The country emerges as a bigger player on the global scene
Prime Minister Manmohan Singh calls the 21st century ‘India’s century’. If the trends of the first decade are anything to go by, the seeds have certainly been sown.
Be it India’s moon odyssey in 2008 or Olympic medals, acquisition by Indian companies or the late Murosali Maran’s solo show at Doha that went a long way in blocking contentious trade issues, the country emerged as a bigger player on the global scene.
For Indian scientists, one of the biggest adrenaline boosters came on October 22, 2008 when Chandrayaan-I, the unmanned spacecraft was launched from Satish Dhawan Space Centre, Sriharikota. India became part of a select group of countries to have launched a moon mission. Though the mission was short-lived, it did ensure the country’s scientists’ contribution in detecting water on the moon.
But India’s new found confidence was most visible in the global mergers and acquisitions filed. In the previous decade itself, Indian companies understood that there was need to have a global footprint but the strategy was more organic. But by the start of the decade, when Tata acquired Tetley in 2000, the situation had changed dramatically. Suddenly, the fear that M&A would only be one-way traffic, with only inbound deals taking place, was gone.
Though the Tata Tetley deal remained the largest Indian deal till Betapharm’s $560-million acquisition by Dr Reddy’s lab was completed in 2006, the next record was broken much faster. Tata Steel went on to acquire Corus for $12 billion. In 2007, pushed by Tata Motors’ acquisition of Jaguar and Land Rover from Ford and the Aditya Birla group’s $6 billion Novellis deal, outbound acquisitions had overtaken inbound transactions.
Amid the success stories of corporate India, there were also failed attempts to establish a global footprint, which included Tata’s bid to acquire Orient Express and Bharti Airtel and Reliance Communication’s unsuccessful MTN safari.
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But the emergence of India on the global scene was not just brute power. Soft power was in play as Indian artists and chefs lent a helping hand to companies at the World Economic Forum’s annual conclave in Davos and other such events.
There were also attempts by India to secure its energy needs through acquisition of assets in countries as diverse as Sudan, Columbia and Russia. While ONGC Videsh Ltd (OVL) and other Indian companies did make some inroads, Chinese companies have so far been one-up in the battle. With higher aid, China changed the way business was done with Africa, especially when it came to bagging oil assets.
It was not just oil where the Chinese held an upper hand, they had their way on most things globally. In 2007, China emerged as the third largest economy, overtaking Germany, as it reported double-digit growth year after year to become the factory to the world.
While it was a few years away from becoming the second largest economy, a slot occupied by Japan at present, the financial crisis meant that China only strengthened its position on the global scale. In the first half of 2009, it emerged as the world’s largest exporter, overtaking Germany again, amidst demands that it shift its currency to a free-float one. The achievement came seven years after China joined the World Trade Organization, which many said would lower its export edge as it had to follow a rule-based system.
It was also a decade which changed the way things worked and we lived.
The Capital got its first taste of Metro railway in 2002 when a small section was opened ahead of schedule. Soon, that became the norm as Delhi Metro Rail Corporation under Chairman E Sreedharan opened one line after another before time — something that most public projects were not used to in India. By the time the second phase is completed in 2010, Delhi would have a 186-km Metro rail network.
The Metro buzz that started with Delhi spread to other parts of the country. Commuters in Mumbai, Hyderabad and Bangalore will also board the Metro in the coming years.
If Metro trains are redefining the way we commute, more internet and broadband connections, thanks to falling tariffs, have pushed households to avoid queues. From online trading portals that mushroomed to electronic payment of utility bills, the shift was evident all across. The change was most visible in the railways. The facility to avoid long queues helped the departmental enterprise sell nearly a third of its tickets online.
Similarly, when the National Stock Exchange and Geojit Securities conducted the first online share transaction in early 2000, few gave the system a chance. A decade later, housewives transact via the internet and most retail investors keep track of their investments online.
