India to address the issues of maternal and child health, gender equality, clean drinking water, access to education, and the other MDGs. We need to establish where the U.K. Government can add value to what India is already doing, either through our expertise and experience, or with financial assistance. And India’s emergence on the international stage means the time is now right to use our combined knowledge and resources to expand this partnership to tackle poverty globally. While India is becoming a global power, we accept that many parts of the country are lagging behind. In Bihar, a shocking 58% of children under three are undernourished. This single State is home to 46 million poor people (or 5% of the world’s poor). That is why DFID is proud to announce a new programme of support in Bihar focusing on health, nutrition and urban development.

So, I come here as a friend of India, and a friend of Prime Minister Singh. I am keen to help showcase some of the best elements of India in the U.K. – which is why I will be visiting two of India’s leading educational institutions and meeting some of India’s top business leaders. And I hope that my discussions with Prime Minister Singh will move the U.K./India relationship forward. We should be working together for the benefit of each other, and, in partnership, taking a leadership role in the world.

(The writer is the Prime Minister of the United Kingdom)

 

 

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Auto Expo logs Rs 20,000 cr business

NEW DELHI: The unveiling of the Nano may have stolen the limelight at the ninth Auto Expo but in real business terms too it was a whopper.

Around 1,200 exhibitors generated a record business of Rs 20,000 crore during the event. Around 1.8 million people, the highest in the history of the show, visited the expo that opened on January 10. Around 1,200 exhibitors generated a record business of Rs 20,000 crore during the event.

Confederation of Indian Industry (CII) deputy director general Gurpal Singh said, “The auto show saw over 9,000 trade enquiries. Of these, 66% enquiries came from business visitors, 21% from foreign visitors, around 4% from co-exhibitors and 8% from general visitors. More than 100 MoUs were also signed. While 59% were inked with business visitors, 27% with foreign visitors about 14% with co-exhibitors. Besides, we had conducted 1,400 business meetings at the expo which is the largest automotive event in Asia in terms of total space area.”

CII has appointed a committee headed by Ashok Leyland MD R Seshasayee to consider organising such auto shows in different parts of the country.

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9th Auto Expo at a glance

“We are considering various innovative ways to change the format of the show. Like the Hannover Auto Show or Frankfurt Auto Show, we can showcase different vehicles on alternative years. We are also considering making it an annual event and if the current venue Pragati Maidan lacks the space, we may move out of the capital,” said Dilip Chenoy, director general, the Society of Indian Automobile Manufacturers.

At the expo, 65 original vehicle manufacturers’ and 95 component makers had put up their pavilions and around 30 different car and automotive technologies were launched at the eight-day event.

 

 

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ICICI Bank, the country's biggest private lender

ICICI Bank, the country's biggest private lender, expects overseas business to account for at least one-fourth of its balance sheet in 2008 and is targeting a place among the world's top ten banks within five years.

"If there ever be an Ivy League of global banks, I believe, in 5-10 years, we have to have a few banks from China and a few from India in that league," ICICI Bank [ Get Quote] managing director and chief executive officer K V Kamath told PTI in an interview.

"The target is that we will try to do it in less than five years. China has done it and their three banks are in the top ten. Three years ago, none of us would have given them any change of getting there," he said.

While attributing the current position of Chinese banks to the economic uptrend that started there ten years ago, he said, "Within six years, as an Indian bank [ Get Quote], we should also enjoy similar change in attributes."

Kamath said he did not see slackening of India growth story for another 15 years and if the GDP grows at 10-11 per cent, banks and financial services sector should grow at a three-times multiple or about 30 per cent every year.

"If you look at that possibility you are really looking at doubling your size every three years. Then in six years, it should be a size where most Chinese banks are today -- in the top 10," said the head of India's most valued bank.

ICICI Bank's joint MD and chief financial officer Chanda Kochhar said the bank was already India's biggest in terms of overseas business and was looking at a contribution of at least 25 per cent from its international business in 2008.

Currently, global assets account for 22-23 per cent of its balance sheet, Kamath said.

Talking about the bank's international expansion plans, Kochhar said after getting a license in the US, it was not looking at merely foraying into other countries. "In each of the 18 countries we are present, we have a lot of deepening and widening to do. This can happen in many ways. For some it can be expanding the role of the branches," she said.

"Our overseas growth would be driven around three platforms - Indian retail customers, Indian corporate customers and our niche cost-competitive areas. As we get into the next year, our international side of balance sheet would be about 25 per cent of the total."

With more than $19 billion of overseas assets, ICICI Bank is the largest international bank in India, she said. ICICI Bank played a role in 88 per cent of total number of outbound merger and acquisition deals by Indian companies during 2007, while in terms of value of these deals, the share was 65 per cent, she said. The involvement was largest in terms of value and second-largest in terms of volume.

Indian companies would invest up to $700 billion over the next few years. While a major part of it would come from their own internal accruals equity issue, a large portion would be through borrowings in local and foreign markets.

"We saw this as a coming opportunity two years ago and we calibrated our skills to be able to take large market share in this business. We have strengthened our investment banking capability and also international capability, so that we can not only give them loans but also syndicate a large part of loans for Indian corporates," Kochhar said.

ICICI Bank currently ranks as a leading arranger of foreign currency loans for India Inc. This was an area dominated by foreign banks till some time ago, Kochhar noted. She said in India also ICICI Bank was looking to have a role in 25 per cent of the investment pipeline worth about $500 billion likely to come from the corporates in the next three-four years.

"Our current balance sheet is over $100 billion and we are talking of a little over doubling the balance sheet in the next three-four years," she said.

Kamath said 100 per cent growth was not the way to go for banking business, but even at 30 per cent growth the size would double every three years. There were also inorganic opportunities, he added.

When asked which other banks from India he expected in the global top ten, Kamath hinted at the country's biggest lender, the State Bank of India [ Get Quote]. "At least one large government bank is clearly capable of entering into that league," he said.

"In China also, it is the government banks that have got into that league. I think any other bank will take time because I do not see the scaling-up that is required being done as yet elsewhere," he noted.

"Ten years down the lane, an Indian bank would have to be there. Our endeavour is to see how much quicker we would achieve that. . . One thing is sure that an Indian bank would reach that Ivy League," Kamath said.

 

 

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