The world could be one crop failure away from an actual food crisis. Market panic has already started.
By George Wehrfritz and Jason Overdorf
(Newsweek, April 5, 2008)
When all goes well, thunderheads tower above India's southwestern state of Kerala in early June, drenching the region's vital rice fields and ensuring a bountiful harvest. From there the summer monsoon plods northward to soak the baking plains and irrigate vital breadbasket regions that feed 1.1 billion people before arriving at the foot of the Himalayas in August. Forecasting this complex meteorological process has always been an obsession within India, but this year the world will be watching. Changes in the monsoon cycle can shrink India's total grain harvest by up to 20 percent, creating a shortfall of 30 million metric tons. During India's last crop failure, in 2002, the country had a massive reserve to fall back on. "Now," says Usha Tuteja, an agricultural economist at Delhi University, "we don't have enough buffer stocks to make up for one bad year."
India isn't the only danger zone today. A major storm battering the Philippines or Bangladesh at the wrong moment, a pest or plant-disease outbreak in Vietnam, or floods along China's Yangtze River like those that occurred in the mid-1990s would put serious strains on global grain reserves already depleted to levels not seen since the 1970s. Global markets are behaving as if a food shock is imminent.
In recent months the commodity prices of rice, wheat and corn has jumped 50 percent or more, pushing retail prices to levels unseen in a generation and prompting grain-exporting countries to curtail trade to suppress domestic inflation. On March 20, the World Food Program issued an emergency appeal for more funding to keep aid moving to the world's poorest countries. Last week World Bank president Robert Zoellick called for urgent global action on the part of rich nations "or many more people will suffer or starve."
Experts blame a variety of factors for today's food crunch. Poor harvests in Europe since 2005 and Australia's ongoing drought have crimped the pipeline of staple grains to world markets. Soaring demand for bio-fuels in response to $100-per-barrel oil is diverting crops. And the rise of Asia's twin giants—China and India—is turning them both into market-moving grain hogs. Add to that climate change and a decline in agricultural investment as a percentage of GDP worldwide, and there's little mystery to why food security is a pressing issue from Tokyo to Abidjan. "We're paying the price of complacency," says biologist Robert Zeigler, head of the Philippines-based International Rice Research Institute.
The immediate crisis is one of confidence. As governments with grain surpluses tighten their grip on reserves, countries that rely on imported staples are scrambling to secure supplies. Driven partly by speculation, commodities markets have seen the per-ton cost of rice, wheat and corn surge by 50 percent or more since mid-2007. There are real supply issues, to be sure. But experts blame governments that inhibit grain flows, speculators betting on price spikes and fearful consumers who buy 10 sacks instead of one at the local markets for making the problem worse than it needs to be. When the United Nations' World Food Program issued an "extraordinary emergency appeal" to fill a $500 million funding gap last month, executive director Josette Sheeran said it was the first ever issued over a "market-generated crisis."
Unfortunately the government response is making the market squeeze worse. Richard Barichello, an economist at the University of British Columbia, argues that countries that have recently slapped new controls on exports—including India, Vietnam, Egypt and Cambodia—are putting politics ahead of economics. "It's a beggar-thy-neighbor policy," he says, that reduces incentives for farmers to grow more and leads to black marketeering.
The underlying problem with global food supplies is stark. After spiking dramatically in the 1970s following the introduction of scientific farming techniques during the Green Revolution, crop yields are now rising by less than 1 percent per year, which is half the annual increase in worldwide demand for grain and well below global population growth, now at 1.3 percent. The problem was largely invisible until 2000, when poor Asian harvests and surging regional demand conspired to draw down global grain stocks from 37 percent to 17 percent of annual consumption in three years—erasing a surplus that took a decade to accumulate.
Today's shortage punishes poor nations disproportionately. In countries with low per capita incomes, food is often the largest single component of household spending—up to 80 percent, compared with just 15 percent for the average American or European family. On the United Nations' list of countries most vulnerable to food shocks (according to their demand for imported food), Indonesia, the Philippines and Bangladesh rank first, second and fourth, respectively—and China and India make the top 10 due to their huge populations of rural poor. As grain prices push higher, "a lot of people are going to be forced to tighten their belts when they don't have any notches left," says environmentalist Lester Brown, founder and president of the Earth Policy Institute in Washington. "The people who will be most affected are those who are on the lower rungs of the global economic ladder."
An emergency is now unfolding in what the United Nations calls "low-income food-deficit countries." Most are in Africa, including Congo, Sudan and Kenya. According to the U.N. Food and Agriculture Organization's latest forecast, those nations will import 2 percent fewer cereals in 2007-08 but pay 35 percent more for its food bill "for the second consecutive year." It warned that if the WFP did not receive emergency funding by May 1, it might be forced to cut back aid to 73 million people.
The crisis has put rural development back on the global agenda. "We're coming off 15 years of neglect in research, technological development and [infrastructure] investment in agriculture," says Zeigler, who advocates a second Green Revolution aimed at boosting crop yields above demand growth for grains. In a speech in Washington last week, Zoellick called for a "New Deal for Global Food Policy" and said the bank would nearly double loans for agricultural development to Africa. Mitigating the global food shortage is expected to dominate discussions at the World Bank and International Monetary Fund's spring meeting this week in Washington.
Poor countries are now vulnerable not because food is unavailable but because they can't afford it. "If in a country like India there is a monsoon failure or some crisis in agriculture, the global food situation will become very, very precarious," says Devinder Sharma, an agriculture analyst in New Delhi. With demand from India and China on global markets, he warns that "the world will not have any food grains left for anybody else." That's a theory nobody hopes will be tested any time soon. Which is why the monsoon skies over Kerala are worth watching closely this year.
URL: http://www.newsweek.com/id/130641
Saturday, April 05, 2008
Saturday, February 16, 2008
small. it's the new big.
Poor countries are getting rich, gas costs are rising and our planet is heating up. The result: a new breed of 21st-century cars that are cooler, cheaper and more compact than ever.
By Keith Naughton
NEWSWEEK
Updated: 11:39 AM ET Feb 16, 2008
When gas prices shot up last summer, Millie Richardson had had it with her minivan. So the Lawrenceville, New Jersey, mom traded in her Dodge Caravan for a $17,000 Nissan Versa, a subcompact car that gets more than 30 miles per gallon. Richardson, 55, likes spending less at the pump, but she's most excited about how roomy her little car is. "My son is 6 foot 6, and he drove it," she marvels. "So it's small, but it's big—does that make sense?" What makes even more sense to Richardson, though, is this $2,500 car she's heard about that was introduced in India last month: the Tata Nano. Though there are no plans yet to bring it to America, Richardson is ready when they do. "Oh, boy, would I ever love to drive one," she says. "I would look at it as a disposable car. We have so many things in our lives now that are disposable—why not disposable cars? It would be so cheap, you could always afford a new one."
Around the automotive world, small is the new big. Driven by growing earning power in emerging markets, and rising gasoline prices and global-warming concerns in developed countries, small-car sales are hitting high gear. By 2012, forecasters expect consumers around the world to buy a record 38 million small cars annually, up 65 percent from a decade earlier. In Western Europe, the market for microcars—the tiniest runabouts on the road—is projected to rise nearly 50 percent by 2011 from 2004 levels. Even in the United States, land of the large, sales of small cars are expected to grow 25 percent by 2012 to a record 3.4 million, while SUVs and pickup trucks continue to tank. Last year subcompact sales soared 33.7 percent in the United States, driven by hot sellers like the tiny Toyota Yaris and the Mini Cooper. And Daimler had 30,000 orders in hand before it even launched its three-meter-long Smart Fortwo model in the U.S. last month. "This is not a fad," says Smart USA president Dave Schembri. "It's a trend."
But the car generating the most buzz hasn't even hit the road yet: the Nano. A car for the price of a laptop computer is transformational. Before it even goes on sale later this year, the Nano is changing the rules of the road for the auto industry and society itself. Millions of emerging-market commuters can now own four-wheel transportation, creating unheard-of mobility for the masses. But the Nano and its expected rivals will also lead to more traffic congestion, more global warming, more highway fatalities and more demand for oil. As the world approaches 1 billion vehicles on the road, the Nano and its ilk raise a daunting prospect for society: global gridlock. If the rest of the world begins buying cars at the same rate as America, the global parking lot will swell to 5.6 billion vehicles, figures Sean McAlinden of the Center for Auto Research in Ann Arbor, Michigan. "The Nano is the 21st-century equivalent of the Model T," says Global Insight auto analyst John Wolkonowicz. "The Nano will put the Third World on wheels, and that will have far-reaching implications. It's going to affect every citizen of the world."
It's already shaking up the industry. All the major car companies dispatched teams to the New Delhi Motor Show in January to snap photos and build a dossier on the new Nano. The little car from India could lead to an overhaul in the global auto industry, which was always geared to earn big profits from big cars. Now the car czars will have to learn to make a business out of selling lots of little cars that make less money, instead of relying on big rigs to make most of their money. Detroit is going through a wrenching overhaul as it retools its product line to offer more small gas sippers and fewer big guzzlers. General Motors, which last week reported a record $38.7 billion loss for 2007, can't make money at home, but turns a tidy profit in Asia selling smaller cars. "The whole story in the auto industry today is that the profits are shifting to the developing markets," says Renault- Nissan CEO Carlos Ghosn, who is working with the Indian motorcycle maker Bajaj to try to develop a $3,000 car to go against the Nano. "I'm very bullish on the $3,000 car. We're not trying to do it in Japan or Paris; we're asking Bajaj to do it. We don't know how to do a car like this, but for them it's a natural evolution."
Consumers see it as natural, too. A new generation, weaned on mini mobile phones and iPods, equates small with high tech, not cheap. "For the first time in the history of the auto industry, we have a generation that's connected globally," says J. Mays, chief designer for Ford Motor Co., which in 2010 will begin importing its stylish Fiesta subcompact from Europe. "They see an iPod or a Nokia phone or a $1,200 woman's handbag and think, 'Just because it's small doesn't mean it can't be fantastic'."
This is where the West parts company with the Nano. Today's car buyers in developed nations expect small cars to have all the accouterments they enjoyed in their XL rides. The hot-selling Mini Cooper is a prime example: sporty and stylish, it's loaded with luxurious items like a 10-speaker stereo, leather seats and an optional voice-activated navigation system, and it's priced accordingly. The well-appointed new Mini Clubman S starts at $24,600—or roughly the price of 10 Nanos. "People like the Mini Cooper because it's so well designed and well equipped; there's nothing spartan about it," says Mini U.S. chief Jim McDowell. "I don't think American consumers are looking for a car with less safety features and fewer windshield wipers."
Indeed, the Nano, which has only one windshield wiper, has more in common with the bare-bones econo-boxes that baby boomers drove during the '70s energy crisis. The children of the boomers wouldn't know what to make of a car like that. "To Gen Y kids, something without power windows or door locks is not a real car," says Jim Lentz, president of Toyota's U.S. sales arm. "Most wouldn't know what this crank thing in the door does. It's like a rotary phone."
What this new generation does get is small as a way to reduce its carbon car-print. After all, these little runabouts are powered by tiny engines that burn less gasoline and spew fewer greenhouse gases. The irony, though, is that as millions of small cars clog the planet, they'll only add to global warming and increase demand for oil. GM chairman Rick Wagoner recently warned that the world is already consuming 1,000 barrels of oil per second, and demand is on track to rise 70 percent more by 2030. The motorization of emerging economies is driving that demand. By 2015, 100 million households in the developing world will be able to afford cars priced between the Nano and the $6,000 Renault Logan, predicts the Boston Consulting Group. Governments are already grappling with how to put the brakes on runaway energy use. In the United States, George W. Bush just signed legislation that will boost mandatory mileage on new cars to an average of 35mpg by 2020, up from about 25mpg today. In Europe, regulators are looking at requiring cars to reduce emissions of carbon dioxide (the prime global-warming gas) by up to 25 percent by 2012.
But the West can enact all the green-leaning laws it wants. That won't stop the emerging world's yearning for the freedom of the open road. And that growing automotive appetite could create a climate calamity, environmentalists warn. "Even if they are very clean cars, collectively it will lead to emissions that will only add to local pollution," Indian climatologist Rajendra K. Pachauri tells NEWSWEEK. Pachauri, chairman of the Intergovernmental Panel on Climate Change—which shared the Nobel Peace Prize with Al Gore last year—is critical of the climate consequences of the Nano: "Before we unleash this kind of animal on the streets of India, we ought to explore the public-transportation options." To rein in car ownership, Pachauri suggests that drivers pay a carbon toll to gain access to the roads. The Nano, he says, "is clearly a carbon-intensive option. We need to impose a price on that carbon."
Others hope the rise of the small car in emerging economies will accelerate alternative-fuel vehicles elsewhere. "We'll be driving $40,000 electric vehicles or hydrogen-powered cars while people in India and China are using the remaining gasoline," says Wolkonowicz. "This push for alternate-fuel vehicles in the developed world is not coming a moment too soon, because the motorization of the Third World is coming at a very rapid pace."
That came clearly into focus when Indian motor mogul Ratan Tata upstaged the Detroit Auto Show by rolling out his "people's car" in New Delhi on Jan. 10. Introducing his car to the theme from "2001: A Space Odyssey," Tata hyped its "disruptive innovation" as the equivalent of the Wright brothers' first flight. At first glance, the stubby little car doesn't look like much: no radio or air conditioning, a top speed of about 95 kilometers per hour and a motorcycle-like engine. What has captured the world's attention is the Nano's spartan simplicity. There are no tubes in the tires, to save weight and money. To ease assembly, body panels are glued instead of welded. The wheels are hooked onto the body in a fashion that one rival compared to a child's little red wagon. "We look closely at anything we regard as a breakthrough," says GM product-planning VP John Smith, with photos and diagrams of the Nano spread out in his Detroit office. "You can look at these, but I can't let you have them."
Rivals eager to develop their own low-cost small cars find they simply can't look away from the Nano, even as they dismiss it as far too crude for Western tastes. "It's not so much the vehicle itself," says Chrysler trend watcher Steve Bartoli, "it's the thought process that went into it that's more provocative." Until Tata rolled out his new model, nobody believed anyone could produce a $2,500 car. Now they're jumping on the Nano wagon. Chrysler is looking at developing a racy little car called the Dodge Hornet with China's Chery Automobile. GM vice chairman Bob Lutz says his company could engineer a Nano competitor with its Chinese partner Wuling. And GM is already working on a new car that would rival Renault's $6,000 Logan, says Smith. In fact, GM recently canceled plans for a new line of big V-8 engines and is pouring that money into developing small cars. "We're spending a lot of money on the low end of the business," says Smith.
Europeans are following suit. Coming soon is Volkswagen's Up!, a funky four-seater that's about three and a half meters long. Last year, Fiat launched a remake of the classic Cinquecento (a.k.a. the Fiat 500). Peugeot already offers its tiny 107 city car, developed with Toyota, which sells a similar model called the Aygo (as in "I go"). On the high end, BMW is launching its diminutive 1 Series sedan in the United States starting at $29,375, making it the smallest Beemer on U.S. highways. "We are at a crossroads," says consultant Peter Schmidt of Automotive Industry Data in Britain. "An increasing proportion of the car-buying public has discovered a conscience."
One key country hasn't bought into small-is-cool: China. SUV sales rose 51 percent in China last year, big Buicks and VWs are all the rage and small cars go begging. Ratan Tata predicted that an automaker in China would be the first to match the Nano's $2,500 price, but analysts doubt that. "In China, image is more important than function," says China auto analyst Michael Dunne of J.D. Power and Associates. "Nobody wants to be seen on the bottom of the totem pole."