In the initial years, there was skepticism about online trading, which partly stemmed from the dotcom collapse. During the boom months, valuations soared as portals and B2B (business-to-business) and B2C (business-to-consumer) became part of everyday vocabulary. In India, deals were done at astronomical prices. But soon several companies in the US went under and the economy was hit. In a matter of months, B2B stood for back-to-Bangalore as software professionals, hit by job losses, started returning.
The technology boom, which pushed market indices to what were record levels then, also meant that stock broker Ketan Parekh used ramped up prices, especially at the ‘K-10’ counters such as DSQ Software and Global Telesystems. The chartered accountant, who had access to funds from various sources, would identify companies with low floating stock and acquire significant holdings either directly or through sub-accounts of foreign institutional investors and overseas corporate bodies. Bank loans and overdrafts were used in creating a web of transactions to hide the link with flow of funds and flow into the markets.
But in 2001, a bear cartel spoilt Parekh’s party. What followed was pressure on lenders such as Global Trust Bank, which had to be rescued, and Madhavpura Mercantile Cooperative Bank, which could not clear dues. Unit Trust of India (UTI) had to be bailed out by the government to protect retail investors. It was split into two, with the arm handling the assured return schemes set to wind up after paying the investors.
The regulators stepped in to change the rules. In came a uniform settlement cycle, OCBs were banned and other norms were tightened.
But all this paled in comparison to what the world got to see towards the end of the decade — the global financial crisis, the seeds for which were sown several decades earlier. The trigger was the repeal of the Glass-Steagall Act — which prevented the consolidation of investment, commercial banking and insurance — in 1999. Aimed at creating more competition, the Gramm-Leach-Bliley Act of 1999 allowed consolidation among banks, securities firms and insurance companies.
As a result, like investment banks, commercial lenders began engaging in trading mortgage-backed securities, collateralised debt obligations and other complex instruments. With interest rates falling in the post-dotcom era, mortgage business thrived, and that in turn, generated a large market for exotic derivatives.
The derivatives market neared the $600 trillion mark in 2007 and highly leveraged securities outfits, which made riskier mortgage investments, began feeling the heat in 2008. Starting with Baer Stearns rescue in March to nationalisation of Fannie Mae and Freddie Mac in the first week of September, the US government tried to do everything it could to prevent the financial crisis from precipitating further. But the collapse of Lehman on September 14, 2008, meant that the global credit markets froze. Interest rates rose as no one was willing to lend.
While Indian banks remained safe, companies found it tougher to raise overseas capital and demand for local funds shot up. Stimulus packages and lifelines such as Troubled Asset Relief Program (Tarp) became the buzzword as most of the developing world was in recession.
Amid the global doom, B Ramalinga Raju’s misdeeds started tumbling out of the closet. First, the Satyam Computer Services founder and chairman tried to merge two companies — Maytas Infra and Maytas Properties — where his sons had significant interests due to opposition from investors.
Barely three weeks later, Raju confessed to committing the biggest fraud in the history of corporate India. By his own admission, the magnitude was almost Rs 8,000 crore, but the Central Bureau of Investigation, which got the case belatedly, expects it to be much bigger.
What saved the company and the investors was prompt action from the government. Within days of Raju’s confession, Satyam’s directors were removed and a new board, comprising eminent persons, was set up. A few months later, the company was sold to the Mahindras who now have a 42.69 per cent stake in the IT firm.
While Satyam attracted global attention on India’s corporate governance standards, the 26/11 terrorism attack finally got the word to take notice of what the government had been saying all these years — Pakistan’s links with the terror syndicate.
In any case, during the decade, terror stopped being a problem that countries such as India had to deal with. On September 11, 2001, the United States faced its worst-ever terror attack when terrorists hijacked planes and flew them into the Pentagon, which was partly damaged, and the World Trade Centre, which collapsed, killing around 3,000 people. A year later, on December 13, terrorists from Pakistan attacked the Indian Parliament, driving the neighbours to the brink of a war.