Now the world’s fifth largest and fastest growing economy, India has become the major alternative to China and specializes in “friendshoring,” placing overseas operations in friendly countries. Gunjan Bagla, CEO of the California consultancy Amritt Inc., describes the billions of dollars being earned by biotech and hi-tech firms such as Medtronic, Apple, Dell, IBM, Honeywell and Oracle. More diverse than the US, Gunjan describes how India has become an innovation hub; a land with the illusion of communication; and a land where the vast majority of consumer products are sold in small packets for the mass market. Gunjan’s podcast also describes how India’s many contradictions are all true.
Gunjan Bagla’s journey
The booming economy of India
Business opportunities in India
The role of women Indian business
The perception of passive Indian employees
The poor sector in India
The downsides of doing business in India
Communication problems in India
Gunjan Bagla, CEO of the consultancy Amritt Inc. of Malibu, CA (metro LA), is trusted by American companies to set up operations, sourcing and engineering in and to understand the culture of India. Clients include Flex, Clorox, Wonderful Company, Bose Automotive, Medtronic and many smaller companies. He has written a book on business with India and co-authors articles about India for the Harvard Business Review. Gunjan has been quoted in the Wall Street journal and Financial Times for his India expertise and speaks at numerous major events about India.
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[email return to Philip@Auerbach-Intl.com]
Hello everyone. Since today’s guest is from India, I’d like to present a blooper that he actually provided which is from India. It was an ad. It was a billboard pasted all over the country by the international advertising agency BBDO and their counterpart in India, called Swami. And it’s an ad by a clothing maker with a guy wearing a suit and advertising a suit.
In Indian languages, just as in many other Asian languages, ranging from Hebrew and Arabic all the way across the continent to Japanese and Korean, there is no word for “a” or “an.” Having “a” or “an” has one meaning; if you drop it, it has another.
As an example, if you say the sentence, “we have few customers this quarter for your new machine,” that’s very different from “we have a few customers this quarter for your new machine.” So the ad simply stated “little style, big impact” with the gentleman modeling a suit. Which has a hugely different meaning than if it were “A little style and A big impact.”
So, with that, I’d like to introduce today’s guest who is Mr. Gunjan Bagla, the CEO of Amritt, a consultancy that helps us executives understand how to set up operations in India, source from India, and do other business ventures in India.
Clients include Flex and Clorox, Wonderful company, Bose Auto, Medtronic, and many smaller companies that have turned to Gunjan who has written a book about doing business with India and co-authored articles about India for the Harvard Business Review.
He’s also been quoted in the Wall Street Journal and the Financial Times of the UK, and speaks at many conferences and major events about India around the world. Welcome Gunjan. I’m glad that you’re with us.
Thank you so much, Philip. Thanks for having me.
So perhaps you could start by giving us your background, your personal background a bit, and then about your company.
So, I was born in the city of Kanpur in North India, and back at that time, my parents’ marriage was quite unusual because they came from different castes and chose each other. I grew up with a very professional mother. She had been a professor since I was four years old as had my father, and college took me to the Indian Institute of Technology.
Some of your listeners might know that it was established during President Kennedy’s tenure and was the largest educational venture for the United States anywhere in the world. Caltech and MIT collaborated with seven other American universities to set it up, so I was fortunate that I got an American college education in India.
And for a couple of years, I worked for an Indian company with a very unusual sounding name called Larsen and Toubro, and both Mr. Larsen and Mr. Toubro were Danish citizens who got stuck in India during the Second World War, and they said, “What the heck, let’s start a company”. And today, it’s one of India’s largest companies. It’s purely Indian, but it still maintains its Danish name.
So, I worked with them for a while before coming to the US. Fast forward to 2002. I’d been working in corporate America. I’d been working at venture-funded startups, each to help my native country. I got strong, I left the corporate world, and I started Amrith to help U.S. companies better understand India. At that time, India was the 25th largest trading partner to the US.