The biggest roadblock facing small cars is fear about safety. Chery's QQ suffered a PR setback when a video circulated on YouTube of a horrific crash in which the tiny car was crushed between two buses and the driver burned to death. A NEWSWEEK REPORTER TEST-drove a Chevy Aveo subcompact in Detroit last week and felt dwarfed by the SUVs. U.S. statistics on highway fatalities show the smallest cars have death rates 2.5 times higher than the biggest cars. In Europe, small cars, which are driven mostly at slower speeds in cities, have lower death rates, but are in more crashes than big cars. "It comes down to physics," says Adrian Lund, president of the Insurance Institute for Highway Safety. "If you're in a smaller vehicle out there, you're at greater risk."
To overcome small-car phobia, automakers are working to burnish their safety bona fides. In every Smart car showroom in the United States, for example, you'll find the car's reinforced steel skeleton on display. Called its "tridion cell," the steel cage protects occupants in a crash. The sales staff also shows prospective buyers violent crash-test videos and talks up the car's four airbags and electronic stability control. "In America," says Smart USA president Schembri, "you have to address this issue."
The more features automakers can stuff into small cars—be they safety, style or stereos—the better for the bottom line. This is the formula Japan and Europe have used to develop a lucrative small-car market. Typically, an automaker earns about a 5 percent profit on a car. That comes to about $125 on a Nano, $1,250 on a Mini Cooper or, better yet, $2,000 or more on a BMW 1 Series convertible. Putting premium-priced mileage misers on the road could help save the planet without bankrupting the world's automakers. The problem comes in convincing drivers in America and China—the world's two largest auto markets—that they should pay more for less. "Space and weight equal value for most buyers" in America and China, says analyst McAlinden. "It's a dollar-per-pound concept."
We may like to think that the recent spike in small-car sales is driven by altruism. But auto execs says it's a pocketbook issue: U.S. gas prices doubled this decade, and Western Europe is now paying about $2 per liter, up nearly 25 cents from just two years ago. "The worst thing that could happen to us now is if gas prices fell back, because that would take the pressure off," says Ford executive chairman Bill Ford Jr. "We've all started down this path now." And there's no turning back. Forecasters predict oil prices, global warming and emerging-market desire for cars will continue to rise. As long as those factors drive demand, small cars will rule the road.
--with Jason Overdorf in New Delhi
URL: http://www.newsweek.com/id/112729
By Keith Naughton
NEWSWEEK
Updated: 11:39 AM ET Feb 16, 2008
When gas prices shot up last summer, Millie Richardson had had it with her minivan. So the Lawrenceville, New Jersey, mom traded in her Dodge Caravan for a $17,000 Nissan Versa, a subcompact car that gets more than 30 miles per gallon. Richardson, 55, likes spending less at the pump, but she's most excited about how roomy her little car is. "My son is 6 foot 6, and he drove it," she marvels. "So it's small, but it's big—does that make sense?" What makes even more sense to Richardson, though, is this $2,500 car she's heard about that was introduced in India last month: the Tata Nano. Though there are no plans yet to bring it to America, Richardson is ready when they do. "Oh, boy, would I ever love to drive one," she says. "I would look at it as a disposable car. We have so many things in our lives now that are disposable—why not disposable cars? It would be so cheap, you could always afford a new one."
Around the automotive world, small is the new big. Driven by growing earning power in emerging markets, and rising gasoline prices and global-warming concerns in developed countries, small-car sales are hitting high gear. By 2012, forecasters expect consumers around the world to buy a record 38 million small cars annually, up 65 percent from a decade earlier. In Western Europe, the market for microcars—the tiniest runabouts on the road—is projected to rise nearly 50 percent by 2011 from 2004 levels. Even in the United States, land of the large, sales of small cars are expected to grow 25 percent by 2012 to a record 3.4 million, while SUVs and pickup trucks continue to tank. Last year subcompact sales soared 33.7 percent in the United States, driven by hot sellers like the tiny Toyota Yaris and the Mini Cooper. And Daimler had 30,000 orders in hand before it even launched its three-meter-long Smart Fortwo model in the U.S. last month. "This is not a fad," says Smart USA president Dave Schembri. "It's a trend."
But the car generating the most buzz hasn't even hit the road yet: the Nano. A car for the price of a laptop computer is transformational. Before it even goes on sale later this year, the Nano is changing the rules of the road for the auto industry and society itself. Millions of emerging-market commuters can now own four-wheel transportation, creating unheard-of mobility for the masses. But the Nano and its expected rivals will also lead to more traffic congestion, more global warming, more highway fatalities and more demand for oil. As the world approaches 1 billion vehicles on the road, the Nano and its ilk raise a daunting prospect for society: global gridlock. If the rest of the world begins buying cars at the same rate as America, the global parking lot will swell to 5.6 billion vehicles, figures Sean McAlinden of the Center for Auto Research in Ann Arbor, Michigan. "The Nano is the 21st-century equivalent of the Model T," says Global Insight auto analyst John Wolkonowicz. "The Nano will put the Third World on wheels, and that will have far-reaching implications. It's going to affect every citizen of the world."
It's already shaking up the industry. All the major car companies dispatched teams to the New Delhi Motor Show in January to snap photos and build a dossier on the new Nano. The little car from India could lead to an overhaul in the global auto industry, which was always geared to earn big profits from big cars. Now the car czars will have to learn to make a business out of selling lots of little cars that make less money, instead of relying on big rigs to make most of their money. Detroit is going through a wrenching overhaul as it retools its product line to offer more small gas sippers and fewer big guzzlers. General Motors, which last week reported a record $38.7 billion loss for 2007, can't make money at home, but turns a tidy profit in Asia selling smaller cars. "The whole story in the auto industry today is that the profits are shifting to the developing markets," says Renault- Nissan CEO Carlos Ghosn, who is working with the Indian motorcycle maker Bajaj to try to develop a $3,000 car to go against the Nano. "I'm very bullish on the $3,000 car. We're not trying to do it in Japan or Paris; we're asking Bajaj to do it. We don't know how to do a car like this, but for them it's a natural evolution."
Consumers see it as natural, too. A new generation, weaned on mini mobile phones and iPods, equates small with high tech, not cheap. "For the first time in the history of the auto industry, we have a generation that's connected globally," says J. Mays, chief designer for Ford Motor Co., which in 2010 will begin importing its stylish Fiesta subcompact from Europe. "They see an iPod or a Nokia phone or a $1,200 woman's handbag and think, 'Just because it's small doesn't mean it can't be fantastic'."
This is where the West parts company with the Nano. Today's car buyers in developed nations expect small cars to have all the accouterments they enjoyed in their XL rides. The hot-selling Mini Cooper is a prime example: sporty and stylish, it's loaded with luxurious items like a 10-speaker stereo, leather seats and an optional voice-activated navigation system, and it's priced accordingly. The well-appointed new Mini Clubman S starts at $24,600—or roughly the price of 10 Nanos. "People like the Mini Cooper because it's so well designed and well equipped; there's nothing spartan about it," says Mini U.S. chief Jim McDowell. "I don't think American consumers are looking for a car with less safety features and fewer windshield wipers."
Indeed, the Nano, which has only one windshield wiper, has more in common with the bare-bones econo-boxes that baby boomers drove during the '70s energy crisis. The children of the boomers wouldn't know what to make of a car like that. "To Gen Y kids, something without power windows or door locks is not a real car," says Jim Lentz, president of Toyota's U.S. sales arm. "Most wouldn't know what this crank thing in the door does. It's like a rotary phone."
What this new generation does get is small as a way to reduce its carbon car-print. After all, these little runabouts are powered by tiny engines that burn less gasoline and spew fewer greenhouse gases. The irony, though, is that as millions of small cars clog the planet, they'll only add to global warming and increase demand for oil. GM chairman Rick Wagoner recently warned that the world is already consuming 1,000 barrels of oil per second, and demand is on track to rise 70 percent more by 2030. The motorization of emerging economies is driving that demand. By 2015, 100 million households in the developing world will be able to afford cars priced between the Nano and the $6,000 Renault Logan, predicts the Boston Consulting Group. Governments are already grappling with how to put the brakes on runaway energy use. In the United States, George W. Bush just signed legislation that will boost mandatory mileage on new cars to an average of 35mpg by 2020, up from about 25mpg today. In Europe, regulators are looking at requiring cars to reduce emissions of carbon dioxide (the prime global-warming gas) by up to 25 percent by 2012.
But the West can enact all the green-leaning laws it wants. That won't stop the emerging world's yearning for the freedom of the open road. And that growing automotive appetite could create a climate calamity, environmentalists warn. "Even if they are very clean cars, collectively it will lead to emissions that will only add to local pollution," Indian climatologist Rajendra K. Pachauri tells NEWSWEEK. Pachauri, chairman of the Intergovernmental Panel on Climate Change—which shared the Nobel Peace Prize with Al Gore last year—is critical of the climate consequences of the Nano: "Before we unleash this kind of animal on the streets of India, we ought to explore the public-transportation options." To rein in car ownership, Pachauri suggests that drivers pay a carbon toll to gain access to the roads. The Nano, he says, "is clearly a carbon-intensive option. We need to impose a price on that carbon."
Others hope the rise of the small car in emerging economies will accelerate alternative-fuel vehicles elsewhere. "We'll be driving $40,000 electric vehicles or hydrogen-powered cars while people in India and China are using the remaining gasoline," says Wolkonowicz. "This push for alternate-fuel vehicles in the developed world is not coming a moment too soon, because the motorization of the Third World is coming at a very rapid pace."
That came clearly into focus when Indian motor mogul Ratan Tata upstaged the Detroit Auto Show by rolling out his "people's car" in New Delhi on Jan. 10. Introducing his car to the theme from "2001: A Space Odyssey," Tata hyped its "disruptive innovation" as the equivalent of the Wright brothers' first flight. At first glance, the stubby little car doesn't look like much: no radio or air conditioning, a top speed of about 95 kilometers per hour and a motorcycle-like engine. What has captured the world's attention is the Nano's spartan simplicity. There are no tubes in the tires, to save weight and money. To ease assembly, body panels are glued instead of welded. The wheels are hooked onto the body in a fashion that one rival compared to a child's little red wagon. "We look closely at anything we regard as a breakthrough," says GM product-planning VP John Smith, with photos and diagrams of the Nano spread out in his Detroit office. "You can look at these, but I can't let you have them."
Rivals eager to develop their own low-cost small cars find they simply can't look away from the Nano, even as they dismiss it as far too crude for Western tastes. "It's not so much the vehicle itself," says Chrysler trend watcher Steve Bartoli, "it's the thought process that went into it that's more provocative." Until Tata rolled out his new model, nobody believed anyone could produce a $2,500 car. Now they're jumping on the Nano wagon. Chrysler is looking at developing a racy little car called the Dodge Hornet with China's Chery Automobile. GM vice chairman Bob Lutz says his company could engineer a Nano competitor with its Chinese partner Wuling. And GM is already working on a new car that would rival Renault's $6,000 Logan, says Smith. In fact, GM recently canceled plans for a new line of big V-8 engines and is pouring that money into developing small cars. "We're spending a lot of money on the low end of the business," says Smith.
Europeans are following suit. Coming soon is Volkswagen's Up!, a funky four-seater that's about three and a half meters long. Last year, Fiat launched a remake of the classic Cinquecento (a.k.a. the Fiat 500). Peugeot already offers its tiny 107 city car, developed with Toyota, which sells a similar model called the Aygo (as in "I go"). On the high end, BMW is launching its diminutive 1 Series sedan in the United States starting at $29,375, making it the smallest Beemer on U.S. highways. "We are at a crossroads," says consultant Peter Schmidt of Automotive Industry Data in Britain. "An increasing proportion of the car-buying public has discovered a conscience."
One key country hasn't bought into small-is-cool: China. SUV sales rose 51 percent in China last year, big Buicks and VWs are all the rage and small cars go begging. Ratan Tata predicted that an automaker in China would be the first to match the Nano's $2,500 price, but analysts doubt that. "In China, image is more important than function," says China auto analyst Michael Dunne of J.D. Power and Associates. "Nobody wants to be seen on the bottom of the totem pole."
The biggest roadblock facing small cars is fear about safety. Chery's QQ suffered a PR setback when a video circulated on YouTube of a horrific crash in which the tiny car was crushed between two buses and the driver burned to death. A NEWSWEEK REPORTER TEST-drove a Chevy Aveo subcompact in Detroit last week and felt dwarfed by the SUVs. U.S. statistics on highway fatalities show the smallest cars have death rates 2.5 times higher than the biggest cars. In Europe, small cars, which are driven mostly at slower speeds in cities, have lower death rates, but are in more crashes than big cars. "It comes down to physics," says Adrian Lund, president of the Insurance Institute for Highway Safety. "If you're in a smaller vehicle out there, you're at greater risk."
To overcome small-car phobia, automakers are working to burnish their safety bona fides. In every Smart car showroom in the United States, for example, you'll find the car's reinforced steel skeleton on display. Called its "tridion cell," the steel cage protects occupants in a crash. The sales staff also shows prospective buyers violent crash-test videos and talks up the car's four airbags and electronic stability control. "In America," says Smart USA president Schembri, "you have to address this issue."
The more features automakers can stuff into small cars—be they safety, style or stereos—the better for the bottom line. This is the formula Japan and Europe have used to develop a lucrative small-car market. Typically, an automaker earns about a 5 percent profit on a car. That comes to about $125 on a Nano, $1,250 on a Mini Cooper or, better yet, $2,000 or more on a BMW 1 Series convertible. Putting premium-priced mileage misers on the road could help save the planet without bankrupting the world's automakers. The problem comes in convincing drivers in America and China—the world's two largest auto markets—that they should pay more for less. "Space and weight equal value for most buyers" in America and China, says analyst McAlinden. "It's a dollar-per-pound concept."
We may like to think that the recent spike in small-car sales is driven by altruism. But auto execs says it's a pocketbook issue: U.S. gas prices doubled this decade, and Western Europe is now paying about $2 per liter, up nearly 25 cents from just two years ago. "The worst thing that could happen to us now is if gas prices fell back, because that would take the pressure off," says Ford executive chairman Bill Ford Jr. "We've all started down this path now." And there's no turning back. Forecasters predict oil prices, global warming and emerging-market desire for cars will continue to rise. As long as those factors drive demand, small cars will rule the road.
--with Jason Overdorf in New Delhi
URL: http://www.newsweek.com/id/112729
Saturday, February 09, 2008
jewels in their crown
Indian investors have pulled a post-colonial table turn, snapping up some of Britain's best brands.
By William Underhill
NEWSWEEK
Updated: 12:02 PM ET Feb 9, 2008
A recent Indian TV commercial for a mouth-freshening chew provides surprising insight into the business climate on the Subcontinent. The scene is modern-day London, and a young Indian tycoon passes a billboard for the East India Company, the giant British trading firm that dominated India's fortunes for almost 200 years. His immediate reaction: buy the company (in hopes of enticing aspirational Indians to buy the product, as well).
If the East India Company was still around, it's likely an Indian firm would be looking into an acquisition. Flush with cash, corporate India is on an investment spree, and Britain, the old colonial master, last year became the favorite target. Indian investment in Britain has more than doubled in the past three years, surpassing the U.K.'s own investment into India. Indians are now the second-biggest investors in London—home to 19 percent of the national economy—topped only by acquisitive Americans. "I don't think that even 20 years ago anyone would have visualized this," says Subir Gokam, chief economist at the Indian ratings agency Crisil. "We'd still have been imagining ourselves as a Third World country subordinate to the U.S., Britain and everyone else."
