India's Promise - The Feel Good Factor
Monday, May 28, 2007DARREN GERSH: I'm standing at the Taj Mahal, one of India's most enduring landmarks. Its construction was the fulfillment of a promise by an emperor to his dying wife. Now, more than 300 years later, India is ready to construct a more promising economic future. Tonight, we explore India's promise, its hopes to become one of this century's economic superpowers.
These are the new landmarks of India: an expensive suburb of Mumbai, an upscale shopping mall in Delhi, a software park in Bangalore. Driving this growth are the new emperors of the Indian economy: a rising generation of entrepreneurs. Sanjay Kapoor was having fun as a banker, but he thought he'd have even more fun in the fashion business.
KAPOOR: So this is a light Indian wedding outfit. This is what the girl wears, like a skirt. And that's like a shawl that she wears over it and a bikini top. Just feel how...
GERSH: Wow!
KAPOOR: And that's not a heavy piece.
GERSH: This must weigh 15 pounds or more.
KAPOOR: Yeah, probably.
GERSH: So Kapoor traded in his pinstripes, tapped some private equity funds and Genesis Colors was born.
KAPOOR: This is a country of entrepreneurs. I mean, if 10 years ago, I told my dad, I'm quitting my job at Citibank to set up a fashion business, I don't think he would be very happy, neither would he think I would be successful in a non-orthodox business.
GERSH: Think of India and software and offshore services come to mind. But western-trained entrepreneurs like Kapoor are now pushing India's growth in high-end manufacturing, design and retail. The Indian fashion industry was a disorganized collection of small family businesses. Then Kapoor brought in a corporate structure and bought up famous Indian labels like Satya Paul.
KAPOOR: The last couple of years, we are doing about 100 percent year on year growth. That's the minimum we expect to maintain.
GERSH: Unlike other Asian tigers, India's economy is driven by consumption and consumption is soaring. Fifty million Indians are considered middle class, earning between $4,000 and $20,000 a year. And salaries in IT and offshore business services are rising at double-digit rates. That's bad news for employers who complain about skill shortages and rising costs, but it's good news for retailers.
KAPOOR: The youth of today is not worried about saving. If I'm making 80,000 rupees a month, I want to spend 80,000 rupees a month because I feel in the next year that my salary is going to go up by 40 percent. And so, hey, why save? There's always a future ahead of you. There is a consuming class, which is out there spending, wanting to look good, wanting to feel good, which is what I call the feel-good factor.
GERSH: Indians want to feel good about their homes, too, and rising incomes have set off a nationwide building boom. Real estate investment fund managers like S. Sriniwasan say financial deregulation has help unlock a new market.
S. SRINIWASAN, CEO, KOTAK REALTY FUND: The entire off shoring industry and the services industry in general has now created a vast pool of white collar employees who are bankable.
GERSH: ...and young. More than half of India's population is under the age of 24. Soon, India will be the most populous nation in the world. Now, for perhaps the first time, that's seen as a strength.
SRINIWASAN: As the rest of the world ages, the world's workforce will be in India.
KAPOOR: We use a very modern print, but traditional work in a modern style.
GERSH: At Genesis Colors, the new Indian economy and the new Indian workforce come together seamlessly.
KAPOOR: If you walk around the office right now, you're going to find a very young workforce in their late 20s, who are energetic, who are passionate about what they're doing, OK, because they feel there's a sense of ownership in what they're doing, which is great; which is what, I think, this country needs.
GERSH: Of course, there are many other things India needs to thrive and here's where the growth story frays. Corruption is rising; government reforms are excruciatingly slow. Entrepreneurs like Kapoor must provide their own electricity and water. Infrastructure bottlenecks are pushing up inflation, sparking concerns the economy is overheating. A land rush for prime retail space has driven up rents, putting margins under pressure. Skeptics say these are all reasons growth in India will come down from a blistering 9 percent a year to a more sustainable 7 percent. What is clear, say business leaders like Microsoft India Chairman Ravi Venkatesan, is that India will be transformed.
VENKATESAN: I think ours is the first generation that believes that in our lifetime India could be a developed nation. That sense of possibility wasn't there five years and 10 years ago. And that's because, I think, for the first time, there's confidence, there's pride as Indian institutions have become globally successful. So people believe we can do it.
KAPOOR: This final garment that gets made will probably sell for $10,000.
GERSH: Sanjay Kapoor is certainly not lacking in ambition. He wants his company to do what other fashion labels have done: create a global luxury powerhouse. Louis Vuitton, meet Satya Paul.
KAPOOR: One can develop into accessories, into fragrances, into lifestyle living, you name it. There's plenty of things to do.