You know, today it’s among the top ten. The growth has been dramatic. And so, I’ve been lucky to be in the right place at the right time. I wish I could say I was just smart back in 2002. You know, luck had a lot to do with it. And it’s been a great ride, the next five years will be even better based on what we have seen.
And that’s because India is booming as an economy. Perhaps you could tell us what makes India such a prime candidate for global investments at this point.
Sure. So there are many factors that go into that. First, it is now the fifth largest economy in the world. Only the US, China, Japan, and Germany are larger, which means India is larger than France. Larger than the UK. It’s also the fastest-growing major economy for 2023, and this is borne out by projections from the International Monetary Fund, the OECD, the World Bank, and other outside agencies.
For the last nine years, India has been led by a Prime Minister who is more business-friendly than India has ever seen, and that has percolated to Indian entrepreneurs as well as Indian executives who had developed major ambitions starting back in 1991 when India liberalized. But today they see the world as their market.
So, I’m sure you saw the announcement yesterday by Boeing that they have won a $46 billion order for almost 300 aircraft. It was important enough that President Joe Biden himself sent out a news release about it. It doesn’t happen very often that the President of the US comments on a business order. So, the economy is large, it is growing, and…
And I’m sorry, this was an order from Air India?
Yes. The order is from Air India, which is a 75-year-old airline. But it was recently repurchased by the Tata Group. And they are ambitiously trying to bring it back to its former glory.
What about business opportunities in terms of sourcing and sales and global engineering and so forth? What kind of opportunities do those sectors present?
You know, we have been working on helping American companies to source from India for 20 years, but it has taken a completely different turn in the last couple of years, and that’s primarily due to the United States’ focus on finding alternatives to China.
So, the US State Department and the Commerce Department have invented a new term in the last few months called Friendshoring, where you try to source products from friendly countries. Well, when you look around the world, you know which friendly companies can offer countries that can offer affordable products in the kind of volume that American consumers have and that business needs. OK, there are very few choices there and India is at the top of the list.
So, for example, Apple was making almost all of its devices in China last year. They went from maybe $10 million in exports from India to over $1 billion in exports of iPhones from India. So, they’re going to employ about 50,000 people. Apple has not hired them directly. There are still third-party contractors, but they are setting up these factories in Bangalore and Chennai sourcing capabilities extend to many sectors beyond electronics.
If you take any generic pharmaceutical medication, you know whether it’s for diabetes or high blood pressure or anything, there’s a 90% chance that the drug was manufactured in India which is the largest biological drug manufacturer. The capabilities go well beyond those sectors but let me turn to India as a market.
OK, I just mentioned the market for aircraft. But if you look at Dell Computer, Hewlett-Packard, you look at Oracle, you look at Google, you look at IBM, they’re all making a billion dollars plus a year in India; it’s a huge market. And now it’s also a market for e-commerce-enabled companies that might be much smaller, and they can sell online with channels in India. That has opened relatively recently, and really accelerated. And digital payments are becoming more common in India.
Finally, let me talk about India’s ability to host engineering centers and this falls really into two buckets. The larger companies and some of the venture-funded startups will actually have their own India back office.
So, for example, General Electric was famous back when Jack Welch was CEO. They set up an R&D center in Bangalore, which now employs over 5000 PhDs. Right? If you look at Honeywell, OK, they have 15,000 people working in India the last I checked. Microsoft, Oracle, you name it.
Also, medical device companies such as Medtronic have set up their engineering centers in Hyderabad. OK, so these are what are called the captive technical centers, where the employees in India are working for the subsidiary of an American company and they are wearing badges that say, General Electric or Medtronic or Boston Scientific. The other side of it is where an American company or a European company for that matter, will hire an external service provider. And that external service provider will then staff up their engineering team altogether between the captive centers and the external providers. Now, there are a few million people working in India and they are innovating Class 3 medical devices for stroke.
They are designing for the next version of Google Maps; they’re working on key components for aircraft. So, this is not just low-cost labor, it’s really the idea of using highly sophisticated and trained scientists and engineers to build the next generation of products that American consumers and businesses the world over are buying.