On a mission to India last month Prime Minister Gordon Brown spoke of a new "partnership of equals," one that the British hope will include freer trade with India, which despite its stellar growth, can still look more protectionist than peers such as China. While the only headline-making British buy in India last year was Vodafone's $11 billion purchase of a controlling stake in the Indian cell-phone outfit Hutchison Essar, Indian businesses have been snapping up a clutch of iconic British brands, including Tetley, Whyte & Mackay whisky, and Corus, a last fragment of British Steel, acquired by Tata last year for $12 billion. For good measure, Tata now looks set to take carmakers Jaguar and Land Rover off the hands of Ford.
Meanwhile, India's superrich flock to buy expat homes in the poshest areas of London. According to estate agent Savills, which staged its first road show in India last year, in 2007 Indian buyers bought more than 10 percent of London properties sold for £4 million or more, topping even the Russians.
The attraction to Britain has little to do with post-colonial revenge. Start with the presence of at least 1.3 million residents of Indian descent, a shared legal system and familiar language. And Britain is unusually open to big acquisitions by foreigners, of all nationalities. Indian-born steel baron Lakshmi Mittal ran into a firestorm of local criticism when he set out to acquire the French steelmaker Arcelor in 2006. In Britain, the Indian purchase of Corus passed almost without comment. "The relationship has never been better," says Alan Rosling, a director of India's multinational Tata Sons: "As an investor from India there are few places as open, as welcoming and as hassle-free for investing as Britain."
And that's the rub. If Britain is open to foreign investors, India remains decidedly cautious. Legal hurdles to foreign investment remain highest in key sectors like financial services or retailing, where British companies are strongest.
Gordon Brown may be trying to encourage better bilateral trade relations with political carrots, such as emphatic support for a permanent seat for India on the U.N. Security Council. But with elections due within the next 15 months, Prime Minister Manmohan Singh is unlikely to push through contentious reforms. "Change will happen very slowly," says Julius Sen, an expert on international trade at the London School of Economics. "There is a perception in India that international investors will just go for the low-hanging fruit." The cliché isn't entirely without merit; while Indian banks maintain a network of low-profit rural branches, it's unlikely a British incomer would. India's micro-stores would likely be driven out of business by Western behemoths.
Indians argue that there has been significant dismantling of trade barriers already. "It's now more a matter of which sectors you can't invest in, rather than which you can," says Mukesh Rajani, who runs the Indian desk of PriceWaterhouseCoopers in London. Andy Scott of the Confederation of British Industry notes that unlike in totalitarian China, "in India you pay the price of democracy," a price that involves concessions to public anxiety over the impact of foreign investment. A robust political system in which leaders have to trouble themselves with election outcomes may be the Raj's last great bequest to India; British business will have to live with the consequences.
--with Jason Overdorf in New Delhi
URL: http://www.newsweek.com/id/109546
By William Underhill
NEWSWEEK
Updated: 12:02 PM ET Feb 9, 2008
A recent Indian TV commercial for a mouth-freshening chew provides surprising insight into the business climate on the Subcontinent. The scene is modern-day London, and a young Indian tycoon passes a billboard for the East India Company, the giant British trading firm that dominated India's fortunes for almost 200 years. His immediate reaction: buy the company (in hopes of enticing aspirational Indians to buy the product, as well).
If the East India Company was still around, it's likely an Indian firm would be looking into an acquisition. Flush with cash, corporate India is on an investment spree, and Britain, the old colonial master, last year became the favorite target. Indian investment in Britain has more than doubled in the past three years, surpassing the U.K.'s own investment into India. Indians are now the second-biggest investors in London—home to 19 percent of the national economy—topped only by acquisitive Americans. "I don't think that even 20 years ago anyone would have visualized this," says Subir Gokam, chief economist at the Indian ratings agency Crisil. "We'd still have been imagining ourselves as a Third World country subordinate to the U.S., Britain and everyone else."
On a mission to India last month Prime Minister Gordon Brown spoke of a new "partnership of equals," one that the British hope will include freer trade with India, which despite its stellar growth, can still look more protectionist than peers such as China. While the only headline-making British buy in India last year was Vodafone's $11 billion purchase of a controlling stake in the Indian cell-phone outfit Hutchison Essar, Indian businesses have been snapping up a clutch of iconic British brands, including Tetley, Whyte & Mackay whisky, and Corus, a last fragment of British Steel, acquired by Tata last year for $12 billion. For good measure, Tata now looks set to take carmakers Jaguar and Land Rover off the hands of Ford.
Meanwhile, India's superrich flock to buy expat homes in the poshest areas of London. According to estate agent Savills, which staged its first road show in India last year, in 2007 Indian buyers bought more than 10 percent of London properties sold for £4 million or more, topping even the Russians.
The attraction to Britain has little to do with post-colonial revenge. Start with the presence of at least 1.3 million residents of Indian descent, a shared legal system and familiar language. And Britain is unusually open to big acquisitions by foreigners, of all nationalities. Indian-born steel baron Lakshmi Mittal ran into a firestorm of local criticism when he set out to acquire the French steelmaker Arcelor in 2006. In Britain, the Indian purchase of Corus passed almost without comment. "The relationship has never been better," says Alan Rosling, a director of India's multinational Tata Sons: "As an investor from India there are few places as open, as welcoming and as hassle-free for investing as Britain."
And that's the rub. If Britain is open to foreign investors, India remains decidedly cautious. Legal hurdles to foreign investment remain highest in key sectors like financial services or retailing, where British companies are strongest.
Gordon Brown may be trying to encourage better bilateral trade relations with political carrots, such as emphatic support for a permanent seat for India on the U.N. Security Council. But with elections due within the next 15 months, Prime Minister Manmohan Singh is unlikely to push through contentious reforms. "Change will happen very slowly," says Julius Sen, an expert on international trade at the London School of Economics. "There is a perception in India that international investors will just go for the low-hanging fruit." The cliché isn't entirely without merit; while Indian banks maintain a network of low-profit rural branches, it's unlikely a British incomer would. India's micro-stores would likely be driven out of business by Western behemoths.
Indians argue that there has been significant dismantling of trade barriers already. "It's now more a matter of which sectors you can't invest in, rather than which you can," says Mukesh Rajani, who runs the Indian desk of PriceWaterhouseCoopers in London. Andy Scott of the Confederation of British Industry notes that unlike in totalitarian China, "in India you pay the price of democracy," a price that involves concessions to public anxiety over the impact of foreign investment. A robust political system in which leaders have to trouble themselves with election outcomes may be the Raj's last great bequest to India; British business will have to live with the consequences.
--with Jason Overdorf in New Delhi
URL: http://www.newsweek.com/id/109546
Saturday, February 02, 2008
walk this way
A pathbreaking tourism iniative in Kumaon
A few years ago, Satri, a village near Binsar in the Uttarakhand foothills of the Himalayas, was dying. Only three families remained, and all the men had gone to nearby towns for work, leaving their mothers and sisters behind. The advent of the Internet meant that even the postman hardly bothered to make the hilly, two-hour hike to Satri from the nearest road. Then, one afternoon, an oddball group trooped over the ridge with a bizarre proposal: Tourists who'd never known life without water and electricity on demand and a shopping mall around the corner would pay good money to rough it out, miles from anywhere, and learn about how the villagers lived. It was, the whole village agreed, a preposterous idea. “It took us around three years to get the villagers to believe in the project. Then they built the guesthouses within a year,” says Himanshu Pande, one of the founders of Village Ways.
When I marched into Satri at the end of a three-day hike through the foothills arranged by Village Ways—the oddballs who cooked up the idea of bringing tourists to Satri and other remote villages—the place was thriving. The men had come back from jobs in nearby towns to work as cooks, guides and porters, and the women, Satri's greatest asset, smiled and joked with an easy, outgoing confidence they've acquired through managing the guesthouse the villagers built here two years ago. Money has rolled in, too. Sher Singh, the local guide who accompanied me and my photographer, was there to report that the village had earned Rs. 72,000 from the tourist trade over the past two months. Neighbouring villages associated with the project, too, had earned upwards of Rs. 60,000.
The reason is simple. The area surrounding Binsar, in the shadow of Nanda Devi, offers spectacular beauty. The pine forest is silent and deep, amid the evergreens rhododendron bloom in a bloodflash of crimson, and on a clear day you can see the majestic snow caps of the high peaks from the crest of nearly every rise. But the hills grow smaller every year. Once sleepy hamlets like Binsar and Bhimtal are now chock-a-block with hotels, guesthouses and restaurants—most of them built, apparently, by blind bricklayers imported from some vast totalitarian state where the cinderblock is considered a work of art. Cars and trucks roar up and down the steep curves without a moment's rest, and garish signs advertising multicuisine restaurants and “ayurvedic” massage assault from all directions. A good rule of thumb: If you can drive to it, it's already been ruined. Satri and other picturesque villages of the area like Kathdhara, Gonap, Risal, and Dalar, which can only be reached on foot due to their location within the Binsar Sanctuary, are therefore the only unspoiled places left.
After waking up to a fine breakfast at the Khali Estate, a quaint, comfortable Raj-era resort that acts as a sort of base camp for Village Ways, Tribhuvan (our photographer) and I set out for our first day of walking. From a sunny spot on the road with a good view of the snowcaps, we dropped quickly down into the dark forest, following the lead of our guide, Sher Singh, a handsome man with a neat moustache. The ground was springy with moisture, but not wet, and there was an impressive silence. A mile or so along, a partridge broke cover and fluttered up beneath our feet, the startling whupwhup of its wings setting my heart going at the same rhythm. It was vigorous walking, mostly downhill, and, not surprisingly, the footing was good. Village Ways spent the better part of a year mapping and building these trails, to make them safe and navigable, of course, but also to create a network of paths that could facilitate tourists of different levels of fitness. “It wasn't easy to make all these different routes,” Sher Singh told me. “But now we can walk from here to the village in one hour or in four hours, depending on the guest.” Naturally, we always took the shortest route.
We stopped at three of the five participating villages, Kathdhara, Gonap and Satri, each one smaller and more pleasant than the last. Coming into Kathdhara, we stopped in the trail above and looked down over the bright green terraces where the farmers were growing wheat, mustard, lentils and spinach in oval steps down the hillside. In another twenty minutes, we'd hiked down to the guesthouse, passing great piles of saffron-colored pine needles, stacked like hay to dry for later use as kindling and bedding for livestock. We ate lunch beside a lemon tree with the Pancha Chulli range before us in the distance, spent a bit of time chatting with the locals, and then we marched on. In Gonap, we built a bonfire out of the football-sized Himalayan pine cones and watched the sunset, then ate a day-laborer's enormous, starchy meal—dal, aloo gobi, aloo tomatr, roti and rice—and sacked out. Frankly, I was exhausted. Either I'm getting old or I'm not as fit as I like to think or the cold air sapped my strength, but there was no shout-singing of Yellow Submarine and no ribald adventurer's tales that night: I was out cold by 8:30. (Note to the energetic: Village life is pretty tame). Don't get me wrong. It was paradise. But I was having a little trouble getting used to it.
The second day proved to be our longest walk—“We were trekking for three hours!” Tribhuvan exclaimed when he flopped down in a doorway at the end of it—and the most rewarding, because it ended in Satri. It's no mystery why Satri is everybody's favorite village. The place only has three families, but it's like a factory for beautiful women, all of whom are constantly smiling and laughing. No lie: These girls make the boy monks in Ladakh seem glum, and even grandma, deeply lined and missing more than a few teeth, looks better than anybody in Bollywood. Apparently, though, whatever it is that makes the women beautiful and happy also makes people crazy (or maybe it's not getting to marry one of the beautiful women?) because most of the houses in the village are empty. Before Village Ways started, bringing not only a source of income but also entertainment and a steady train of news and supplies, the few villagers left here thought they would have to abandon their homes and move to town. Thanks to Pande and his partners at Village Ways, that now looks unlikely to happen.
The key to making the Village Ways project sustainable—in other words, to making sure it remains a going concern without damaging the land or the local community—was to make the villagers themselves the owners of the guesthouses, Dinesh Pande, a local activist who advised Village Ways on the project, told me. Burned once by the state and the forest department when their land was declared part of the Binsar Wildlife Sanctuary, the local people would not have been keen to accept yet another domineering landlord. And the borrow-build-operate model that financed the construction of the guesthouses—Village Ways provided 40 percent of the money with a grant, 60 percent with an interest-free loan, and the villagers themselves did the building--gives them a much deeper commitment to the project than they'd have to a hotelier who simply cut them a paycheck.
The local end of management, too, is collaborative. Every village has a democratically elected Gram Paryatan Samiti (village tourism committee), and one member from each of these committees represents the village in a project-wide decision-making body called the Paryatan Vikas Samiti (tourism development committee), which allocates jobs and makes other essential decisions. The Gram Paryatan Samitis supervised the construction of the five Village Ways guesthouses, which on the advice of their city-bred collaborators, were built by local craftsmen in the traditional style the villagers used for their own houses. Built with stone and mud mortar, the guesthouses have flush toilets and showers, but solar power provides electricity and hot water. Now, the Gram Paryatan Samitis manage the guesthouses' day-to-day operation and finances—including making payments on the 10-year loan from Village Ways. The Gram Paryatan Samitis also administer a village development fund, which receives 20 percent of the guesthouse income and is used to finance projects that will benefit the entire community. Whether or not Village Ways has provided them the villagers welcome the results, I found when I chatted with residents of Kathdhara, Gonap and Satri. "Now, at least 25 percent of the migration out has stopped, and the only people who leave are those who get good jobs,” said 78-year-old Amar Singh, a retired policeman who lives in Gonap. "If we continue to get more tourists," he said, "we might get a motorable road. We might get more development."
For the duration of the day's hike, I wondered whether the villages I was visiting were truly 'sustainable,' and if Gonap was a rural paradise, or a people zoo. Then I walke into Satri, and Kiran, a teenaged village belle, garlanded me with a string of mustard flowers.
Was there a flirtatious sparkle in her eye, I thought? Perhaps I am not so old after all.
And so the fate of the countryside, fragile as it is, slipped easily from my mind. Fleeting, maybe, but this was paradise.
A few years ago, Satri, a village near Binsar in the Uttarakhand foothills of the Himalayas, was dying. Only three families remained, and all the men had gone to nearby towns for work, leaving their mothers and sisters behind. The advent of the Internet meant that even the postman hardly bothered to make the hilly, two-hour hike to Satri from the nearest road. Then, one afternoon, an oddball group trooped over the ridge with a bizarre proposal: Tourists who'd never known life without water and electricity on demand and a shopping mall around the corner would pay good money to rough it out, miles from anywhere, and learn about how the villagers lived. It was, the whole village agreed, a preposterous idea. “It took us around three years to get the villagers to believe in the project. Then they built the guesthouses within a year,” says Himanshu Pande, one of the founders of Village Ways.
When I marched into Satri at the end of a three-day hike through the foothills arranged by Village Ways—the oddballs who cooked up the idea of bringing tourists to Satri and other remote villages—the place was thriving. The men had come back from jobs in nearby towns to work as cooks, guides and porters, and the women, Satri's greatest asset, smiled and joked with an easy, outgoing confidence they've acquired through managing the guesthouse the villagers built here two years ago. Money has rolled in, too. Sher Singh, the local guide who accompanied me and my photographer, was there to report that the village had earned Rs. 72,000 from the tourist trade over the past two months. Neighbouring villages associated with the project, too, had earned upwards of Rs. 60,000.
