India and Europe:

Beginning of a new era

Excerpt from research monograph "India and Europe", published by CIPRA Books(2007).

INTRODUCTION

 

Europe and India are two pluralistic global communities that share much in common – in antiquity and traditions, histories and cultures, plurality and diversity, commitment to democracy and human rights, to an independent judiciary and free press, and the strategic role that both required to play in today’s rapidly changing world. We are multi-cultural civilizations that are rich repositories of memories, of refinement, of values that are mature and distilled and bearers of foundational ideals of special relevance to the modern world, ideas which demand a blend of the ancient and the contemporary, of the old and the new, of the past and the future.
We live in turbulent times. The past continues to cast a shadow over our endeavors. We cannot forget the millions who perished in the two World Wars, or in the partition of India, nor can we erase from our memory the gas chambers, the gulags, the civil wars in which millions were killed and millions more became refugees. We have to build a new world from the debris of the past and harness all our creative energies, at many levels, in this effort, overcoming age-old conflicts of boundaries and borders between nations, as indeed you have remarkably done in Europe. Indeed, the emergence of the European Union after centuries of internecine conflict was one of the most remarkable and positive developments of the twentieth century. It is a model for the way in which our own Regional Association – SAARC – should develop in the years ahead. However, terrorism and ethnic brutality continue to cause concern to India as much as to Europe. We, in India, have been victims of cross-border terrorism for years and our suffering, especially in Jammu and Kashmir, hardly needs elaboration.
We can draw many parallels between our two regions. We are a storehouse of myths and narratives. Our mythical histories are perhaps as rich as our actual ones. We have legends and tales for every occasion. Gods and Goddesses, major and minor, so human and so endearing, enrich our lives. From them we draw our names, our stories. In fact, the resemblance between Roman, Greek and Indian mythologies is quite remarkable. Again, it would be interesting to visualize Europe and India as composites made up of numerous nations. Europe actually is this amalgam; India is one country made of numerous states, several as populous as any European country. We move across terrains of all kinds – plains, hills, mountains, rivers, seas, oceans. We have all possible weather conditions, diverse foliage, flora and fauna.
India and Europe are pluralistic societies – multi-regional, multi-linguistic, multi-cultural and multi-religious. Europe sustains itself through a gamut of languages that derive from the same roots and yet maintain their rich flavours. The same is the case in India. The Indian states share not only their languages but also their literatures; the cross-fertilization between the languages and the literatures enriching each other. Indeed, the sharing of languages and literatures between Europe and India has an amazing track record. We Indians have grown up on a staple diet of European literatures, and Europe has produced some of our most respected Sanskritists and Indolgists. The history of films has been the same. European cinema has been an Indian favourite while Indian directors and movies have always enthralled Europe. The more recent fusions in dance and music also reflect the same creative symbiosis. In a world that is under continuous threat of becoming more rigid, inflexible and unyielding, we, as Indians and Europeans, believe not in the Clash but in the Confluence of civilizations.
The 20th century has seen immense co-operation and progress between India and Europe – in physics and mathematics, science and technology, mechanical and computer sciences, engineering, environment, management, and so on. Europe and India have also agreed to strengthen their collaboration in research projects in a number of areas including genomics, nanotechnology and high-energy physics, and have joined forces to confront the global challenges posed by HIV/AIDS, tuberculosis and malaria. Our economic relations are growing fast, especially in the area of foreign investments and co-operation in the fields of biotechnology, telecommunications and energy. The EU has been a major trade and investment partner of India and is still the largest importer of goods and services from India. European companies have been making large investments ever since India opened its economy in 1992, and Indian companies have made substantial investments in Europe in the recent years. This partnership, especially at the geo-political levels, will give India and Europe a strong basis to assert their common policies and to build strong affiliations.
A major step towards strengthening the EU-India relationship was the launching of our Strategic Partnership at the Hague Summit in November 2004. The sixth Summit meeting between India and EU held in New Delhi in September 2005 was significant, as it endorsed a comprehensive and ambitious Joint Action Plan which provides a framework for deeper cooperation and engagement over a range of issues, especially in economic, trade and investment matters. The JAP provides ways and means of enhancing cooperation over several areas, including the social sector, science and technology, space, energy, clean development, and environmental improvement. On the economic front, as you know, the EU is India’s largest export destination. In 2005, India’s exports to the EU over 2004 registered an increase of 16.2% amounting to Euros 18.87 billions. EU exports to India have also increased by almost 24% amounting to Euros 21.08 billions during the same period. Impressive as these figures are, it is hoped that India-EU trade can still grow exponentially in the years ahead.
