Our trip began on Tuesday, December 28, 2010 with a city tour. With over 6.3 million residents, Hyderabad is India’s 6th largest city, and is known as one of its technology hubs. In addition to IT, many biotech and pharmaceutical companies have set up shop in Hyderabad. Geographically, the city sits at the crossroads of north and south India, resulting in the blending of many religions, languages and cultures. While walking through the streets of Hyderabad, we heard at least 4 languages (Telugu, Urdu, English and Hindi). During our tour, we visited Golconda, a 13th century fort, and Charminar, the most famous mosque and monument in the city. Around Charminar, we had the chance to shop in the open markets around the center of the city.
On Wednesday, we began the educational part of our trip at the Indian School of Business (ISB). Barely ten years old, ISB is already considered one of the top business schools in the world. While touring the beautiful campus, we learned ISB is completely self-funded, receiving no financial assistance from either the state or federal government. ISB conducts research in areas vital for the development of India’s economy, including entrepreneurship, global logistics, emerging markets and change leadership. 30% of the professors are permanent, while the other 70% visit from top universities to teach classes and conduct research.
After the campus tour, we spent the day learning about the Indian Economy and Financial System from Professor Rajesh Chakrabarti. To set the stage for what was a very interesting lecture, Professor Chakrabarti provided us with a brief overview of modern Indian history. After 200 years of British rule, India gained its independence in 1947. From 1947 to the early 90’s, India modeled its economy after Russia’s, focusing on the creation of a large, state-controlled economy. After the collapse of the former Soviet Union in 1991, India underwent a series of economic reforms known as liberalization. India shifted away from central planning towards free market economic principles. As a result of the reforms, India’s GDP has grown 8-10% each year since liberalization. Professor Chakrabarti then walked us through a high-level overview of India’s financial system. He noted many positives, including a stable banking system and vibrant financial markets, but noted some challenges to continued growth, including poor credit infrastructure (India does not have credit monitoring services, which it makes it difficult to safely loan money to individuals), an overly-bureaucratic regulatory system and an ineffective court system which makes the enforcement of contracts difficult.
Thursday’s lectures focused on emerging sectors in the Indian economy. Currently the world’s 11th largest economy, India has been growing rapidly, but faces three major challenges to continued growth; education, health care and infrastructure. Researchers at ISB believe by 2025, there could be up to 500 million Indians denied access to education due to capacity constraints in the public school system. This has led to a debate on whether or not to allow for-profit schools in India. Currently, for-profit educational institutions are illegal, but many believe allowing the private sector to build and operate schools is necessary to provide access for all students. Some believe India will soon become the largest market in the world for education. However, before that can become a reality, India’s infrastructure needs further development. In order for continued growth, India needs clean water, reliable power, more airports, efficient roads and public transportation systems for its largest cities. To meet these needs, the Indian government has been exploring PPP’s or public-private partnerships. In a typical PPP agreement, the government provides land to developers, who build and operate large-scale projects like airports, freeways and bridges for a given period of time. The government then assumes ownership of the asset after the developer has recouped the capital invested in the projects. PPP’s have lead to new airports in Hyderabad and Delhi as well as a 32-lane freeway around Delhi. India has aggressive plans to continue the modernization of its infrastructure. Over $500B in new projects are slated for completion within the next ten years.
On Friday, we had the opportunity to visit one of India’s most successful companies, Infosys. Infosys began in 1981 with 7 people and $250 of working capital. Today, the IT giant employs over 100,000 people, and earned $4.68B in revenue last year. It was also the first Indian company to be listed on the NASDAQ. In Hyderabad, Infosys has a beautiful campus which sits on 250 acres and employs 12,000 people. With 61% of their business coming from US companies, Infosys felt the effects of the US recession, but our guide noted they are looking to replace the lost revenue by satisfying increasing demand from Indian companies.
So far, it’s been a wonderful visit. After resting up over the weekend, we’ll spend next week studying rural marketing (both in the classroom and by visiting a rural village) and touring other software and biotech companies. While this trip is winding down, other Illinois MBA students are getting ready to visit Berlin, Germany next week, and Sao Paulo, Brazil over spring break in March. Stay tuned for more updates as our students travel the world.