The reason is simple. The area surrounding Binsar, in the shadow of Nanda Devi, offers spectacular beauty. The pine forest is silent and deep, amid the evergreens rhododendron bloom in a bloodflash of crimson, and on a clear day you can see the majestic snow caps of the high peaks from the crest of nearly every rise. But the hills grow smaller every year. Once sleepy hamlets like Binsar and Bhimtal are now chock-a-block with hotels, guesthouses and restaurants—most of them built, apparently, by blind bricklayers imported from some vast totalitarian state where the cinderblock is considered a work of art. Cars and trucks roar up and down the steep curves without a moment's rest, and garish signs advertising multicuisine restaurants and “ayurvedic” massage assault from all directions. A good rule of thumb: If you can drive to it, it's already been ruined. Satri and other picturesque villages of the area like Kathdhara, Gonap, Risal, and Dalar, which can only be reached on foot due to their location within the Binsar Sanctuary, are therefore the only unspoiled places left.
After waking up to a fine breakfast at the Khali Estate, a quaint, comfortable Raj-era resort that acts as a sort of base camp for Village Ways, Tribhuvan (our photographer) and I set out for our first day of walking. From a sunny spot on the road with a good view of the snowcaps, we dropped quickly down into the dark forest, following the lead of our guide, Sher Singh, a handsome man with a neat moustache. The ground was springy with moisture, but not wet, and there was an impressive silence. A mile or so along, a partridge broke cover and fluttered up beneath our feet, the startling whupwhup of its wings setting my heart going at the same rhythm. It was vigorous walking, mostly downhill, and, not surprisingly, the footing was good. Village Ways spent the better part of a year mapping and building these trails, to make them safe and navigable, of course, but also to create a network of paths that could facilitate tourists of different levels of fitness. “It wasn't easy to make all these different routes,” Sher Singh told me. “But now we can walk from here to the village in one hour or in four hours, depending on the guest.” Naturally, we always took the shortest route.
We stopped at three of the five participating villages, Kathdhara, Gonap and Satri, each one smaller and more pleasant than the last. Coming into Kathdhara, we stopped in the trail above and looked down over the bright green terraces where the farmers were growing wheat, mustard, lentils and spinach in oval steps down the hillside. In another twenty minutes, we'd hiked down to the guesthouse, passing great piles of saffron-colored pine needles, stacked like hay to dry for later use as kindling and bedding for livestock. We ate lunch beside a lemon tree with the Pancha Chulli range before us in the distance, spent a bit of time chatting with the locals, and then we marched on. In Gonap, we built a bonfire out of the football-sized Himalayan pine cones and watched the sunset, then ate a day-laborer's enormous, starchy meal—dal, aloo gobi, aloo tomatr, roti and rice—and sacked out. Frankly, I was exhausted. Either I'm getting old or I'm not as fit as I like to think or the cold air sapped my strength, but there was no shout-singing of Yellow Submarine and no ribald adventurer's tales that night: I was out cold by 8:30. (Note to the energetic: Village life is pretty tame). Don't get me wrong. It was paradise. But I was having a little trouble getting used to it.
The second day proved to be our longest walk—“We were trekking for three hours!” Tribhuvan exclaimed when he flopped down in a doorway at the end of it—and the most rewarding, because it ended in Satri. It's no mystery why Satri is everybody's favorite village. The place only has three families, but it's like a factory for beautiful women, all of whom are constantly smiling and laughing. No lie: These girls make the boy monks in Ladakh seem glum, and even grandma, deeply lined and missing more than a few teeth, looks better than anybody in Bollywood. Apparently, though, whatever it is that makes the women beautiful and happy also makes people crazy (or maybe it's not getting to marry one of the beautiful women?) because most of the houses in the village are empty. Before Village Ways started, bringing not only a source of income but also entertainment and a steady train of news and supplies, the few villagers left here thought they would have to abandon their homes and move to town. Thanks to Pande and his partners at Village Ways, that now looks unlikely to happen.
The key to making the Village Ways project sustainable—in other words, to making sure it remains a going concern without damaging the land or the local community—was to make the villagers themselves the owners of the guesthouses, Dinesh Pande, a local activist who advised Village Ways on the project, told me. Burned once by the state and the forest department when their land was declared part of the Binsar Wildlife Sanctuary, the local people would not have been keen to accept yet another domineering landlord. And the borrow-build-operate model that financed the construction of the guesthouses—Village Ways provided 40 percent of the money with a grant, 60 percent with an interest-free loan, and the villagers themselves did the building--gives them a much deeper commitment to the project than they'd have to a hotelier who simply cut them a paycheck.
The local end of management, too, is collaborative. Every village has a democratically elected Gram Paryatan Samiti (village tourism committee), and one member from each of these committees represents the village in a project-wide decision-making body called the Paryatan Vikas Samiti (tourism development committee), which allocates jobs and makes other essential decisions. The Gram Paryatan Samitis supervised the construction of the five Village Ways guesthouses, which on the advice of their city-bred collaborators, were built by local craftsmen in the traditional style the villagers used for their own houses. Built with stone and mud mortar, the guesthouses have flush toilets and showers, but solar power provides electricity and hot water. Now, the Gram Paryatan Samitis manage the guesthouses' day-to-day operation and finances—including making payments on the 10-year loan from Village Ways. The Gram Paryatan Samitis also administer a village development fund, which receives 20 percent of the guesthouse income and is used to finance projects that will benefit the entire community. Whether or not Village Ways has provided them the villagers welcome the results, I found when I chatted with residents of Kathdhara, Gonap and Satri. "Now, at least 25 percent of the migration out has stopped, and the only people who leave are those who get good jobs,” said 78-year-old Amar Singh, a retired policeman who lives in Gonap. "If we continue to get more tourists," he said, "we might get a motorable road. We might get more development."
For the duration of the day's hike, I wondered whether the villages I was visiting were truly 'sustainable,' and if Gonap was a rural paradise, or a people zoo. Then I walke into Satri, and Kiran, a teenaged village belle, garlanded me with a string of mustard flowers.
Was there a flirtatious sparkle in her eye, I thought? Perhaps I am not so old after all.
And so the fate of the countryside, fragile as it is, slipped easily from my mind. Fleeting, maybe, but this was paradise.
Friday, February 01, 2008
stolen kidneys
Indian investigators suspect as many as 500 illegal transplants have been performed.
By Jason Overdorf
Newsweek Web Exclusive
Updated: 5:41 PM ET Feb 1, 2008
Mohammad Salim Khan, 33, was squatting on a corner where unemployed day laborers congregate, looking for work, in the Uttar Pradesh town of Meerut, when a bearded man offered him a three-month job in Delhi that would pay about $3 a day. Khan jumped at the chance. But when he eventually reached Delhi, the promised job never materialized. Instead, Khan was taken to a house in Gurgaon where two men held him at gunpoint and knocked him out with an injection of sedatives. When he woke up hours later, he had a horrible pain in his abdomen, and a man in a surgical mask was leaning over him. "Your kidney has been removed," the man said. "Don't tell anyone after you leave here. Not your friends or family or relatives or anyone. If you say anything, one of our guys will find you and shoot you."
It sounds like a sci-fi movie or an urban legend. But Indian police, who broke into the house where Khan was being held not long after his surgery, say that organized gangs who steal, or buy, kidneys and other organs for illegal transplant operations are an all-too-common reality here, where some 320 million people survive on less than $1 a day. The authorities believe that this ring—which was allegedly run by a man calling himself Dr. Amit Kumar, though he was not a doctor of medicine—may have performed as many as 500 illegal transplants without being detected over the past eight or nine years. The criminal network apparenlty involved four doctors, five nurses, 20 paramedics, three private hospitals, 10 pathology clinics and five diagnostic centers, police believe, and drew patients from as far afield as the Canada, Greece and the United States. Authorities are trying to talk to U.S. patients who may be involved, saying the patients will not be in trouble and that they are only seeking further information on the doctors involved.
Christened "Dr. Horror" and "Dr. Dracula" by Indian tabloids, the man who allegedly ran the Gurgaon-based racket had been arrested on a similar charge in Mumbai in 1994, but police allege that he jumped bail, changed his name from Dr. Santosh Raut to Dr. Amit Kumar and set up a new operation in Delhi. His Gurgaon clinic was raided by the police in 2000, and police reportedly failed to investigate after television and newspaper exposes alleged that Kumar was performing illegal surgeries. "In the maximum number of these cases, they [the accused] are under trial for many years, and there are very few convictions," said Bhuwen Ribhu, a lawyer and activist who specializes in cases of human trafficking. "It is quite sad. Even when the person is arrested, he gets bail within three or four months and continues as he was doing before." Comparing this case to a 2006 scandal in which police ignored complaints from poor parents, allowing a serial child murderer to go on killing for months, Ribhu adds, "In most of these incidents, I'm sure the police [are] not even registering cases."
The Gurgaon ring was broken because a former victim who had joined the gang as a recruiter approached the police with his story, but a leak allowed Kumar to escape before the police raid, and despite a national and international manhunt he remains at large. So far, police have arrested only one of the four main doctors, as well as a nurse, cook, driver and other minor figures in the gang. However, officials suspect that several private hospitals in Delhi and its suburbs may have known about the illegal transplants—or at least have avoided asking too many questions. "Due to its scale, we believe more members of the Delhi medical fraternity must have been aware of what was going on," Gurgaon police commissioner Mahinder Lal told reporters.
Similar organ-theft rings have been unearthed across the country in the past. But if these estimates can be confirmed by testimony and evidence, this would be the largest illegal-transplant network uncovered to date in India—and even so it may be just a fraction of the cases.
"It is clear that a large number [of transplants] are not being documented within the system, which means that they are being done elsewhere," said Dr. Amit Verma, chief operating officer of a Delhi hospital run by Fortis Healthcare that is one of only a few institutions to use an independent screening committee to evaluate potential donors. "For a country of our size, and for the number of renal failures that we have, we should be doing at least a thousand times the number of transplants that we do officially." Indian surgeons perform 3,000-4,000 legally documented kidney transplants per year, in part because India has strict laws that mandate that organ donors must be close relatives to the recipient.
Those laws help create a huge gap between supply and demand, and illegal transplants go on because the legal system is ill-equipped—and some say unwilling—to deal with the problem. "Most of these cases are never reported," said Manjit Ahlawat, joint commissioner of the Gurgaon police. "The person who wants a kidney benefits, and the person whose kidney has been taken benefits, because he gets a lot of money, so nobody files a complaint." He believes that the three donors that the police found in Gurgaon were likely promised large sums of money—by their desperate standards—and in exchange for their organs. Now, they must claim that they were compelled by force, because otherwise they could be prosecuted as criminals. "If they admit that they did this willingly, they will be arrested, too," Ahlawat said.
Apart from evidence derived from the interrogation of suspects and five foreigners whom the police believe were waiting for transplants and the testimony of Khan and other men whose kidneys were allegedly stolen, the police recovered letters and e-mail messages from 48 foreigners inquiring about transplants from Dr. Kumar's office. According to Gurgaon police, touts canvassed Delhi and other cities to recruit donors, focusing on the poor and unemployed. Some were allegedly asked if they wanted to sell a kidney for $1,000 to $2,500.
Khan, an unemployed laborer who earns about $2 a day when he is lucky enough to find work, says that the offer of a steady job was simply too good to pass up, and even though he was kept waiting for almost two weeks in a house with a couple guys with rifles stationed outside it, he didn't complain because he was well fed and they promised he would be paid for his time. Only when the blood test was administered did he begin to catch on. "I asked why I needed a blood test, and one of the guys pointed his gun at me and told me not to ask pointless questions if I wanted to live," he said, casually leaning against the wall on the balcony outside the isolation ward at Gurgaon Civil Hospital. Lifting up his shirt, he reveals a puckered, 10-inch incision in his side, stitched together with broad exes of black surgical thread. "When I heard that my kidney had been removed, for a long time I was in shock," he reflects. Khan, who supports five children, his mother and two sisters, has no marketable skills, and doctors say that he will no longer be able to perform the backbreaking labor that he's used to doing. "I keep thinking about how I will live now." He says he received no payment for his kidney.
Naseem Mohammad, a 25-year-old laborer from Ahmedabad, in Gujarat, has a similar story. He was waiting for work at a labor market near the Old Delhi Railway Station when a man approached him with an offer for a three-month painting contract. He was taken to a house in Uttar Pradesh for two weeks, where his recruiters told him that they were waiting for a tender to be passed before the work could begin. "I didn't try to run, because I still thought I was going to get the job," he said outside the isolation ward. "Then one day they didn't give me anything to eat. They tested my blood. Then they gave me an injection. I asked them what was in it and why they were giving it to me, and they told me it was for my own good. Then I passed out." When he woke up, his kidney was gone. "I've gone before like this with people for 15-20 days work," he said. "Nothing like this has ever happened. Once I went to Mehrauli with a labor contractor to do road work. I didn't know this will happen. I'm in shock after this. What will I do?" He, too, says he received no money for his stolen organ.
Whether they volunteered and were cheated of their payoff or were drugged and robbed of their kidneys, there is no doubt Khan and Mohammed were victims of an inescapable, suffocating poverty that made them--like millions of others--vulnerable to all kinds of exploitation.
"They were easy prey," said Gurgaon deputy police commissioner Rakesh Arya.
URL: http://www.newsweek.com/id/107448
By Jason Overdorf
Newsweek Web Exclusive
Updated: 5:41 PM ET Feb 1, 2008
Mohammad Salim Khan, 33, was squatting on a corner where unemployed day laborers congregate, looking for work, in the Uttar Pradesh town of Meerut, when a bearded man offered him a three-month job in Delhi that would pay about $3 a day. Khan jumped at the chance. But when he eventually reached Delhi, the promised job never materialized. Instead, Khan was taken to a house in Gurgaon where two men held him at gunpoint and knocked him out with an injection of sedatives. When he woke up hours later, he had a horrible pain in his abdomen, and a man in a surgical mask was leaning over him. "Your kidney has been removed," the man said. "Don't tell anyone after you leave here. Not your friends or family or relatives or anyone. If you say anything, one of our guys will find you and shoot you."
It sounds like a sci-fi movie or an urban legend. But Indian police, who broke into the house where Khan was being held not long after his surgery, say that organized gangs who steal, or buy, kidneys and other organs for illegal transplant operations are an all-too-common reality here, where some 320 million people survive on less than $1 a day. The authorities believe that this ring—which was allegedly run by a man calling himself Dr. Amit Kumar, though he was not a doctor of medicine—may have performed as many as 500 illegal transplants without being detected over the past eight or nine years. The criminal network apparenlty involved four doctors, five nurses, 20 paramedics, three private hospitals, 10 pathology clinics and five diagnostic centers, police believe, and drew patients from as far afield as the Canada, Greece and the United States. Authorities are trying to talk to U.S. patients who may be involved, saying the patients will not be in trouble and that they are only seeking further information on the doctors involved.
Christened "Dr. Horror" and "Dr. Dracula" by Indian tabloids, the man who allegedly ran the Gurgaon-based racket had been arrested on a similar charge in Mumbai in 1994, but police allege that he jumped bail, changed his name from Dr. Santosh Raut to Dr. Amit Kumar and set up a new operation in Delhi. His Gurgaon clinic was raided by the police in 2000, and police reportedly failed to investigate after television and newspaper exposes alleged that Kumar was performing illegal surgeries. "In the maximum number of these cases, they [the accused] are under trial for many years, and there are very few convictions," said Bhuwen Ribhu, a lawyer and activist who specializes in cases of human trafficking. "It is quite sad. Even when the person is arrested, he gets bail within three or four months and continues as he was doing before." Comparing this case to a 2006 scandal in which police ignored complaints from poor parents, allowing a serial child murderer to go on killing for months, Ribhu adds, "In most of these incidents, I'm sure the police [are] not even registering cases."