India’s admission into the elite group of scientifically advanced countries that form a consortium for a energy research project – the International Thermonuclear Experimental Reactor (ITER) Project – and India’s participation in the Galileo Project are recognition of its ability to meaningfully contribute to the advancement of scientific research in the world. We note that some EU Member States have concerns about globalisation, including about increasing competition from countries like India. Here it must be appreciated that significant opportunities exist for a win-win situation for both sides. The EU’s own interest in increasing its competitiveness would be served in closer and mutually beneficial cooperation with India, especially in services and the knowledge economy. While the EU continues to press countries like India to open their markets, it also needs to acknowledge the necessity of opening its own services sector and facilitate the movement of professionals from non-EU countries.
On the political front, India and the EU have an important stake in the reforms in the United Nations, which is still frozen in obsolete structures, in the whole WTO exercise, in the question of human rights and in dealing with the menace of global terrorism. That is why the relationship between India and Europe cannot be built solely through bilateral cooperation; we have to work together in addressing global issues that concern us all. The India-Europe relationship is an example of collaboration in the age of globalization. The India-Europe axis is extremely important as a factor for peace and stability on a global level. Globalization has far-reaching implications, beyond just the economic. It raises critical cultural questions that we need to address together, a fact that is often overlooked. The question of cultural identity in a pluralistic, multi-polar society is of paramount importance.
India and Europe are natural partners. We need to work together to tackle international issues affecting us – poverty, climate change, terrorism, migration as well as economic growth and prosperity. India is the world’s largest democracy. It is emerging as a significant economic power, especially in the areas of IT, and has significant achievements in many frontier areas of technology. Its middle class today numbers close to 300 million, and is growing. As one of the largest markets in the world, India seeks to strengthen its economic interaction with Europe. India and Europe can be partners in the building of a new global order based on prosperity, respect for human rights, tolerance, plurality and diversity, and the democratic order.
Not long ago, markets in Europe and the U.S. reacted with alarm when some countries that had long been the target of corporate takeovers, such as Spain, launched their own international takeovers. Now new alarm bells are sounding in Europe, especially in countries that are conservative and protectionist. That's because Indian entrepreneurs are now launching such takeovers. As a result, figures such as Lakshmi Mittal and Ratan Tata are beginning to attract significant attention in the European media.
Although Chinese companies are making a strong push into global markets, their executives have yet to achieve the fame recently won in Europe by such Indian executives as Lakshmi Mittal, who took control of the steel consortium Arcelor, and Ratan Tata, who is trying to buy Corus, the Anglo-Dutch steelmaker. These are some of the best known names, but they are hardly the only ones. In the near future, such figures as Anil D. Ambani, president of Reliance, and Sunil Bharti Mittal, founder of Bharti, will become very well-known in Europe. Their faces will occupy the same front pages as Emilio Botin, president of Santander, who bought the British bank Abbey, and Amancio Ortega, founder of the Zara fashion group, who has opened branches around the world.
Sanjay Peters, a professor in Esade's economics department, says that in addition to these figures, other Indian executives are playing a major role in big multinationals, such as Arun Sarin, chief executive of Vodafone, and Sanjiv Ahuja, chief executive of Orange. Both of these companies provide mobile phone services. In other cases, Indian managers have risen to the top of Western companies, such as Indra Nooyi, CEO of PepsiCo. "It's not just that Indian executives have an amazing presence in foreign companies, but also that they have such a presence in the most prestigious universities of the world, such as Harvard in the U.S. and Cambridge in the U.K.," says Peters. In the academic world, more and more Indians are acquiring a higher profile. Examples include C.K. Prahalad, a well-known strategy guru, and Das Narayandas, an expert in international marketing.
Why are Indian companies undergoing a process of globalization? Although many have had a presence in the U.S. markets for several years, their appearance in Europe has been a more recent phenomenon. According to Juan Carlos Martínez Lázaro, a professor at the Instituto de Empresa (IE), the Madrid-based business school, "These companies are already large enough in the India market, so they need to expand.... Usually, they operate in those sectors where size is important, such as steelmaking, and where they can take advantage of economies of scale in order to lower their costs," he notes.
Although it may still seem strange that Indian conglomerates are buying European companies, Martinez Lázaro suggests that this is a logical development, and that the same process is beginning to happen with Chinese companies. The first step usually involves making an acquisition in the United States "because it is easier to operate there," given the bureaucratic barriers in other countries. The next step is to grow in Europe -- a trend that will accelerate over the next few years, says Martínez Lázaro.