What about the role of women in India in Indian business? There are some common assumptions or common myths, I guess, but really common assumptions of visitors to India, and the role of women as being somewhat subservient is one of them. So perhaps you could speak about that and then some others.
Yeah, sure. So first I should say and I’m not the first to say this, India has a large, complex and textured country. So, for every truth in India, I can present you with equal and opposite truths. OK, so when you want to understand India, you have to listen very carefully and observe things so that you can come to the right and relevant conclusions.
So, it is true that in the past for many reasons, rural Indian women were quite subservient to men. It is true that you might see middle-class women behave in a similar manner; they might be college educated, they might be physicians, but in the home, they might act as if they are a homemaker and kind of put their professional background literally in the background.
The reality, however, is that the new India is very different. I took the CEO of California’s largest biotech trade group to Bangalore last June. Our very first meeting was with Dr. Kiran Mazumdar Shaw. Kiran started a company called Biocon and she became India’s first self-made female billionaire. OK, she is really the godmother of all Biotech in India. We visited several of our competitors. Of her company’s competitors as well, the front of the company had a tree planted by Doctor Shaw to wish them well. So, she is very prominent and very effective in the work she does.
Now you look at banking. OK, HSBC India is a very, very large bank in India. You know the same HSBC that we all know was headed for a long time by Naina Lal Kidwai. Bidwai is again a self-made woman who rose to the top and she had no family ties to get her there.
There are other cases where women have inherited power or wealth from their families, and an example of that is the Reddy sisters. You know Doctor Reddy, who was a physician in the United States, moved back to India in the 1980s and established what is now India’s largest corporate hospital chain. It’s publicly traded. OK, well, he’s in his 80s now. I have met him several times, but all of the companies under that umbrella are run by the Reddy sisters. He has four daughters and two of them are very prominently involved in running the hospitals as well as the pharmacies and related services.
In politics, India has had a woman Prime Minister. You know, we’re still working on that in this country, I should say, even though we have an Indian American in the White House and you might see her running. We have Nikki Haley, who was the governor of one of the Carolinas, and she is running for president. However, in India, we’ve had a woman Prime Minister. Today, one of the most powerful ministers.
That’s Indira Gandhi.
Indira Gandhi in the 1960s and 70s. And then she came back again in the 80s until her assassination. Today in Mr. Modi’s cabinet, one of the most powerful portfolios in finance is held by a woman named Nirmala Sitharaman. You know, finance, defense, and external affairs are the three top positions in the Cabinet and Missy Faraman holds one of them.
So women are not limited in what they can do in India.
There’s a perception that Indian employees don’t really take the initiative. They do what they’re told and they’re not terribly creative in many ways, and they wait for their boss to tell them what to do, and then they implement it. Especially engineers, for example.
Is this perception accurate? Or is the situation changing?
So let me give some context there. So in India, like in many Asian cultures, from a very early age, you are taught to respect your elders which Implies that somebody older than you knows more than you and has more intelligence and wisdom and should be respected even when they are wrong. You don’t want to challenge them.
So even in a situation where the person who is older may be performing a menial job, OK, and then there are many such jobs in India, but at a company or in a family, there may be a 20-year-old member of the family who is addressing somebody who’s 40 or 50. They will generally address them with respect. They will treat them in a similar manner that they might treat their father or grandfather or grandmother.
So translated into corporate culture, that often means that employees will, as you said, do as they are told. They will not challenge the boss. The boss is supposed to know better. Whether the boss is male or female doesn’t matter. However, what has happened in the last 20 years is that knowledge work in India has become much more important than it used to be. And the colonial mindset that the British left behind in India – where, the administrators, the small number of Brits that were running this giant country were supposed to be smart and supposed to know what they were doing – has been challenged.