The Gurgaon ring was broken because a former victim who had joined the gang as a recruiter approached the police with his story, but a leak allowed Kumar to escape before the police raid, and despite a national and international manhunt he remains at large. So far, police have arrested only one of the four main doctors, as well as a nurse, cook, driver and other minor figures in the gang. However, officials suspect that several private hospitals in Delhi and its suburbs may have known about the illegal transplants—or at least have avoided asking too many questions. "Due to its scale, we believe more members of the Delhi medical fraternity must have been aware of what was going on," Gurgaon police commissioner Mahinder Lal told reporters.
Similar organ-theft rings have been unearthed across the country in the past. But if these estimates can be confirmed by testimony and evidence, this would be the largest illegal-transplant network uncovered to date in India—and even so it may be just a fraction of the cases.
"It is clear that a large number [of transplants] are not being documented within the system, which means that they are being done elsewhere," said Dr. Amit Verma, chief operating officer of a Delhi hospital run by Fortis Healthcare that is one of only a few institutions to use an independent screening committee to evaluate potential donors. "For a country of our size, and for the number of renal failures that we have, we should be doing at least a thousand times the number of transplants that we do officially." Indian surgeons perform 3,000-4,000 legally documented kidney transplants per year, in part because India has strict laws that mandate that organ donors must be close relatives to the recipient.
Those laws help create a huge gap between supply and demand, and illegal transplants go on because the legal system is ill-equipped—and some say unwilling—to deal with the problem. "Most of these cases are never reported," said Manjit Ahlawat, joint commissioner of the Gurgaon police. "The person who wants a kidney benefits, and the person whose kidney has been taken benefits, because he gets a lot of money, so nobody files a complaint." He believes that the three donors that the police found in Gurgaon were likely promised large sums of money—by their desperate standards—and in exchange for their organs. Now, they must claim that they were compelled by force, because otherwise they could be prosecuted as criminals. "If they admit that they did this willingly, they will be arrested, too," Ahlawat said.
Apart from evidence derived from the interrogation of suspects and five foreigners whom the police believe were waiting for transplants and the testimony of Khan and other men whose kidneys were allegedly stolen, the police recovered letters and e-mail messages from 48 foreigners inquiring about transplants from Dr. Kumar's office. According to Gurgaon police, touts canvassed Delhi and other cities to recruit donors, focusing on the poor and unemployed. Some were allegedly asked if they wanted to sell a kidney for $1,000 to $2,500.
Khan, an unemployed laborer who earns about $2 a day when he is lucky enough to find work, says that the offer of a steady job was simply too good to pass up, and even though he was kept waiting for almost two weeks in a house with a couple guys with rifles stationed outside it, he didn't complain because he was well fed and they promised he would be paid for his time. Only when the blood test was administered did he begin to catch on. "I asked why I needed a blood test, and one of the guys pointed his gun at me and told me not to ask pointless questions if I wanted to live," he said, casually leaning against the wall on the balcony outside the isolation ward at Gurgaon Civil Hospital. Lifting up his shirt, he reveals a puckered, 10-inch incision in his side, stitched together with broad exes of black surgical thread. "When I heard that my kidney had been removed, for a long time I was in shock," he reflects. Khan, who supports five children, his mother and two sisters, has no marketable skills, and doctors say that he will no longer be able to perform the backbreaking labor that he's used to doing. "I keep thinking about how I will live now." He says he received no payment for his kidney.
Naseem Mohammad, a 25-year-old laborer from Ahmedabad, in Gujarat, has a similar story. He was waiting for work at a labor market near the Old Delhi Railway Station when a man approached him with an offer for a three-month painting contract. He was taken to a house in Uttar Pradesh for two weeks, where his recruiters told him that they were waiting for a tender to be passed before the work could begin. "I didn't try to run, because I still thought I was going to get the job," he said outside the isolation ward. "Then one day they didn't give me anything to eat. They tested my blood. Then they gave me an injection. I asked them what was in it and why they were giving it to me, and they told me it was for my own good. Then I passed out." When he woke up, his kidney was gone. "I've gone before like this with people for 15-20 days work," he said. "Nothing like this has ever happened. Once I went to Mehrauli with a labor contractor to do road work. I didn't know this will happen. I'm in shock after this. What will I do?" He, too, says he received no money for his stolen organ.
Whether they volunteered and were cheated of their payoff or were drugged and robbed of their kidneys, there is no doubt Khan and Mohammed were victims of an inescapable, suffocating poverty that made them--like millions of others--vulnerable to all kinds of exploitation.
"They were easy prey," said Gurgaon deputy police commissioner Rakesh Arya.
URL: http://www.newsweek.com/id/107448
Friday, January 11, 2008
how green is a mini?
Tata's Nano may put millions of new drivers on the roads. It also may herald a new source of pollution.
By Jason Overdorf and Fred Guterl
Newsweek Web Exclusive
Updated: 9:26 AM ET Jan 11, 2008
The unveiling of Tata Motors' People's Car—perhaps the most anticipated vehicle in a decade—had the frenzied atmosphere of a blockbuster movie opening. For four years Tata kept every detail of the car's development top secret, and now a hundred or more photographers jostled to get the first shot. When chairman Ratan Tata, citing the first flight by the Wright brothers and the invention of the computer, pulled back the curtain on the newly named Nano, it turned out to be a four-seater, a bit more than three meters long, with a 642cc engine and made of plastic and glue instead of welded steel.
Despite speculation to the contrary, the car will retail for 100,000 rupees, or $2,500. ("A promise is a promise," Tata said.) At less than half what Maruti Suzuki, the current market leader in India, charges for its cheapest model, the Nano is priced to get urban Indians off their motor scooters and motorcycles and into a car. It is expected to inspire other manufacturers to develop cheap cars and force Maruti Suzuki and others to slash prices, bringing millions more new cars onto Indian roads over the next five years. But the prospect of a flood of new drivers in a nation of 1 billion people has inspired a backlash against the Nano from environmentalists, who fear it's a major new source of pollution.
The concern is that a supercheap auto will encourage development on the American model—relying on the car rather than mass transit. More drivers will add to air pollution, already a critical problem in more than half of India's cities, and to the carbon in the atmosphere that causes global warming. "This car promises to be an environmental disaster of substantial proportions," says Daniel Esty, an environmental expert at Yale.
Tata has worked hard to get out in front of its critics, at least on air pollution. The first models to roll off the company's assembly line in Singur, West Bengal, will get about 20 kilometers per liter of gasoline (50 miles per gallon) and meet stringent European emissions standards that have yet to be adopted in India. Tata insists that the Nano will pollute less than the two-wheelers it is intended to replace and get roughly the same gas mileage as the Maruti models. The Nano's catalytic converter appears to reduce most pollutants by about 80 percent—not as much as the 99 percent Western models do, but still a big reduction. Environmentalists, though, say that it will probably fail after a few years on the road. The reason: Indians typically don't keep their autos in tip-top shape. When the catalytic converter fails, emissions of pollutants could shoot up fivefold.
The story gets worse when you consider greenhouse gases like CO2, which escape catalytic converters. The more gas burned, the more CO2 released. The Nano is likely to replace motor scooters and motorbikes, which get about 54 kilometers to the liter, more than twice what the Nano gets, according to Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis, who has studied the situation in Delhi. That means fuel consumption and carbon emissions will almost certainly rise. "Every new purchase of this vehicle is increasing fuel use [per passenger] by a factor of two to seven, depending on how many people are in the car," says Sperling. That doesn't even account for a decline in fuel efficiency if the cars are not maintained well.
Western environmentalists know they have little moral standing to criticize Indians for wanting cars, particularly one that meets the highest Western emissions standards. But they're rattled in part because they didn't see this coming, and will have to recalculate projections for the buildup of greenhouse gases based on a world of many more drivers. "In none of our reports did we assume there'd be a car like this," says Judy Greenwald, director of innovative solutions at the Pew Center on Global Climate Change. "This is a new category. It will affect everybody's projections."
Indian leaders must also now grapple with the prospect that their nation will become an auto-based society like the United States much faster than expected. Tata's chairman chafed at the suggestion that his firm should be held responsible for the state of pollution in India—or the planet. "Were we to succeed and sell 500,000 small cars every year, we would then, at the end of five years, constitute approximately 2.5 percent of all passenger vehicles in this country," Tata said. "We could hardly be considered a nightmare."
URL: http://www.newsweek.com/id/91380
By Jason Overdorf and Fred Guterl
Newsweek Web Exclusive
Updated: 9:26 AM ET Jan 11, 2008
The unveiling of Tata Motors' People's Car—perhaps the most anticipated vehicle in a decade—had the frenzied atmosphere of a blockbuster movie opening. For four years Tata kept every detail of the car's development top secret, and now a hundred or more photographers jostled to get the first shot. When chairman Ratan Tata, citing the first flight by the Wright brothers and the invention of the computer, pulled back the curtain on the newly named Nano, it turned out to be a four-seater, a bit more than three meters long, with a 642cc engine and made of plastic and glue instead of welded steel.
Despite speculation to the contrary, the car will retail for 100,000 rupees, or $2,500. ("A promise is a promise," Tata said.) At less than half what Maruti Suzuki, the current market leader in India, charges for its cheapest model, the Nano is priced to get urban Indians off their motor scooters and motorcycles and into a car. It is expected to inspire other manufacturers to develop cheap cars and force Maruti Suzuki and others to slash prices, bringing millions more new cars onto Indian roads over the next five years. But the prospect of a flood of new drivers in a nation of 1 billion people has inspired a backlash against the Nano from environmentalists, who fear it's a major new source of pollution.
The concern is that a supercheap auto will encourage development on the American model—relying on the car rather than mass transit. More drivers will add to air pollution, already a critical problem in more than half of India's cities, and to the carbon in the atmosphere that causes global warming. "This car promises to be an environmental disaster of substantial proportions," says Daniel Esty, an environmental expert at Yale.
Tata has worked hard to get out in front of its critics, at least on air pollution. The first models to roll off the company's assembly line in Singur, West Bengal, will get about 20 kilometers per liter of gasoline (50 miles per gallon) and meet stringent European emissions standards that have yet to be adopted in India. Tata insists that the Nano will pollute less than the two-wheelers it is intended to replace and get roughly the same gas mileage as the Maruti models. The Nano's catalytic converter appears to reduce most pollutants by about 80 percent—not as much as the 99 percent Western models do, but still a big reduction. Environmentalists, though, say that it will probably fail after a few years on the road. The reason: Indians typically don't keep their autos in tip-top shape. When the catalytic converter fails, emissions of pollutants could shoot up fivefold.
The story gets worse when you consider greenhouse gases like CO2, which escape catalytic converters. The more gas burned, the more CO2 released. The Nano is likely to replace motor scooters and motorbikes, which get about 54 kilometers to the liter, more than twice what the Nano gets, according to Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis, who has studied the situation in Delhi. That means fuel consumption and carbon emissions will almost certainly rise. "Every new purchase of this vehicle is increasing fuel use [per passenger] by a factor of two to seven, depending on how many people are in the car," says Sperling. That doesn't even account for a decline in fuel efficiency if the cars are not maintained well.
Western environmentalists know they have little moral standing to criticize Indians for wanting cars, particularly one that meets the highest Western emissions standards. But they're rattled in part because they didn't see this coming, and will have to recalculate projections for the buildup of greenhouse gases based on a world of many more drivers. "In none of our reports did we assume there'd be a car like this," says Judy Greenwald, director of innovative solutions at the Pew Center on Global Climate Change. "This is a new category. It will affect everybody's projections."
Indian leaders must also now grapple with the prospect that their nation will become an auto-based society like the United States much faster than expected. Tata's chairman chafed at the suggestion that his firm should be held responsible for the state of pollution in India—or the planet. "Were we to succeed and sell 500,000 small cars every year, we would then, at the end of five years, constitute approximately 2.5 percent of all passenger vehicles in this country," Tata said. "We could hardly be considered a nightmare."
URL: http://www.newsweek.com/id/91380
the man behind the $2500 car
CEO Ratan Tata defends the Nano's environmental credibility
By Jason Overdorf
Newsweek Web Exclusive
Updated: 1:03 PM ET Jan 11, 2008
Four years ago Tata Motors embarked on an ambitious project to bring millions of people in India and elsewhere into the car-owning class. Today Chairman Ratan Tata unveiled the result: the Nano, a stripped down car with a 624 cc four-stroke engine that can seat four passengers. The car is a feat of engineering-it's made from plastic parts held together with adhesives-and meets all India's environment standards. Partly because of the visibility of the project, the Nano has become a lightening rod for criticism on the environmental impact of cars. Tata talked with NEWSWEEK's Jason Overdorf at the Delhi Auto Expo on the eve of the announcement. Excerpts:
NEWSWEEK: Some people have said this car is going to be a disaster for the environment. What impact will the introduction of these vehicles have on pollution levels in India?
Ratan Tata: Our car will meet all emissions requirements in India and in fact the emissions requirements overseas, present and future. Our engine today will meet Euro 3 [emissions standards] today and with small tweaking will meet Euro 4. It will therefore meet all the specifications of emissions that exist in India. We will emit less pollutants than the best two-wheelers in the country. I don't mean per passenger mile or anything. I mean per vehicle. So I am both amused and intrigued by why we are being panned as an environmental disaster before anyone even knows. And in fact the major NGO that's making much of the noise [the Center for Science and the Environment] already knows because I responded to them in great detail with what our numbers were. That appears to have been ignored.
One other point you made is that the sales numbers are not going to be so huge initially, right?
We're building a plant for 250,000 [cars]. It will be expandable to 300,000, and if you mirrored it that would be 500 or 600,000. It would be a challenge to get vendors and a whole infrastructure in place that would enable us to just endlessly build cars, apart from the resources that would be required. So if somebody thinks that we will be putting 2 million cars or 4 million cars into the market, I think that's a bit absurd. Today, with 4, 2 and 3-wheelers, every year [India adds] about 7 million [vehicles] in the market. [India] produced 1.4 million passenger cars last year, so it's kind of flat. What would this car do? Would it sit on top of that by adding 2 and 3 and 4 million? Would it wipe out everybody else? Would we produce and sell 7 million cars? No. It's reasonable to assume that we might be looking at in the next four to five years, maybe a half a million cars, which would be a very good number. No single platform would have that kind of number. What would half a million cars be as a part of an annual production that at that time, with 2-wheelers, 3-wheelers and 4-wheelers, might be 12 to 15 million vehicles? I don't see what the concern is, unless people are seeing ghosts.
I just want to raise one other thing. The noise is being raised by people who are doing nothing about pollution in a holistic manner. Nobody is doing anything about the total population and pollution from two-wheelers, from power stations, from generators. All of this has to be viewed together if one is truly worried about the environment. There are two scooter plants being established today-Honda and Suzuki-each one has about 250,000 unit capacity when they come online. They're not said to be polluting, they're not said to be congesting, they're not said to be unsafe. It's only us.
The other big question for everyone is how you brought down costs so dramatically. Is there a shortlist of two or three big innovations you made to cut costs?
When you start an exercise like this you dimension your product, and we dimensioned the size of our product. When you shrink the size of the product you obviously reduce the amount of material and material is the largest single element in [the cost of] a product. Then there are hundreds of innovative ideas that have brought the price down, or have in fact generated the kind of low costs that we have developed. And there are more on the anvil that will come from vendors, and not all of them will be based on volume.
Are there any that have the potential to change the way the traditional big guns in the auto industry are making cars?
The whole process of putting a car together perhaps needs to change by welding going to adhesives at some point in time. [Among] the most expensive parts of an assembly process are the paint shop and the press shop, so [global manufacturers will move to] materials that will lower the [capital investment] and operating costs [for] those types of units.
