Category — Economy

Bill Gates has been there several times. George Soros has. Today it is finally Warren Buffett’s turn. He’s on his first trip to India.

The Sage of Omaha told the BBC,  “”I don’t consider India as an emerging market. I consider India as a very big market. We continue to look at large countries like India.”  He did not miss an opportunity to publicly criticize Indian regulations that limit foreign investments in the insurance sector to a 26% minority stake, even though he plans to meet Prime Minister Dr. Manmohan Singh later. No one has accused Buffett of being a diplomat .

Buffett  has incorporated Berkshire India to sell and distribute general insurance products in India. India’s insurance regulator IRDA gave approval for the on-line corporate agency set up by Berkshire in India, The agency, where Allianz holds 20 per cent share, will have a capital of more than $5 million and according to media reports is the first such entity setup by Buffett outside the USA.

Choice Hotels International Inc. of Silver Spring-based, Maryland has agreed to acquire the remaining 60 percent ownership interest in Choice Hospitality (India) Ltd.

Choice Hospitality India has 28 properties in 21 destinations in India and another 14 properties under different stages of development.In years to come the company plans to add 20-30 new hotels each year, mostly in second tier towns, according to Choice India CEO Vilas Pawar

Takeaway: 100 percent ownership of Indian entities by US corporations is often becoming quite desirable. Growth in second tier towns in a significant factor to many new entrants. (In fact I was featured on Bloomberg TV in an interview on this very subject, click here)

Hundreds of millions of people in India will be glued to their televisions on Sunday night. But many won’t be watching the Oscars, even though musician A.R. Rahman (of Slumdog Millionaire fame) is a nominee for his score for 127 Hours. There are two competing activities that have Indians captivated.

AR Rahman at Asian Awards

February 27^th in Hollywood is already the 28^th in Asia and India’s Finance Minister Pranab Mukherjee will release the Annual Budget for the Union Government, which becomes effect on April 1. With direct and indirect taxation playing such a major role in India’s economy, consumers’ well-being and business fortunes are influenced greatly by the changes in tax rates and allocations of expenditure. The final budget will be posted online at the same time as Mukherjee gives his budget speech before India’s Parliament.  Indians watch the budget news with much greater intensity than Americans watch the annual State of the Union address from the President and even the preparations for the budget speech are national news.

India's Finance Minister Pranab Mukherjee

The second draw on television is India’s all consuming passion, the sport of cricket. The World Cup competition just started. In the city of Nagpur,in Central India, Zimbabwe will play Canada at 9:30 am Indian Standard Time, which is 8 PM on Sunday night in California. A few hours later the West Indies will square off against Ireland at New Delh’s Feroz Shah Kotla grounds. Despite the fact that these games are played during a working weekday, many Indians will receive regular SMS (text) updates on their cellphones; radios and TVs everywhere will be tuned to the right channels. Cricket will be the major topic of conversation until the final game is played on April 2 at Wankhede Stadium in Mumbai.

And who did you say won the Best Picture Award?

Takeaway: While Hollywood appears to unite the world and is certainly watched in India, there are many other forces at play in the Indian executive’s or consumer’s mind. Being aware of these forces makes it easier for you to succeed in business in India.

Investment bankers are forecasting a stellar year for mergers and acquisitions in Asia following a leap in the value of both inbound and outbound transactions in 2010, according the the Financial Times. The paper said that outbound M&A soared 166 per cent to a record $126.1bn in the region (excluding Japan and Australia), according to Citigroup, with total deal flows including inbound and intra-regional transactions jumping 48.8 per cent to a record $470.5bn.

In India, for example, Mukesh Ambani’s Reliance Industries has spent $3 billion in American acquisitions, mostly of shale oil but it ready to invest another $7-9 billion if they can find good deals. Godrej, Jindal, Tata and other groups have made significant buys earlier.

Meanwhile India’s Business Standard newspaper report a similar trend. Among the 41 per cent of Indian companies planning an acquisition in the next three years, the motivational factors for growth are access to new geographic markets (64 per cent ), acquiring new technology or established brands (58 per cent), building scale (55 per cent) and access to low-cost operations (37 per cent). The report says that there’s been a noticeable shift in preference from last year, when acquiring technology or established brands (57 per cent) was the key factor. This year, there’s been a 20 per cent jump in access to new geographic markets, making it the most sought-after medium for growth.

Matthew Hanning, joint head of investment banking for Asia at UBS in Hong Kong says there are very few acquisitions that Indian companies cannot afford to finance. “If the deal and the valuation make sense, there is no shortage of capital” in that part of the world.

Takeway: Watch out for more global M&A involving Indian companies. This can affect you even if you are not an M&A player. For example your supplier or customer from India could be consumed by a major capital transaction leaving them less bandwidth to focus on you. Alternatively an M&A transaction may suddenly convert an Indian partner into a potential competitor or perhaps into a much better partner. Stay tuned.

According to new data released by the Department of Commerce, American exports of merchandise to India grew by 17.2 percent from $15.03 billion during the period Jan- Nov 2009 to $ 17.61 billion during the corresponding period in 2010.

At the same time, imports from India also grew to $27.39 billion,  from  $19.38 billion,   an increase of 41.36 per cent comparing the first 11 months of 2009 and 2010.

There is a good chance that bilateral trade between the countries for the full year 2010 will cross $50 billion for the first time. The India  Expert expects this number to exceed $200 billion in less than six years.