So, the modern Indian company understands that knowledge resides at the bottom of the organization and the higher up you go, the less the executives know, particularly when you see American companies operating in India, whether it’s a Google or a Cisco or Cap Gemini, or Venture. They reward and encourage their employees. They train them, they almost force them to speak their minds and to challenge the existing status quo.
Once employees know this after a few weeks of being reinforced, they will open up. It’s not that they are not created, they’ve just been socialized to hide their creativity. So, once they know that they won’t be penalized for this, they do open up.
When writing my book, I interviewed a friend of mine who had 12,000 people working for him at IBM, and he described how they had caused this transition to happen within the company. You look at a company called Adobe. They now design products in India.
Product management is done in India, not just the coding and the development. One version of Google Maps was actually developed in India and then transported to the US, so there are many examples of that. If an average company just goes into India and plays along with the stream of things happening, then yes, they will encounter all of the issues that you mentioned.
But if they make a deliberate and determined effort to harness and you know the harness or unleash the creativity and assertiveness of their employees, they will be amply rewarded. Now the evidence of that is visible.
Philip, when you look at managers from India all over the world. You go to Singapore. OK? Many of the companies are run by Indians, people of Indian origin. I was in Shanghai and I was surprised to see Indian managers running Chinese companies. OK, it’s not that the Chinese don’t have talent. It’s just that Indians have transportable talent. It’s no surprise that Google and IBM and Microsoft today are headed by executives of Indian origin here in the US.
So, none of them got there by being subservient.
Of course, yeah. That’s really quite amazing.
One of the other aspects of doing business in India is the enormous poor sector. Obviously, not everyone is middle class and people are rising. I was wondering if you could speak about how companies, not the high-tech companies, but perhaps low-tech manufacturing companies, consumer product companies primarily, how do they adjust their products to tap the huge monetary wealth of the poor sector? Just because they’re poor doesn’t mean they don’t have money. It just means that they spend it in a different way.
In the Western world, we buy a large package or bottle of something.
And if you go to Costco, you can buy ten bottles of shampoo. That’s assuming you’ve got a closet to store it in.
But in Africa, companies still sell shampoo, but they make little packets or little sachets of shampoo that you can buy for a penny or a nickel or something, and you know it lasts for a day or two. So that’s one way that it works. Can you speak to whether it’s the same in India?
Yes, you bring up a great example and I was fortunate to visit a company in southern India called Cabin Care. The founder of Cabin Care invented the concept of the sachet. Since then, I’ve seen at least a dozen other people claim to have invented it. OK, but Cabin Care’s approach was that we want to offer products that the upper middle class can consume, we want to offer them to the lower middle class and to the masses. And one way that they thought that they could do this was by reducing the ticket price so that people, such as blue-collar workers who often are paid by the week and sometimes even by the day, could buy the products.
So, he took his bottles of shampoo and said, let me sell the sachet for ₹1.00 K at that time, a rupee was maybe $0.10 and now a rupee is, because of devaluation, a couple of pennies and the cost of the sachets has gone up to ₹2 or ₹5.
But the idea Is that the laborer who’s working in the fields only wants to use the shampoo once a week. And then on the special day where he’s going to be meeting his friends or her friends and so on, the way home from work, you know, he or she can stop by this little kiosk that sells the products and the sachets are hanging in strips, and they buy just one.
So the idea of buying these small quantities, no matter what you buy, has been reinforced in India and today, of shampoo sales in India, 67% by volume are with Sachets. So Calvin Care unlocked a market that didn’t exist before. And today you know whether it is Unilever, which is the largest consumer company in India, or Amway or whomever you know, they all now follow this approach.
I took the Wonderful Company to India to market their pistachios. And we said pistachios are expensive in India and the imported pistachios from California are going to be really expensive. And we said that one way to get the consumer to try them is to package them in the smallest quantity possible. So, we’ll get like six or seven pistachios in this pack, but it enabled the Indian consumer to see how much better the American pistachios were compared to products from another country. This mentality pervades everything in India. Even the rich will buy in small quantities in many cases.