India has been talked about as becoming a small car manufacturing hub. What impact will the Nano have on that future?
It will only enhance it. It won't hurt it in any way. Finally, the people are going to decide if this car is going to do what everybody fears it will do or not. Not us. We have as a company put together a concept and converted it to reality, and we believe it is a very interesting value proposition but finally the market will need to decide. Who enters and who competes and what that product is going to do to us is a function of who addresses what the customer wants.
Renault-Nissan has already announced they are going to get into this game. Do you anticipate that this will be an active space that a lot of companies want to get into?
It will be. There's been self-denial that this space is a real space until we addressed it. We will have several people following us, including big companies, and we will need to raise the issue of why those big companies did not address those areas earlier. But possibly the first national car company to address it will be a Chinese company. The day they consider this to be an important segment of the market we will see a Chinese company come closest to us or even break our barrier.
Your coming into this market is somewhat similar to the entrance of Suzuki in the 1980s, in that it has the potential to create huge volumes. In working with suppliers, have you seen inklings of the kind of sea change that the launch of the Maruti 800 engendered?
We have. There was first a lot of disbelief among suppliers that we were really serious about this business. In West Bengal we conceived of a situation where they would be a campus-with ourselves and our vendors on the same campus. The acceptance of this and the investment in this was minimal at first. But now we can't provide enough space in our campus. Suddenly vendors are seeing large volumes, the ability to amortize investments they would have to make that they were not willing to do, and they've ceded their place to other vendors who were willing to do it. Now some of the majors want to come back in and play a role. In fairness, somebody else did take the risk, did place their faith in us, and they're there.
URL: http://www.newsweek.com/id/91447
By Jason Overdorf
Newsweek Web Exclusive
Updated: 1:03 PM ET Jan 11, 2008
Four years ago Tata Motors embarked on an ambitious project to bring millions of people in India and elsewhere into the car-owning class. Today Chairman Ratan Tata unveiled the result: the Nano, a stripped down car with a 624 cc four-stroke engine that can seat four passengers. The car is a feat of engineering-it's made from plastic parts held together with adhesives-and meets all India's environment standards. Partly because of the visibility of the project, the Nano has become a lightening rod for criticism on the environmental impact of cars. Tata talked with NEWSWEEK's Jason Overdorf at the Delhi Auto Expo on the eve of the announcement. Excerpts:
NEWSWEEK: Some people have said this car is going to be a disaster for the environment. What impact will the introduction of these vehicles have on pollution levels in India?
Ratan Tata: Our car will meet all emissions requirements in India and in fact the emissions requirements overseas, present and future. Our engine today will meet Euro 3 [emissions standards] today and with small tweaking will meet Euro 4. It will therefore meet all the specifications of emissions that exist in India. We will emit less pollutants than the best two-wheelers in the country. I don't mean per passenger mile or anything. I mean per vehicle. So I am both amused and intrigued by why we are being panned as an environmental disaster before anyone even knows. And in fact the major NGO that's making much of the noise [the Center for Science and the Environment] already knows because I responded to them in great detail with what our numbers were. That appears to have been ignored.
One other point you made is that the sales numbers are not going to be so huge initially, right?
We're building a plant for 250,000 [cars]. It will be expandable to 300,000, and if you mirrored it that would be 500 or 600,000. It would be a challenge to get vendors and a whole infrastructure in place that would enable us to just endlessly build cars, apart from the resources that would be required. So if somebody thinks that we will be putting 2 million cars or 4 million cars into the market, I think that's a bit absurd. Today, with 4, 2 and 3-wheelers, every year [India adds] about 7 million [vehicles] in the market. [India] produced 1.4 million passenger cars last year, so it's kind of flat. What would this car do? Would it sit on top of that by adding 2 and 3 and 4 million? Would it wipe out everybody else? Would we produce and sell 7 million cars? No. It's reasonable to assume that we might be looking at in the next four to five years, maybe a half a million cars, which would be a very good number. No single platform would have that kind of number. What would half a million cars be as a part of an annual production that at that time, with 2-wheelers, 3-wheelers and 4-wheelers, might be 12 to 15 million vehicles? I don't see what the concern is, unless people are seeing ghosts.
I just want to raise one other thing. The noise is being raised by people who are doing nothing about pollution in a holistic manner. Nobody is doing anything about the total population and pollution from two-wheelers, from power stations, from generators. All of this has to be viewed together if one is truly worried about the environment. There are two scooter plants being established today-Honda and Suzuki-each one has about 250,000 unit capacity when they come online. They're not said to be polluting, they're not said to be congesting, they're not said to be unsafe. It's only us.
The other big question for everyone is how you brought down costs so dramatically. Is there a shortlist of two or three big innovations you made to cut costs?
When you start an exercise like this you dimension your product, and we dimensioned the size of our product. When you shrink the size of the product you obviously reduce the amount of material and material is the largest single element in [the cost of] a product. Then there are hundreds of innovative ideas that have brought the price down, or have in fact generated the kind of low costs that we have developed. And there are more on the anvil that will come from vendors, and not all of them will be based on volume.
Are there any that have the potential to change the way the traditional big guns in the auto industry are making cars?
The whole process of putting a car together perhaps needs to change by welding going to adhesives at some point in time. [Among] the most expensive parts of an assembly process are the paint shop and the press shop, so [global manufacturers will move to] materials that will lower the [capital investment] and operating costs [for] those types of units.
India has been talked about as becoming a small car manufacturing hub. What impact will the Nano have on that future?
It will only enhance it. It won't hurt it in any way. Finally, the people are going to decide if this car is going to do what everybody fears it will do or not. Not us. We have as a company put together a concept and converted it to reality, and we believe it is a very interesting value proposition but finally the market will need to decide. Who enters and who competes and what that product is going to do to us is a function of who addresses what the customer wants.
Renault-Nissan has already announced they are going to get into this game. Do you anticipate that this will be an active space that a lot of companies want to get into?
It will be. There's been self-denial that this space is a real space until we addressed it. We will have several people following us, including big companies, and we will need to raise the issue of why those big companies did not address those areas earlier. But possibly the first national car company to address it will be a Chinese company. The day they consider this to be an important segment of the market we will see a Chinese company come closest to us or even break our barrier.
Your coming into this market is somewhat similar to the entrance of Suzuki in the 1980s, in that it has the potential to create huge volumes. In working with suppliers, have you seen inklings of the kind of sea change that the launch of the Maruti 800 engendered?
We have. There was first a lot of disbelief among suppliers that we were really serious about this business. In West Bengal we conceived of a situation where they would be a campus-with ourselves and our vendors on the same campus. The acceptance of this and the investment in this was minimal at first. But now we can't provide enough space in our campus. Suddenly vendors are seeing large volumes, the ability to amortize investments they would have to make that they were not willing to do, and they've ceded their place to other vendors who were willing to do it. Now some of the majors want to come back in and play a role. In fairness, somebody else did take the risk, did place their faith in us, and they're there.
URL: http://www.newsweek.com/id/91447
Tuesday, January 08, 2008
the world's cheapest wheels
When Tata Motors set out to build a $2,500 car, people said it couldn't be done. This week the company will unveil its vehicle of the future.
By Jason Overdorf
Newsweek (January 14, 2008)
Tata Motors is best known as a maker of industrial trucks from India's rust belt that launched the country's first completely indigenous passenger car, the Indica, 10 years ago. Next week the company will unveil another revolutionary new vehicle that will throw down the gauntlet in the highly competitive race to capture the first-time-buyer segment of the world's automobile market. Tata's not-so-secret weapon: the car is cheap. Unbelievably cheap.
Back in 2003, when chairman Ratan Tata revealed his plans to build a car that would cost less than 100,000 rupees (about $2,500 in today's dollars), rival carmakers said it couldn't be done. As time passed, and Tata kept at it, they hedged. Maybe it will be more like an enclosed motorcycle, they said. As tantalizing details about the car's design leaked, they started to get worried. Finally, in April, Renault-Nissan's Carlos Ghosn announced his own plans to build a $3,000 car in partnership with Indian motorcycle maker Bajaj Auto.
The move signaled that the race to create the world's best-selling starter car was on. The stakes are incredibly high, which is why the international auto industry is descending in unprecedented numbers on the New Delhi Auto Expo, where Tata will reveal the design for its People's Car for the first time on Jan. 10. The vehicle could have almost as large an impact in India as the original Volkswagen had in Germany back in 1938—perhaps doubling the size of India's passenger-car market overnight, and delivering a much-needed boost to the manufacturing sector in a country that has long suffered from so-called jobless growth. By encouraging parts suppliers to develop innovative ways to slash costs, it could also help build a highly efficient supply chain for the Indian automotive industry.
But the tremors won't be felt only in India. Small cars like VW's Gol, Nissan's Tsuru and Renault's Clio are already the top sellers in Latin America and Europe, and PricewaterhouseCoopers estimates that about half the growth in automobile sales between 2006 and 2011 will come from Brazil, Russia, India and China, countries that are expected to buy mainly small, cheap vehicles. Even in gas-guzzling America, where the cheapest car is today the $10,000 Chevy Aveo, buyers are warming up to subcompacts. As a result, virtually all of the world's major automakers are striving to develop cheap, fuel-efficient small cars that can first be sold in emerging markets, then exported to the West.
Until the past year, these cars were meant to be sub-$10,000 vehicles like the Renault Logan. Now, with Tata setting the limbo stick much lower, the price target has been slashed to below $5,000. Add to that Tata's pole position in the bidding to buy the premium Jaguar and Rover brands from Ford Motor Co., and it truly looks like the Indian carmaker has arrived.
If successful, the People's Car could help shift the growth dynamic of the entire Indian economy, which has until recently been based more on service than manufacturing expertise. When Suzuki first brought the Maruti 800 (currently the world's cheapest car at about $5,000) to India in 1983, it completely transformed the domestic component business, laying the foundation for India's current emergence as an auto-parts hub. Suzuki's Indian factories have always built for the domestic market, but recently it announced it will sell an Indian-made hatchback in Europe next year. Others have also set up production in India, attracted by its large domestic market and growing components expertise. Hyundai has been the most aggressive in its efforts to make India a manufacturing hub. It exported more than 100,000 cars built here to Europe, South Africa and Latin America last year, and it chose India as the site for the global launch of its new compact model, the i10. But even Ford and General Motors, slower to see India's potential, have ramped up their efforts.
Analysts are even more bullish on Tata's plans. "There's no doubt this car is going to create a new [automotive] segment altogether," says Abdul Majeed, a partner in the automotive practice of PricewaterhouseCoopers. "If you look at the Indian automotive market, the bulk of it—over 70 percent—is two-wheelers. But the price gap between two-wheelers and four-wheelers has been very significant." The price tag for the People's Car is a bit more than double the cost of a midrange motorcycle, like Hero Honda's 100cc Splendor. Majeed forecasts that Tata's new car could encourage 10 to 20 percent of India's scooter and motorcycle buyers to purchase a car instead. If that happens, it would mean an additional 1.8 million vehicles sold per year—almost equal to the current size of the entire Indian passenger-car market.
Most analysts are waiting for a view of the car before pegging sales estimates—a task made difficult because Ratan Tata has played his cards very close to the vest in the three-year lead-up to the launch of the People's Car, revealing almost nothing about the design and features of the vehicle, or how the company managed to slash costs—both of which will define how the car affects the global industry. Prototypes have been as jealously guarded. Virtually all that is known for sure about the car so far—courtesy of a scripted "leak" by one of the company directors after Nobel Prize-winning climatologist R. K. Pachauri suggested the People's Car could be an environmentalist's nightmare if it vastly increases numbers on the road—is that it gets 25 kilometers per liter (59 miles per gallon) of gasoline, meets European emissions standards and matches the Maruti 800 in acceleration. It was also revealed that the car uses more plastic and fewer bolts than conventional designs, lending credence to rumors that Tata engineers visited Lotus in Malaysia to study adhesive bonding as an alternative to welding.
But its other cost-saving measures could have the biggest impact. Promising huge sales volumes, Tata has worked closely with components suppliers to bring the price of each part into a predetermined target range. The efforts are reminiscent of the techniques Tata used a few years back to bring down the price of the Ace, India's first mini-pickup truck, to about $6,000—close to the cost of the three-wheeled vehicles generally used for small jobs. In a considerable feat of engineering, the company came up with a design that allowed it to cut two engines for the Ace from the same block it used for the Indica. Not only did that allow the company to avoid building a new assembly facility, it also allowed it to capitalize on further economies of scale. If the People's Car shows more of the same, Tata—and India—may well win the race to miniaturize the automobile.
URL: http://www.newsweek.com/id/84503
By Jason Overdorf
Newsweek (January 14, 2008)
Tata Motors is best known as a maker of industrial trucks from India's rust belt that launched the country's first completely indigenous passenger car, the Indica, 10 years ago. Next week the company will unveil another revolutionary new vehicle that will throw down the gauntlet in the highly competitive race to capture the first-time-buyer segment of the world's automobile market. Tata's not-so-secret weapon: the car is cheap. Unbelievably cheap.
Back in 2003, when chairman Ratan Tata revealed his plans to build a car that would cost less than 100,000 rupees (about $2,500 in today's dollars), rival carmakers said it couldn't be done. As time passed, and Tata kept at it, they hedged. Maybe it will be more like an enclosed motorcycle, they said. As tantalizing details about the car's design leaked, they started to get worried. Finally, in April, Renault-Nissan's Carlos Ghosn announced his own plans to build a $3,000 car in partnership with Indian motorcycle maker Bajaj Auto.
The move signaled that the race to create the world's best-selling starter car was on. The stakes are incredibly high, which is why the international auto industry is descending in unprecedented numbers on the New Delhi Auto Expo, where Tata will reveal the design for its People's Car for the first time on Jan. 10. The vehicle could have almost as large an impact in India as the original Volkswagen had in Germany back in 1938—perhaps doubling the size of India's passenger-car market overnight, and delivering a much-needed boost to the manufacturing sector in a country that has long suffered from so-called jobless growth. By encouraging parts suppliers to develop innovative ways to slash costs, it could also help build a highly efficient supply chain for the Indian automotive industry.
But the tremors won't be felt only in India. Small cars like VW's Gol, Nissan's Tsuru and Renault's Clio are already the top sellers in Latin America and Europe, and PricewaterhouseCoopers estimates that about half the growth in automobile sales between 2006 and 2011 will come from Brazil, Russia, India and China, countries that are expected to buy mainly small, cheap vehicles. Even in gas-guzzling America, where the cheapest car is today the $10,000 Chevy Aveo, buyers are warming up to subcompacts. As a result, virtually all of the world's major automakers are striving to develop cheap, fuel-efficient small cars that can first be sold in emerging markets, then exported to the West.
Until the past year, these cars were meant to be sub-$10,000 vehicles like the Renault Logan. Now, with Tata setting the limbo stick much lower, the price target has been slashed to below $5,000. Add to that Tata's pole position in the bidding to buy the premium Jaguar and Rover brands from Ford Motor Co., and it truly looks like the Indian carmaker has arrived.
If successful, the People's Car could help shift the growth dynamic of the entire Indian economy, which has until recently been based more on service than manufacturing expertise. When Suzuki first brought the Maruti 800 (currently the world's cheapest car at about $5,000) to India in 1983, it completely transformed the domestic component business, laying the foundation for India's current emergence as an auto-parts hub. Suzuki's Indian factories have always built for the domestic market, but recently it announced it will sell an Indian-made hatchback in Europe next year. Others have also set up production in India, attracted by its large domestic market and growing components expertise. Hyundai has been the most aggressive in its efforts to make India a manufacturing hub. It exported more than 100,000 cars built here to Europe, South Africa and Latin America last year, and it chose India as the site for the global launch of its new compact model, the i10. But even Ford and General Motors, slower to see India's potential, have ramped up their efforts.