One of the great advantages of Indian executives, compared with their Chinese counterparts, is their knowledge of Anglo-American culture. Another advantage is the greater openness that India has enjoyed when it comes to foreign capital, notes Pedro Moreno de los Ríos, a partner at Parangon Partners, an executive search firm. Indian managers tend to have an international approach, and "India is [even] exporting managers to China." When it comes to multinationals, local Indian executives are part of the cadre of new executives who are promoted within the company and move up to headquarters. They bring a multicultural character to these companies, breaking the stereotype that only Americans become chief executives of large global companies.
This viewpoint is shared by John J. Grumbar, the new president of Egon Zhender International, the executive search company. A significant number of Indians have "a lot of talent" and need only to broaden their goals and study abroad, he says. When they finish their training, they return to India ready to take advantage of the opportunities and potential of that country. Indians also bring their knowledge of the English language and the Anglo-American business style, inherited from the British colonial era. This is one of the major differences from China, where it is very hard for a foreigner to join a local company because of language problems and because of a very hierarchical structure that is "too paternalistic," says Grumbar. As recently as 25 years ago, the law even prohibited companies in China from recruiting employees who were working in other companies.
According to Martínez Lázaro, the big Indian companies pushing their way into Europe have already spent quite a lot of time operating in the West. As a result, "they have adapted perfectly to the rules of the game here." In addition, they have had to comply with the same norms and codes of good governance as their competitors in order to list their shares on [Western] stock markets. Nevertheless, Martínez Lázaro recognizes that "the Indian way of doing business is quite different." For example, Indian business culture is based on trust, while business in Europe is more impersonal. "Here, the contract is the law, while in India, there are times when your word and personal relationships are more important than the actual contract," he notes.
Peters points out that things have changed a great deal in India over the last two decades, and so have the characteristics of the typical [Indian] business leader. He notes that there are some families that have a long tradition of doing business, where a new generation of leaders is pushing to find their own place in the sun through hard work and tenacity. In India, says Peters, there are a lot of family-owned industrial firms, and some "even pre-date the colonial period" of British rule.
Nevertheless, some small, family-owned companies have become truly large enterprises now considered among the largest industrial firms in the country. Examples include the Tata Group, Mahindra & Mahindra, Birla Group and Reliance. In many of these cases, notes Peters, the portion of the company owned by family members has been diluted. In part, that's because minority shareholders now have a great deal of weight and influence within the company, which has become "totally professionalized" from the corporate point of view.
On the other hand, a new group of business leaders has emerged over the past two decades, according to Peters. Some are in "companies that have not relied on any support from the government," while others came from a small elite that received support from the government. In his opinion, both groups of entrepreneurs have learned how to take advantage of opportunities in a "country that is no longer agricultural," and where they can provide a significant boost to the service sector. Perhaps the most familiar case involves Narayana Murthy, founder of Infosys, one of India's top software firms. According to Peters, there is only one Bill Gates in the U.S., but many similar figures are emerging in India. Gates launched his company in his garage, assembling computers. For his part, Murthy sold all of his belongings, even his mother's jewelry, to establish a company that now competes with the computer giant.
According to Peters, the names of an entire new generation of young business leaders is emerging on the international landscape, and other names will do so over the next few years. "What is special about them is that they have managed to create large companies through their own sweat," not because of outside help or sponsorship from large families. Many have studied in Indian universities, but others have gone abroad and later returned. Some have earned an MBA in a prestigious business school. No matter what their area of activity, they are ready to take advantage of the opportunities that India offers, so their companies can grow. Ranbaxy, Dr. Reddys Lab, Satyam and Wipro are only some of the names that will start to appear on the front pages of the global press in coming months, Peters predicts.
Diversification Style
One thing that may surprise European and American executives is the way both traditional and new Indian companies channel their energy. For example, it is hard to put all of their company's activities into a single sector. Consider the Tata Group, which owns steel plants but also operates an automobile division, and also owns Tata Consultancy Services, the largest IT consulting firm in India. The holdings of The Reliance group, which has one of the highest market capitalizations in Asia, range from the telecommunications sector to companies that supply electricity. Bharti Tele-Ventures, one of the largest mobile telephone companies in India, has also reached an agreement with Wal-Mart to open a chain of supermarkets throughout India.
To take advantage of such opportunities, these new executives must find sources of financing, including foreign sources of capital. "They are aware that there are markets that have not been exploited, and they want to take advantage of them, but not if foreigners get 100% of the profits," says Peters, adding that "this way, they guarantee that India will not be sold off to foreigners." He says India will keep its doors open while maintaining control and participating in its own development. "India wants to create its own companies and brands, while China leaves the road wide open to foreign companies," says Peters.
