INDIA SCORCHES THE PACE FOR MNCS

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India is not just shining it is actually taking the shine off some pretty bellwether markets. Though new to the ball, India 's vast 'middle class' is powering a turbo-charged growth and a mindset change among top global companies.

Be it automobiles, mobile handsets, colour televisions, air conditioners or footwear, India has emerged among the fastest growing markets in the world. For MNCs operating here, this has turned India into a critical market for their global growth platforms.

In automobiles, for instance, the sluggishness of '00 and '01 made way for double-digit growth in '02 and fiscal '03 should see India 's vehicle sales and exports collectively cross the 1m mark for the first time. The perky growth (which has been 20%-plus month-on-month right through fiscal '03) put India among the top growth markets for MNCs like Suzuki, Hyundai, Honda and Toyota , alongside the 1.9-m unit Chinese market which is almost double the Indian vehicle population. Says A Toyoshima, MD, Toyota Kirloskar Motor: " India , along with China , is one of the two markets with the most potential in this century."

The growth story is the sharpest in mobile telephony. India 's cellular growth is currently four times faster than China 's. In percentage terms, India is the fastest growing market in Asia , followed by Indonesia and the Philippines . About 15 lakh mobile connections are being added every month and mobile phone connections will actually overtake fixed phone subscribers in India in the third quarter of '04 as cellular penetration doubles from 2.7% (end-'03) to 5.2% by the end of '04. Says Bertrand Bidaud, vice-president, Gartner, "The year '04 will see increased growth, investments and consolidation in the telecom sector in India ."

Cut to consumer durables industry where products like colour TVs and air conditioners are witnessing double digit growth, something developed markets have not seen in a while.

The domestic colour TV market, for instance, has grown 50% in just three years from 5m units in '00. The growth rate on average has been in the region of 10-15% against 5-10% in China and 3-5% in Europe and North America . The high growth rates are likely to hold in the coming years as the replacement market takes over, with consumers switching from conventional screen to flat screen and other new display TV technology.

While the size of the market is still small relative to major markets like China and the US , it is fast catching up. Says Girish Rao, head of marketing, LG Electronics India: "The growth is related to the relatively low penetration rate of the product in the country. We are, for instance, looking at sales of 2.5m units for LG alone this year which would make India even more critical in terms of volumes."

The jump in domestic sales is sharper for air conditioners. The size of the market has more than doubled in the last four years from just 3.5 lakh units and given the direction of the market, it looks set to continue with double digit growth rates for the next decade. And that's a conservative estimate.

What this gold rush has meant is better balance sheets for MNCs and a greater sensitivity to things Indian. In automobiles, a clutch of MNCs have broken even in the past 12 months. Honda, for instance, has announced it is likely to clock a Rs 80-crore profit this year, wiping out its entire accumulated loss of Rs 75 crore. Toyota too has announced a 56% increase in turnover to Rs 2,700 crore this fisc along with operating profits that will wipe out all its accumulated losses by '06. General Motors is at break-even point and Ford is current on cash-break-even level. With capacity utilisation, the black ink is back on MNC balance sheets.

India 's spiffy performance has also attracted some top dollar R&D interest. Take India 's largest carmaker Maruti. It's April-February tally of 376,529 units this year comprises 10% of Suzuki Motor group sales. Says a company spokesperson: "In SMC's global operations, Hungary has been selected as the mid-size car hub, Japan has the big car hub and India as the small car hub for export." The growth of the Indian market and Maruti's dominance of it has also helped turn the Indian operation as unequivocally Asia 's R&D centre for cars. Says JI Kim, MD, Hyundai Motor India: "The learnings from HMIL are constantly transferred through our people to other Hyundai operations including the US ."

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