Analysts are even more bullish on Tata's plans. "There's no doubt this car is going to create a new [automotive] segment altogether," says Abdul Majeed, a partner in the automotive practice of PricewaterhouseCoopers. "If you look at the Indian automotive market, the bulk of it—over 70 percent—is two-wheelers. But the price gap between two-wheelers and four-wheelers has been very significant." The price tag for the People's Car is a bit more than double the cost of a midrange motorcycle, like Hero Honda's 100cc Splendor. Majeed forecasts that Tata's new car could encourage 10 to 20 percent of India's scooter and motorcycle buyers to purchase a car instead. If that happens, it would mean an additional 1.8 million vehicles sold per year—almost equal to the current size of the entire Indian passenger-car market.
Most analysts are waiting for a view of the car before pegging sales estimates—a task made difficult because Ratan Tata has played his cards very close to the vest in the three-year lead-up to the launch of the People's Car, revealing almost nothing about the design and features of the vehicle, or how the company managed to slash costs—both of which will define how the car affects the global industry. Prototypes have been as jealously guarded. Virtually all that is known for sure about the car so far—courtesy of a scripted "leak" by one of the company directors after Nobel Prize-winning climatologist R. K. Pachauri suggested the People's Car could be an environmentalist's nightmare if it vastly increases numbers on the road—is that it gets 25 kilometers per liter (59 miles per gallon) of gasoline, meets European emissions standards and matches the Maruti 800 in acceleration. It was also revealed that the car uses more plastic and fewer bolts than conventional designs, lending credence to rumors that Tata engineers visited Lotus in Malaysia to study adhesive bonding as an alternative to welding.
But its other cost-saving measures could have the biggest impact. Promising huge sales volumes, Tata has worked closely with components suppliers to bring the price of each part into a predetermined target range. The efforts are reminiscent of the techniques Tata used a few years back to bring down the price of the Ace, India's first mini-pickup truck, to about $6,000—close to the cost of the three-wheeled vehicles generally used for small jobs. In a considerable feat of engineering, the company came up with a design that allowed it to cut two engines for the Ace from the same block it used for the Indica. Not only did that allow the company to avoid building a new assembly facility, it also allowed it to capitalize on further economies of scale. If the People's Car shows more of the same, Tata—and India—may well win the race to miniaturize the automobile.
URL: http://www.newsweek.com/id/84503
Thursday, January 03, 2008
objective observations of a ludicrous freak
Often, it all ends up as a strange, involuntary, one-man circus act by a bald, white man
By Jason Overdorf
Outlook India (Jan. 14, 2008)
There is no one moment that has defined my experience in India, no epiphany when it was all made clear. Rather, my time here has been a confusing blur. A synaptic overload. In the course of my job (I’m a journalist), I travel to strange places and try to catch the essence of what is going on. I try to record a mental image of the scene—what the principals are wearing, what the hawkers are selling (and for how much), the particular sort of stink (nullah? body odour? diesel?)—and at the same time to get "the story". I’m not sure I ever succeed.
When I show up, everybody surrounds me to scrutinise my every word and gesture. Somewhere I have run across the idea that the presence of the observer has a subtle, often unreported influence on the phenomenon he’s meant to be observing. My experience is nothing like that. It’s more like the phenomenon I’m meant to be observing comes to a complete halt and normal life is replaced by a strange, involuntary, one-man circus performance by a bald white man. If I were to be truthful, I’d headline all my stories the same way: Objective observations made by a ludicrous freak, while ignoring the woman staring into his ear and trying to take notes with a serious and dignified air.
You think I’m exaggerating. But that is because Indians are capable of doing many things at once. You can conduct a heated argument while brushing off a beggar tugging at your sleeve, accepting a cup of tea from a servant and ignoring a religious figure of some sort who is chanting, setting something on fire, or just making some kind of piercing noise over a loudspeaker. You don’t even think about it. For you this is normal.
I’ll give you an example. Before the last national election, I took a taxi to Gorakhpur to write about Sonia Gandhi’s "road show". I’d managed to track down Salman Khursheed, then president of the UP Congress, and wangled my way into his fancy jeep (a Scorpio or Sumo or something) for the ride out to the villages where Sonia was supposed to whip up enthusiasm for her campaign. It was the only time I was going to have for an interview, and it wasn’t likely I’d get any time with Sonia herself.The convoy took off as though somebody had waved a green flag, all the drivers jockeying for a position close to Sonia’s car, bumping quarterpanels like some kind of khadi-clad nascar final. Every so often, a policewallah would come alongside in an open jeep, lean out like a polo player, and clout one of the Scorpios or Sumos or Qualises with his lathi to force it back in line. All the while, I’m firing interview questions at Khursheed and the other UP Congress bigwigs, with my eyes riveted to the road ahead so I won’t miss my last moment on earth. If I hadn’t had a tape recorder, the only thing I’d have gotten out of the whole experience would have been the thwack of a lathi on the roof and, when the driver made a move to off-road it through a deep ravine to inch closer to Sonia’s car, the sudden interruption of Khursheed’s erudite explanation of the caste equation in UP so that he could exclaim: "Mat karo! Mat karo!" Later, I listened to the tape. Sure enough, Khursheed had given me articulate, even eloquent, answers.
Another time, near Vidarbha in Maharashtra, I went to visit the families of some farmers who’d committed suicide. In one house, I remember, the man had killed himself only the day before, and his wife, probably in shock, lay without speaking in a bed in a darkened room in the back. There I was being shepherded around by an activist for the farmers who was really just a politician by another name. My usual circus-act arrival had attracted a lot of attention when we rolled in, and now we had an entourage of a dozen or so villagers who all wanted to go on record with the story of the tragedy.We trooped into the widow’s house, all the way to her bedside. It was a horrible invasion. But she didn’t react. If she had, she wouldn’t have been able to get a word in edgewise, there were so many people competing to tell me how bad things had become, watching my reactions, cataloguing the expressions of sympathy and concern I was able to muster. I was trying to look at the widow so that I could describe her in her anguish—steeling myself for a part of the job I’m not sure that I believe in—and everybody else was rubbernecking at me.
Sometimes, too, it’s the great Indian instinct for hospitality that throws my observations off kilter. I’ll be sent to a Dalit village someplace, or to the home of a notorious goonda, or to an encampment of bonded labourers, and everything will come to a stop as first a plastic chair is unearthed for me to sit on, then discarded in favour of a charpoy. Then tea appears. A conference develops: perhaps the foreigner won’t drink tea, foreigners get the loosies from all manner of things, and so on. The tea disappears and is replaced with Pepsi. Everyone talks at once. The translator summarises five minutes of narrative with a single sentence. I stupidly write down "woman in blue sari" and "boy in Nike T-shirt". I should be cutting my subjects, who earn all of 50 rupees a day if they are lucky, in on the proceeds from my article—which will affect a tone of outrage and perhaps occasion a coffee-table discussion or two. But instead they’re buying me Pepsi.
Those are, I suppose, after all, my defining experiences of India. It’s too immediate for definition. There are too many interpreters. Too many guides for me to look and listen properly. So I don’t experience India at all. I just try my best to stop it from experiencing me.
Jason Overdorf is a Delhi-based American freelance journalist and a frequent contributor to Newsweek
By Jason Overdorf
Outlook India (Jan. 14, 2008)
There is no one moment that has defined my experience in India, no epiphany when it was all made clear. Rather, my time here has been a confusing blur. A synaptic overload. In the course of my job (I’m a journalist), I travel to strange places and try to catch the essence of what is going on. I try to record a mental image of the scene—what the principals are wearing, what the hawkers are selling (and for how much), the particular sort of stink (nullah? body odour? diesel?)—and at the same time to get "the story". I’m not sure I ever succeed.
When I show up, everybody surrounds me to scrutinise my every word and gesture. Somewhere I have run across the idea that the presence of the observer has a subtle, often unreported influence on the phenomenon he’s meant to be observing. My experience is nothing like that. It’s more like the phenomenon I’m meant to be observing comes to a complete halt and normal life is replaced by a strange, involuntary, one-man circus performance by a bald white man. If I were to be truthful, I’d headline all my stories the same way: Objective observations made by a ludicrous freak, while ignoring the woman staring into his ear and trying to take notes with a serious and dignified air.
You think I’m exaggerating. But that is because Indians are capable of doing many things at once. You can conduct a heated argument while brushing off a beggar tugging at your sleeve, accepting a cup of tea from a servant and ignoring a religious figure of some sort who is chanting, setting something on fire, or just making some kind of piercing noise over a loudspeaker. You don’t even think about it. For you this is normal.
I’ll give you an example. Before the last national election, I took a taxi to Gorakhpur to write about Sonia Gandhi’s "road show". I’d managed to track down Salman Khursheed, then president of the UP Congress, and wangled my way into his fancy jeep (a Scorpio or Sumo or something) for the ride out to the villages where Sonia was supposed to whip up enthusiasm for her campaign. It was the only time I was going to have for an interview, and it wasn’t likely I’d get any time with Sonia herself.The convoy took off as though somebody had waved a green flag, all the drivers jockeying for a position close to Sonia’s car, bumping quarterpanels like some kind of khadi-clad nascar final. Every so often, a policewallah would come alongside in an open jeep, lean out like a polo player, and clout one of the Scorpios or Sumos or Qualises with his lathi to force it back in line. All the while, I’m firing interview questions at Khursheed and the other UP Congress bigwigs, with my eyes riveted to the road ahead so I won’t miss my last moment on earth. If I hadn’t had a tape recorder, the only thing I’d have gotten out of the whole experience would have been the thwack of a lathi on the roof and, when the driver made a move to off-road it through a deep ravine to inch closer to Sonia’s car, the sudden interruption of Khursheed’s erudite explanation of the caste equation in UP so that he could exclaim: "Mat karo! Mat karo!" Later, I listened to the tape. Sure enough, Khursheed had given me articulate, even eloquent, answers.
Another time, near Vidarbha in Maharashtra, I went to visit the families of some farmers who’d committed suicide. In one house, I remember, the man had killed himself only the day before, and his wife, probably in shock, lay without speaking in a bed in a darkened room in the back. There I was being shepherded around by an activist for the farmers who was really just a politician by another name. My usual circus-act arrival had attracted a lot of attention when we rolled in, and now we had an entourage of a dozen or so villagers who all wanted to go on record with the story of the tragedy.We trooped into the widow’s house, all the way to her bedside. It was a horrible invasion. But she didn’t react. If she had, she wouldn’t have been able to get a word in edgewise, there were so many people competing to tell me how bad things had become, watching my reactions, cataloguing the expressions of sympathy and concern I was able to muster. I was trying to look at the widow so that I could describe her in her anguish—steeling myself for a part of the job I’m not sure that I believe in—and everybody else was rubbernecking at me.
Sometimes, too, it’s the great Indian instinct for hospitality that throws my observations off kilter. I’ll be sent to a Dalit village someplace, or to the home of a notorious goonda, or to an encampment of bonded labourers, and everything will come to a stop as first a plastic chair is unearthed for me to sit on, then discarded in favour of a charpoy. Then tea appears. A conference develops: perhaps the foreigner won’t drink tea, foreigners get the loosies from all manner of things, and so on. The tea disappears and is replaced with Pepsi. Everyone talks at once. The translator summarises five minutes of narrative with a single sentence. I stupidly write down "woman in blue sari" and "boy in Nike T-shirt". I should be cutting my subjects, who earn all of 50 rupees a day if they are lucky, in on the proceeds from my article—which will affect a tone of outrage and perhaps occasion a coffee-table discussion or two. But instead they’re buying me Pepsi.
Those are, I suppose, after all, my defining experiences of India. It’s too immediate for definition. There are too many interpreters. Too many guides for me to look and listen properly. So I don’t experience India at all. I just try my best to stop it from experiencing me.
Jason Overdorf is a Delhi-based American freelance journalist and a frequent contributor to Newsweek
Tuesday, December 25, 2007
fifteen killed as bridge collapses after hindu festival
By Jason Overdorf in Delhi
Published: 26 December 2007
At least fifteen people were killed and hundreds missing feared dead last night after the collapse of a suspension bridge over a river in a remote part of rural Nepal, a local official said.
The bridge across the Bheri River, near Chunchu village in western Nepal, collapsed when 300-400 local people crowded on to it on their way to a Hindu religious festival. As many as half of them swam to safety, but many others were swept downstream and are feared to have drowned. Last night police officers at the scene predicted the death toll would rise.
"It was not an old bridge, but there were too many people on it," said Yam Prasad Suvedi, the district administrative officer of Surkhet District, the area where the accident occurred. The steel suspension bridge was about 350 metres long, Mr Suvedi said.
The Bheri River is said to have strong currents and be difficult to swim in, although the winter flow is said to be slower than at other times of the year. Some people were seen scrambling to safety.
In the immediate aftermath of the incident, local agencies deployed a helicopter ambulance. After dark, the rescue efforts continued with boats. One local report estimated that rescuers helped about 40 people swim to safety and about 150 others managed to reach shore on their own.
The Nepalese Army, Armed Police Force, Nepal Police and Nepal Red Cross Society were mobilised along with several helicopters to search for survivors. The remote location of the bridge, however, about 240 miles from the capital, Kathmandu, delayed some of the relief efforts.
The timing of the incident, which occurred during the Bheri's low winter ebb, may have mitigated the effects of the disaster by allowing some of the victims to swim to safety.
The incident took place at around 1.30pm, as the victims made their way to a temple to celebrate the occasion of Dhanya Poornima, a full moon festival.
Last night hopes that a significant number of the missing would be rescued were fading. Anil Pandey, chief district officer in the area, said: "There were possibly 500 people on the bridge when it collapsed because of the weight. Some of them managed to climb to safety, some fell on the banks, but the ones who plunged into the river are the ones still missing."
Police and troops had been called in to help the rescue effort. Mr Pandey told the AFP news agency: "The rescue work has been halted for today as darkness has gripped the area. Police and army have set up temporary camps to begin rescue works from early Wednesday morning. "The remoteness of the area and poor communication facilities has delayed rescue efforts," Mr Pandey added.
According to some local reports, the majority of those missing are women and children. Deputy Inspector General at the regional Armed Police Force Office, Krishna Bahadur Bista, said that most people crossing the bridge had been women and girls.
Published: 26 December 2007
At least fifteen people were killed and hundreds missing feared dead last night after the collapse of a suspension bridge over a river in a remote part of rural Nepal, a local official said.
The bridge across the Bheri River, near Chunchu village in western Nepal, collapsed when 300-400 local people crowded on to it on their way to a Hindu religious festival. As many as half of them swam to safety, but many others were swept downstream and are feared to have drowned. Last night police officers at the scene predicted the death toll would rise.
"It was not an old bridge, but there were too many people on it," said Yam Prasad Suvedi, the district administrative officer of Surkhet District, the area where the accident occurred. The steel suspension bridge was about 350 metres long, Mr Suvedi said.
The Bheri River is said to have strong currents and be difficult to swim in, although the winter flow is said to be slower than at other times of the year. Some people were seen scrambling to safety.
In the immediate aftermath of the incident, local agencies deployed a helicopter ambulance. After dark, the rescue efforts continued with boats. One local report estimated that rescuers helped about 40 people swim to safety and about 150 others managed to reach shore on their own.
The Nepalese Army, Armed Police Force, Nepal Police and Nepal Red Cross Society were mobilised along with several helicopters to search for survivors. The remote location of the bridge, however, about 240 miles from the capital, Kathmandu, delayed some of the relief efforts.