It’s fascinating that I didn’t know. Yeah, it’s quite amazing.
One of the downsides of doing business in India is the perception that business is difficult. For example, with a lot of rules and regulations that can suddenly change. So, what are some difficulties that companies typically encounter? And how do you suggest overcoming them?
So, there’s a strong perception that India is not an easy place to do business. And I would divide my answer into two parts. Partly yes, it’s true. OK. India is on the other side of the planet. It has 23 languages. From the American perspective, they drive on the wrong side of the road. You know, when you try to flip a switch in India, you have to flip it the other way. It forces down the line. If you look at the chart of accounts, you know the assets are on the wrong side of the balance. Many of these are British habits, by the way. So, it’s not just, it’s not just India.
They speak English, but they speak Indian English. In fact, on my website, the most popular section is called the Dictionary of Indian English, and there are about 800 words listed there that may have different meanings. Or they may be in words that you have never encountered in the US. My favorite is preponed. When somebody meets earlier than planned, instead of postponing, they say let’s prepone the meeting.
The appendix at the end of a document is called an annexure. OK, that word doesn’t exist in Merriam-Webster diction. But the Indians will use it. OK, so those are the superficial issues that cause people to trip up. OK, the more fundamental point is that people need to listen carefully when they enter India. We talk about how India’s rules and regulations are difficult. When a foreign company is entering the United States, they are bewildered by our employment laws. They are completely confused by what the US FDA wants. In India, people don’t understand Equal Employment Opportunities. In India, on a resume you’ll find the date of birth, age, and religion listed and we have to tell my Indian clients who are coming to the US that they can’t ask those questions. In the US, you know it’s against the law to ask those questions.
And also, because in this country we’ve got National law and then 51 State and District laws.
I’m so glad you brought that up. People in India are very puzzled about why everyone wants to register their company in Delaware and why it matters. Why are there fifty sets of rules, depending on which state you enter?
In India, you register a company anywhere and you can do business in the entire country. Commercial laws don’t change from state to state. So, the legal system in India has many challenges, but you brought up a very important point. India’s legal infrastructure and corporate law are the same no matter where you go.
Anything about perhaps communication problems that you’ve encountered besides the wonderful dictionary that you’ve mentioned?
There are a couple of levels to that, so the modes of communication are different. In the US, you know, we used to have letters and faxes, and then we went to emails, and then if you’re in a large company, you might use Slack or a product like that.
Well, India made the leap to instant messaging, particularly with WhatsApp. So India now despises e-mail. The only way I get any response to e-mail anymore is I send an e-mail because you can communicate much more in-depth. And then I sent them a WhatsApp message saying to please look at my e-mail. WhatsApp has become the primary way that Indians communicate with one another.
And in fact, when Facebook paid about $20 billion to buy WhatsApp several years ago, most Americans didn’t even know what WhatsApp was, and it had no revenue. You know, no model for revenue at that time, but Zuckerberg and Company knew that they were on to something big. And today, of course, WhatsApp is accepted in the US as well. So, the mode of communication is important.
Secondly, the form in which they would write an e-mail or a contract can be different from what we see in the US. So, the way I like to put it is that you can look at my Indian dictionary and my Dictionary of Indian English and you will understand the words. But I interviewed R Gopalakrishnan, who was on the board of Tata Sons for my book, and he came up with a concept that I used in my book to communicate with Indians. You must understand the song behind the words, OK, you can understand the letters and words and sentences, and you may feel that just because you have an Indian doctor in the US, you can communicate with people in India. Well, Indians may speak English. But they don’t think American.
And you have to be able to make that bridge. And you always must reinforce it. Well, people call me an Indian expert, and I have this experience with my own Indian employees from time to time where they think they’ve communicated something to me, and I have misunderstood it.
