India, it seems, is on a merry buying spree. And off late, it appears to have developed a special fondness for European companies, a fondness that was quite unthinkable two decades ago.
The most well known acquisition, of course, is the steel deal carried out by Laxmi Mittal, the world’s third richest man, whose $32.4 billion takeover of Luxembourg’s Arcelor created Arcelor-Mittal, the world’s largest steel producer.
Close on his heels was Ratan Tata’s audacious buyout of Corus, an Anglo-Dutch steel maker, for $12 billion. Barely had this deal been inked came one more – this time by another Indian business house, Aditya Birla Group, which acquired the American aluminum products manufacturer Novelis, for about $6 billion.
Now India’s king of spirits and liquor tycoon, Vijay Mallya - popularly known as the Richard Branson of India – has bought Scottish whiskey maker Whyte & Mackay for about $1.2 billion. Mallya’s United Spirits is India’s largest maker of spirits and the world’s third biggest based on its distribution. And the Taj Hotels chain is snapping up landmark hotels across the U.S. beginning in staid old Boston where it snapped up the Ritz Carlton and New York where it bought the historic Pierre.
If someone had predicted this even as recently as ten years ago, chances are the remark would’ve been met with sardonic amusement, at best. India? The land of dhoti-wearing home-spinning Mahatma Gandhi? Buying whiskey makers, steel manufacturers and posh hotels? Today, however, it seems almost natural. A sign of the times.
And this is only a short list of high-profile transactions. Since the beginning of 2006 Indian companies have made overseas acquisitions worth about $16 billion. More than half of the international acquisitions are in Indian software, outsourcing and health care sectors. The list is endless and the numbers staggering. As a result, India now has the largest number of billionaires in Asia – snatching that title this year from Japan – and they’re doing what men with lots of money do: Buying and selling
To me, however, all this seems a little surreal. True, that India is one of the fastest growing economies of the world and is being hailed as the future economic super-power, so its bold and confident bids for European and American companies should seem normal. After all, India’s gross domestic product – a measure of how much the country is producing and therefore a measure of economic growing – was put at over 8 percent last year, only slight higher than the 2004-05 rate of 7.4 percent. And manufacturing is a key part of that boom showing double-digit growth. That’s undoubtedly why so many of these deals are for hard, manufacturing corporations that provide the things most needed to build a nation: Steel, iron, construction material.
But yet it all seems a little bizarre.
The nation is, after all, still a third world country, a fact that makes the takeovers more commendable. Being a developing nation, the odds – of currency conversion for one – are against it, but Indian businessmen, riding on a buoyant economy, have managed to cross the hurdles.
And it does not stop here. The trend is only going to grow as the nation grow and prospers. Many large Indian companies feel the pressure to make announcements that would mark their arrival on the global stage, something that has almost become a yardstick for performance and growth. It is, of course, in this global economic environment, how we measure success: Buying something. And for an Indian businessman to buy a company in a nation that once held economic sway over his nation – name something more British than Scotch whiskey – the deals must be very satisfying.
But remarkable as that is, there is also this nagging reality that tugs at the heart. It begs you to look at the other side of India, the dark side. About twenty-two percent of its people still live below the poverty line, some forty million people. The dichotomy is striking and hard to ignore.
Growing up in India you learn, mostly, not to let the disparity affect you. But there are times when it’s too stark to ignore. Imagine this: a designer clad woman sits in a cooled chauffeur driven BMW seven series at a traffic light in Delhi, she’s reading a paper whose headlines are celebrating yet another Indian takeover running into billions of dollars. There is a picture of Vijay Mallya bejeweled, as he always is, with gold bracelets and rings, at a Glasgow (Scotland) hotel next to myriad bottles of Scotch whiskey. It’s the middle of the summer and the temperature outside is touching 110 degrees Fahrenheit, the traffic signal is about to change and the rapping on her window is now hard and desperate. A little girl waits for the lady to look up so she can make eye contact and plead a little more. She even performs some acrobatics on the road, bending her emaciated body in the hope of getting some money. But the lady does not look up; because making eye contact is something she has learnt not to do. If she meets the little girl’s eager eyes, it would make her uncomfortable, so she continues to read her paper extolling India’s global successes. The lights change, the girl invokes God, but the car speeds away.
On the one hand there is the global India – confident, strong and rich – on the other there is the desperate India – desolate, weak and deprived. The two live side-by-side, but there are times when things come to a head. And that is real the danger that India faces, of the two colliding hard against each other. If India is to truly become an economic giant, it needs to bridge that gap.
In the international ring, this may be India’s moment with its businessmen milking the opportunity of all it’s worth. But on the domestic front, India needs to address pressing issues of poverty and development, only then can it surge boldly into the next century.
For better or for worse, India as a country is far from having seen the end.