Tata, Reliance and Bharti
One example of an Indian business leader who has long been famous in India but is now beginning to be known internationally is Ratan Tata, who inherited the business empire founded by his ancestor Jamsetji Tata in the second half of the 19th century. Currently, Tata Group comprises about 80 companies. When Ratan Tata inherited the title in 1991, the holding company had more than 300 companies, which the company controlled through trusts that, in most cases, did not provide Tata with ownership of more than five percent. Ratan Tata decided to reorganize the group and increase its ownership and influence in those companies that the Tata holding company still owned.
To do that, Tata gave up many companies in such sectors as textiles, and focused on other areas, such as automobiles. In so doing, the Tata holding company continued to grow, and became the largest business conglomerate in the country. When India became too small for the Tata group, Ratan Tata decided to make a great leap outside India. In 2000, he bought Britain's Tetley Tea for $435 million. Some experts described the deal as the first great foreign acquisition made by any Indian company.
Nowadays, Tata has been in the news not only for trying to buy the Anglo-Dutch steelmaker Corus, but also for Tata Motors, which manufactures economy cars. Although some people have doubts about this approach to doing business, it is the family legacy of the Tatas. In 1904, Jamsetji Tata, who founded the company, decided to construct the Taj Mahal Hotel in Bombay because, as an Indian, he was not allowed to enter any hotel in that city. The hotel was the first building in the city that used electricity and the first hotel with American fans, German elevators, Turkish baths and English servants, among other novelties of the era. In short, Tata turned adversity into an opportunity.
The Reliance group is another fast-growing conglomerate, and its market capitalization is one of the highest among private-sector companies in India. Nevertheless, problems regarding succession have taken their toll on the company. Dhirubhai H. Ambani, who died in 2002, founded this giant firm, and he is also considered one of the fathers of capital markets in India, mainly because he opened the doors of the country's stock market to other investors who did not belong to the country's elite. In 2002, Reliance laid about 60,000 kilometers of fiber optic cable, bringing the digital era into a country where infrastructure continues to be the great challenge of the future. Ambani, a former schoolteacher, began his company with only $300, and was among India's wealthiest people at the time of his death. After Dhirubhai's demise, the Reliance Group was reorganized and is now managed by his two sons, Mukesh and Anil.
Under the Airtel brand, Bharti has more than 28 million cell phone customers. In addition to developing software for telecommunications, Bharti has diversified into other businesses, including exporting fresh agricultural produce to Europe and the U.S., with help from the Rothschild Group. Bharti also has a presence in the insurance business, in a partnership with AXA, a Paris-based provider of financial services. With Wal-Mart, Bharti will also create supermarkets throughout India. Bharti's market capitalization has reached $25 billion, and it employs more than 30,000 people.
This sort of tale is beginning to become familiar in India -- the story of an entrepreneur who has created his company by himself, with tenacity and a vision of the future. Sunil Bharti Mittal is the president and founder of the company. (He is not related to Lakshmi Mittal, the steel magnate.) In 1976, when he was only 18, Mittal founded his company, using $1,500 that he borrowed from his father. In those days, in order to set up a business, a new company had to acquire a license from the government, and Mittal used his license to import portable electric generators.
In 1992, when he was working for Siemens, he took advantage of the deregulation of India's telecom sector, and bought licenses for both mobile and fixed-line telephone services. From that day forward, his company's prospects have continued to expand rapidly. Now, if Bharti wants to expand through Europe, its only option will be a series of isolated acquisitions, rather than one large-scale takeover, because no free licenses for telephone services exist in European countries.
In the post WW II period some European countries, especially in the Nordic region, transformed their inegalitarian governance systems into caring states; states in which not only basic rights but also real possibilities of participation in social, political and cultural life were granted to all. This civilisational achievement was based on vibrant democratic participation and made possible through progressive taxation and active implementation of the social welfare state idea.
In the dialogue between civilizations the “Nordic model” has been a shining light that has inspired people on all continents searching for “modernisation with a human face”. In the same dialogue India is known and respected because its progeny has included people like Buddha, Mahavir and Gandhi. This year itself is the hundredth year of use of the novel tool of satyagraha, truth force and non-violent struggle, first developed by Gandhi and his team in South Africa and later used creatively on all continents by large movements and inspiring leaders such as Nelson Mandela, Jayaprakash Narayan, Victor Jara and Martin Luther King. Drawing on its plural cultural heritage India has also after independence frequently shown inspiring moral leadership among the non-aligned nations, in the UN and in other international for a such as the World Trade Organisation.