So yes, it takes time and effort. And the challenge comes about because when someone goes to China or Japan or even Germany or France, they know they don’t know the language. And so, they will hire somebody who’s translating the language. OK, they go to India, and they have the illusion of communication because the words being spoken are in English, but the thoughts are not in American, so you still need a translator. Not a language translator. For the most part, a culture translator who can tell you what Indians mean when they say something and more importantly, what they don’t mean or they don’t say, and to read between the lines. That’s a very important skill to have in dealing with India.
Very true. This non-verbal communication is very critical in any language and any culture. But especially if you are right, when people speak English, one assumes that we’re all speaking the same language or have the same thinking process outlined. That’s very different, very untrue.
I should comment for our viewers, our listeners can’t see it, but that wonderful structure behind you is not the Sydney Opera House. That’s the Lotus Temple in Delhi, is that correct?
That is correct and there are many layers to that image. Since you brought up that photo. First, it is in India and not in Australia.
Second of all, people ask me if it is the Taj Mahal. No, it’s not. They asked me whether it was a Hindu temple. It’s not. The other religions they talk about are Islam and Christianity and Sikhism and Jainism. And the man says no. And then they say what in the world it is.
There’s a small religion called the Baha’i faith, and they have only one major temple on every continent. They chose to put their Asian temple in Delhi. And the temple is interesting to me for a couple of other reasons. You see, there are no straight lines in it. OK, all the lines are curves. It’s a very modern, modern structure.
I told you about the company I first worked for in India called Larsen and Toubro. They have a construction division, and they built this Temple in 1986. It only takes ten minutes to visit, and I think, Philip, you’ve either been there or seen it and I highly recommend to anybody who travels to India to stop by and take a quick peek at it. There’s no admission charge the last time I went. And it’s remarkable.
The curves are also important because that’s another metaphor for what you are dealing with. In India, there are no straight lines to decision-making in India; everything is a curve and it’s not necessarily a bad thing. OK, so. If one can understand curves, one can understand India better than the straight lines we are used to here in the United States.
That’s a fascinating and fascinating metaphor and very true. I did not know that it was the Baha’i Temple, I know the Baha’is. They’re wonderful people and a wonderful religion, but I was not aware that this is their temple. Before we closed, is there anything else you’d like to add?
I think for most Americans, India is still an undiscovered opportunity.
Twenty years ago, as I’ve said and it is still true today, even though trade between the two countries has skyrocketed, even though there are three million people of Indian origin living in the US, even though we have an Indian American in the White House and two past governors, there is still a lack of understanding.
About the opportunity and the breadth of interaction that the two countries can have, I encourage everyone to take a deeper look. Part of the challenge, Philip, is that most American media only brings bad news about India. The one newspaper or media site that has fuller business coverage about India than any other is the Wall Street Journal. And if you read their pages, you’ll find you know much more news about India that The Washington Post, or my hometown paper, the LA Times, or even the New York Times often misses.
So yeah, I encourage people to look at the Wall Street Journal and also to look at Indian media if they want to understand the country. India is an open society, unlike other East Asian countries, which are insular and closed because it’s as diverse as the US, more diverse. And it’s been that diverse for 3000 years. OK, so there are no secrets in India. Humility and a sense of humor are the two most important things to pack when you travel to India.
If you say I’m American, I’m the best in the world, it’s going to screw you up everywhere. If you go there with a humble attitude, people will open up. They know American products are good. They know America is a world-class country. The relatives of many of the business leaders in India actually live in the US. India’s foreign minister has two children. One life in Washington; one lives here in Los Angeles. It’s a very open society, if you know how to listen.
So that’s probably the most important takeaway that I would encourage your readers to explore. And if they have more questions about that, they’re, you know, I’m happy if they reach out to me and I think you’re going to share my LinkedIn, URL and my website. I’m delighted to take on Questions from any of your listeners or viewers.
Thank you very much. This was a fascinating discussion with Mr. Gunjan Bagla of Amrit, the CEO of Amritt Corporation. And hope you will join us next week for another edition of Global Gurus and their stories of International Business. If you would have ideas about future episodes, please let me know at Philip@Auerbach-Intl.com.
Thank you, Philip.
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