While both Europe and India have much to cherish about the democratic traditions and achievements, the present trends are not at all favourable to deepening and expanding democratic ideas and practices. The dominance of short-sighted economic objectives and submission to corporate power in political life are serious concerns all over. People are keen to contribute and participate, but the the commercialised media and “there is no alternative” mentality present major obstacles for genuine participation.
Nuclear weapons remain a long-term threat to the survival of the planet. Should India and E.U. not be trying for a global movement to persuade all the nuclear bomb holding states to revise their nuclear doctrine in a manner that global nuclear disarmament could become a realistic idea? The present nuclear doctrine especially of the current White House regime is the main source of anxieties and clandestine proliferation all across the world. EU and India together are strong enough and their interests diverse enough so that they would together be well placed to play a realistic role in building a world that would, ultimately, be freed from the threat of planetary disaster.
The Huntingtonian vision of a clash between civilizations has rapidly emerged as a real threat to peaceful coexistence and conviviality in and between countries and regions. India, that hosts the second largest Muslim population in the world, and Europe, with its diverse streams of Christian and other faith traditions, both have long, albeit vulnerable, experiences of successful and creative efforts in the building of plural, secular and peaceful societies in which equal respect is granted to people of all religions and of all ethnic origins. They could get together to set an example of concerted inter-civilisational effort to enhance institutional, intellectual, economic and social resources that secure the dignity and provide for the flowering of all their citizens and residents without any threat to their identity. Their dialogue could start as of today by addressing the question of secularism. Considering recent tragic events in some EU member states, such as France and Germany, and in some Indian states, including Gujarata and Mahararshtra, EU and India should together work to define, consolidate and develop models of state action and protection that have, under diverse and changing conditions been most successful in preventing inter-faith and inter-race violence and oppression.
There is need to address the underlying dreams and aspirations that seem to propel short-term political effort globally today, including Europe and South Asia. Article I-3.1 of the Draft Treaty Establishing a Constitution for Europe states that “the Union shall work for … sustainable development … based on balanced economic growth”. With similar neglect of the long-term limits to economic expansion the Prime-Minister from the land of Gandhi is still chasing the mirage of the Northern consumer paradise. We do not here wish to enter at all into the debate about models of sustainability and shifts from quantitative to qualitative growth, nor even into the debates about ecological and inter-continental justice and democracy. These are all mandatory topics for further elaboration, but leadership is needed globally at a more fundamental level.
The efforts for environmental sustainability need to be stepped up if the dangerous climate change or irreversible loss of biological diversity is to be avoided. In this, the millennium long traditions of the indigenous people of India (adivasi) can be a major inspiration. The cultures and livelihoods of adivasis, rural workers, peasants, artisans, fisher folks and other sustainable communities need to be appreciated and protected from the onslaught caused by the expansion of modern consumerist culture.
With all due respect for the democratic legitimacy of current growth regimes and for technological inventiveness, in which Europe and India both remain at the forefront, it must be made clear to the world that no lasting peace, no dignity for all and not even survival in the long term can come to all peoples unless limits to powers of humans are acknowledged.
The crux in all serious search for ways out of the one-way road to disaster that the presently dominant civilisational model offers is a critical, in-depth engagement with the universalist ethics, the vision of Vasudhaiva Kutumbakam ---the whole earth as one family --- that lies at the heart of the moral aspirations of all great cultures since times immemorial. Whether we turn to the Qu’ran, the Sermon of the Mount, the Baghavad Gita or other foundational roots of our cultures we found in them a common ground for the values expressed also in the UN charters of human rights. The core of this common ground is the dignity and equal value of all human beings and the inherent worth of all living beings. A common denominator is also a warning against turning cultural means into ends in themselves.
In their common search for new, morally sustainable political visions India and Europe could do well in raising to the underlying civilisational needs of the day. Significant progress e.g. in terms of recreating and reshaping the vision for economic progress can be found be starting ambitious experiments with economic design and monitoring that takes the well-being of what Gandhiji referred to as dharidnarayan and Jesus of Nazareth referred to as the Last Person as its ultimate criterion of success.
In practical terms India and Europe could start their work towards this end immediately by agreeing to set up by 2008 a democratic, participatory, high-level Last-Person-First-monitoring mechanism for reporting on the effects of the agreements and practices in the Indo-European trade and investment relations and for providing policy recommendations on this basis. EU and India should not start negotiating new trade nor investment agreement from the viewpoint of liberation. Instead they should look into the effects liberation has had on those in the weakest position in the society and the more and more unequal status of the poor majority and commit to a program designed to correct this situation. This small, first step would be sure to meet with great interest in our regions and across the world and could inspire us and others to further, more ambitious work along these lines.