The timing of the incident, which occurred during the Bheri's low winter ebb, may have mitigated the effects of the disaster by allowing some of the victims to swim to safety.
The incident took place at around 1.30pm, as the victims made their way to a temple to celebrate the occasion of Dhanya Poornima, a full moon festival.
Last night hopes that a significant number of the missing would be rescued were fading. Anil Pandey, chief district officer in the area, said: "There were possibly 500 people on the bridge when it collapsed because of the weight. Some of them managed to climb to safety, some fell on the banks, but the ones who plunged into the river are the ones still missing."
Police and troops had been called in to help the rescue effort. Mr Pandey told the AFP news agency: "The rescue work has been halted for today as darkness has gripped the area. Police and army have set up temporary camps to begin rescue works from early Wednesday morning. "The remoteness of the area and poor communication facilities has delayed rescue efforts," Mr Pandey added.
According to some local reports, the majority of those missing are women and children. Deputy Inspector General at the regional Armed Police Force Office, Krishna Bahadur Bista, said that most people crossing the bridge had been women and girls.
Tuesday, December 18, 2007
cashless in the hinterlands
Mobile banking might save the government and banks money and reduce fraud that plagues the public-distribution system.
By Jason Overdorf
Newsweek (Dec. 17, 2007)
Mobile phones are making life better for people in remote, underserved areas of India. They no longer have to walk kilometers to public call offices to use a telephone—an essential tool for buying and selling goods based on the latest market data, getting credit from lenders and other commonplace activities. So far, most of the benefits have come from one of the phone's simplest features: voice calls.
With more than 250 million mobile users and 6 million new ones added each month, India now has the "teledensity" to support more-sophisticated mobile technologies, which could have a big impact on Indian society and the economy in the next few years. (An extra 10 mobile phones per 100 people in a typical developing country leads to an additional 0.59 percentage points of growth in GDP per person, according to a London Business School study.) These include "voice broadcast" services that would let a truck owner inform residents of a village about a scheduled trip to the city, or doctors announce the availability of polio vaccinations. A more complex system would allow a small business, say, to keep track of shipments. What's holding up these services is the lack of mobile banking.
With urban markets nearing saturation, global giants like Nokia are now looking to appeal to the hinterlands. Reliance Communications, which has offered Internet service over its mobile phones since 2002, is sponsoring a contest this year for developers to invent new rural services. "We want to really take advantage of our mobile platform, our data network, and our ability to provide the mobile Internet experience to bridge the digital divide," says Mahesh Prasad, president of applications and development.
Several small companies are at work on mobile banking for small businesses. New Delhi-based ekgaon technologies has developed a system for tracking transactions made by so-called Self Help Groups, which pool members' money and offer small loans to poor people. The system uses a camera-equipped mobile phone to scan forms and a voice-recognition system. A.Little.World, a mobile software business in Mumbai, has developed a microfinance and payment system that lets customers perform banking transactions through a local agent affiliated with a bank (a practice allowed for the first time in January 2006). Customers get a secure electronic identity via phone or smart card; agents take deposits and dispense cash. Biometric data, such as fingerprints, make the phones and smart cards more secure than paper-based banking. A.Little.World has extended such services to about 400 local businesses acting as agents. And it's now working on a national rollout with the State Bank of India—the biggest player in the rural market. Meanwhile, ekgaon, whose partners include CARE, WorldVision and the World Bank, has a pilot transaction-management system for 10,000 Self Help Groups, with plans to extend it to 14 Indian states.
Mobile banking services can reduce the cost of transactions for loans and other services—the main obstacle to providing banking for the poor—by as much as three quarters, according to ekgaon's chief operating officer Rohit Magotra. Mobile transactions could have an even broader effect applied to India's social-security payments and public-distribution system, which sells essential goods to the poor at subsidized rates. By March 2008, people in 8,000 villages in Andhra Pradesh will get their benefits zapped via mobile phone to their smart cards, which they may eventually use instead of cash to buy goods at the ration shop. A.Little.World, which is building the system, says a nationwide service could help reduce fraud in the public-distribution system. It would also mean going from a bankless world to a cashless one, maybe even faster than America or Europe.
URL: http://www.newsweek.com/id/74440
By Jason Overdorf
Newsweek (Dec. 17, 2007)
Mobile phones are making life better for people in remote, underserved areas of India. They no longer have to walk kilometers to public call offices to use a telephone—an essential tool for buying and selling goods based on the latest market data, getting credit from lenders and other commonplace activities. So far, most of the benefits have come from one of the phone's simplest features: voice calls.
With more than 250 million mobile users and 6 million new ones added each month, India now has the "teledensity" to support more-sophisticated mobile technologies, which could have a big impact on Indian society and the economy in the next few years. (An extra 10 mobile phones per 100 people in a typical developing country leads to an additional 0.59 percentage points of growth in GDP per person, according to a London Business School study.) These include "voice broadcast" services that would let a truck owner inform residents of a village about a scheduled trip to the city, or doctors announce the availability of polio vaccinations. A more complex system would allow a small business, say, to keep track of shipments. What's holding up these services is the lack of mobile banking.
With urban markets nearing saturation, global giants like Nokia are now looking to appeal to the hinterlands. Reliance Communications, which has offered Internet service over its mobile phones since 2002, is sponsoring a contest this year for developers to invent new rural services. "We want to really take advantage of our mobile platform, our data network, and our ability to provide the mobile Internet experience to bridge the digital divide," says Mahesh Prasad, president of applications and development.
Several small companies are at work on mobile banking for small businesses. New Delhi-based ekgaon technologies has developed a system for tracking transactions made by so-called Self Help Groups, which pool members' money and offer small loans to poor people. The system uses a camera-equipped mobile phone to scan forms and a voice-recognition system. A.Little.World, a mobile software business in Mumbai, has developed a microfinance and payment system that lets customers perform banking transactions through a local agent affiliated with a bank (a practice allowed for the first time in January 2006). Customers get a secure electronic identity via phone or smart card; agents take deposits and dispense cash. Biometric data, such as fingerprints, make the phones and smart cards more secure than paper-based banking. A.Little.World has extended such services to about 400 local businesses acting as agents. And it's now working on a national rollout with the State Bank of India—the biggest player in the rural market. Meanwhile, ekgaon, whose partners include CARE, WorldVision and the World Bank, has a pilot transaction-management system for 10,000 Self Help Groups, with plans to extend it to 14 Indian states.
Mobile banking services can reduce the cost of transactions for loans and other services—the main obstacle to providing banking for the poor—by as much as three quarters, according to ekgaon's chief operating officer Rohit Magotra. Mobile transactions could have an even broader effect applied to India's social-security payments and public-distribution system, which sells essential goods to the poor at subsidized rates. By March 2008, people in 8,000 villages in Andhra Pradesh will get their benefits zapped via mobile phone to their smart cards, which they may eventually use instead of cash to buy goods at the ration shop. A.Little.World, which is building the system, says a nationwide service could help reduce fraud in the public-distribution system. It would also mean going from a bankless world to a cashless one, maybe even faster than America or Europe.
URL: http://www.newsweek.com/id/74440
Wednesday, November 28, 2007
clear skies ahead?
India's economy reaches the "takeoff" point. But will tumultuous politics put it in a holding pattern?
By Jason Overdorf/New Delhi
(Newsweek Web Extra - November 24, 2007)
India's politics may be in turmoil, but so far the chaos hasn't put a crimp in the country's economy. Last quarter, GDP grew by more than 9 percent, a huge improvement over the 3.5 percent the country averaged in its first 30 years.
The explanation for the disconnect, according to a recent report by Lehman Brothers, is that India's economy has reached what experts call a "takeoff" point where the "old blocks and resistances to steady growth [have been] finally overcome." The report predicts that India's economic momentum has become virtually unstoppable, thanks to two main factors: an average 6.9 growth rate in per capita GDP since 2003, and a trade-to-GDP ratio that has doubled over the past seven years.
The surge in per capita GDP to about $800—from less than $350 in 1995—has more than doubled the size of India's middle class to about 50 million, increasing demand for consumer goods and stimulating manufacturing. The increase in the trade-to-GDP ratio shows that India's economy has finally opened up to the world as dramatically as China's and South Korea's did before it. Meanwhile, a boom has boosted India's investment-to-GDP ratio into the 30 to 40 percent range, from about 15 percent in the early 1990s—hitting the level many analysts believe was essential to the rapid growth experienced in other parts of Asia. And the trends, according to Lehman Brothers, suggest that India is just getting started. If it continues to make economic reforms, such as simplifying taxes, loosening labor laws and changing the pension system to help build a healthy corporate bond market, the economy could soon hit China's mythic 10 percent annual growth rate.
But that's a big if. Prime Minister Manmohan Singh's reforms—most of which he made as finance minister between 1991 and 1996 (one reason he doesn't get credit for them now)—succeeded so well that they eliminated any sense of urgency. In this sense, the prime minister may be a victim of his own achievements. The problem, says Subir Gokarn, chief economist at Crisil, a credit-rating agency, is that "when the economy is doing so well, you cannot create a constituency for reform." The ability to make big changes, he explains, is "independent of the individual, independent of the party, independent of the system. When there's a widespread perception of crisis, then reform happens. When there isn't, it doesn't." In 1991, such a crisis atmosphere came from an exchange-rate drop that nearly depleted India's foreign-exchange reserves. But the country has faced no similar threat since 2004.
Thus reform has slowed dramatically. Singh's government has failed to take steps like relaxing India's stringent labor laws and selling off state-owned industries. That said, it has managed to make some important improvements in recent years—despite fractures within the governing coalition and the lack of an outside prod. For instance, after becoming prime minister in 2004, Singh, despite local opposition, began measures to allow foreign direct investment in the retail sector and to facilitate the creation of large domestic retail chains. He also moved to encourage public-private partnerships in infrastructure projects—potentially bringing more money and better management to one of India's biggest laggards. And he unleashed what could be the biggest stimulus for India's manufacturing sector since 1991, setting up a huge number (386) of special economic zones last year, where industry will enjoy preferential tax policies and government assistance in acquiring land. (Between 1965 and 2004, by contrast, India established only eight.)
The alignment of economic agendas between India's two largest political parties—Congress and the BJP--is perhaps the best sign of all for the country's economic future. Politics in India can prove unstable; four different governments ruled during the 1990s; the BJP-led alliance held sway from 1998 to 2003, and a coalition led by the Congress Party has ruled since 2004. But as the politicians have traded seats, economic reforms have continued apace. This suggests that despite some resistance and reluctance to make further changes, both of the major parties believe there's no going back on reforms already undertaken. Moreover, as the Lehman Brothers report points out, "The general pattern in democracies worldwide is that governments find it easier to push through reforms—and other potentially controversial legislation—earlier in their term of office." That means the 2009 general elections might give the Indian snowball another push, bringing 10 percent growth into view at last.
URL: http://www.newsweek.com/id/72071
By Jason Overdorf/New Delhi
(Newsweek Web Extra - November 24, 2007)
India's politics may be in turmoil, but so far the chaos hasn't put a crimp in the country's economy. Last quarter, GDP grew by more than 9 percent, a huge improvement over the 3.5 percent the country averaged in its first 30 years.
The explanation for the disconnect, according to a recent report by Lehman Brothers, is that India's economy has reached what experts call a "takeoff" point where the "old blocks and resistances to steady growth [have been] finally overcome." The report predicts that India's economic momentum has become virtually unstoppable, thanks to two main factors: an average 6.9 growth rate in per capita GDP since 2003, and a trade-to-GDP ratio that has doubled over the past seven years.
The surge in per capita GDP to about $800—from less than $350 in 1995—has more than doubled the size of India's middle class to about 50 million, increasing demand for consumer goods and stimulating manufacturing. The increase in the trade-to-GDP ratio shows that India's economy has finally opened up to the world as dramatically as China's and South Korea's did before it. Meanwhile, a boom has boosted India's investment-to-GDP ratio into the 30 to 40 percent range, from about 15 percent in the early 1990s—hitting the level many analysts believe was essential to the rapid growth experienced in other parts of Asia. And the trends, according to Lehman Brothers, suggest that India is just getting started. If it continues to make economic reforms, such as simplifying taxes, loosening labor laws and changing the pension system to help build a healthy corporate bond market, the economy could soon hit China's mythic 10 percent annual growth rate.
But that's a big if. Prime Minister Manmohan Singh's reforms—most of which he made as finance minister between 1991 and 1996 (one reason he doesn't get credit for them now)—succeeded so well that they eliminated any sense of urgency. In this sense, the prime minister may be a victim of his own achievements. The problem, says Subir Gokarn, chief economist at Crisil, a credit-rating agency, is that "when the economy is doing so well, you cannot create a constituency for reform." The ability to make big changes, he explains, is "independent of the individual, independent of the party, independent of the system. When there's a widespread perception of crisis, then reform happens. When there isn't, it doesn't." In 1991, such a crisis atmosphere came from an exchange-rate drop that nearly depleted India's foreign-exchange reserves. But the country has faced no similar threat since 2004.
Thus reform has slowed dramatically. Singh's government has failed to take steps like relaxing India's stringent labor laws and selling off state-owned industries. That said, it has managed to make some important improvements in recent years—despite fractures within the governing coalition and the lack of an outside prod. For instance, after becoming prime minister in 2004, Singh, despite local opposition, began measures to allow foreign direct investment in the retail sector and to facilitate the creation of large domestic retail chains. He also moved to encourage public-private partnerships in infrastructure projects—potentially bringing more money and better management to one of India's biggest laggards. And he unleashed what could be the biggest stimulus for India's manufacturing sector since 1991, setting up a huge number (386) of special economic zones last year, where industry will enjoy preferential tax policies and government assistance in acquiring land. (Between 1965 and 2004, by contrast, India established only eight.)
The alignment of economic agendas between India's two largest political parties—Congress and the BJP--is perhaps the best sign of all for the country's economic future. Politics in India can prove unstable; four different governments ruled during the 1990s; the BJP-led alliance held sway from 1998 to 2003, and a coalition led by the Congress Party has ruled since 2004. But as the politicians have traded seats, economic reforms have continued apace. This suggests that despite some resistance and reluctance to make further changes, both of the major parties believe there's no going back on reforms already undertaken. Moreover, as the Lehman Brothers report points out, "The general pattern in democracies worldwide is that governments find it easier to push through reforms—and other potentially controversial legislation—earlier in their term of office." That means the 2009 general elections might give the Indian snowball another push, bringing 10 percent growth into view at last.
URL: http://www.newsweek.com/id/72071
Tuesday, November 20, 2007
deal or no deal
By Jason Overdorf/New Delhi
Newsweek Japan (published in Japanese)
Not long back, Indian Prime Minister Manmohan Singh told a group of executives that his fractured mandate has made it difficult for his government to do “what is manifestly obvious” to maintain his country's impressive economic growth. For Singh, who is renowned, and sometimes even criticized, for his humility, that was as acerbic as it gets. But the message hidden between the lines is the one that international observers should heed: If doing the obvious is difficult, then achieving the unexpected and controversial is well-nigh impossible. And unfortunately, by pushing forward a nuclear deal with the United States, that is exactly what the man often called India's weakest prime minister in history has set out to do.
To many, the nuclear pact, which was clinched between the two governments in August, does indeed seem obvious. For India, it is essentially an invitation to come in from the cold without substantially altering its nuclear policies. The pact would finalize the rollback of sanctions imposed when India tested its first nuclear device in 1974, allowing for the free transfer of technologies classified as “dual use” because they can be used for both peaceful and military projects. That in turn would spark a boom in the construction of nuclear power plants in a country which desperately needs more electrical power to meet its future targets for economic growth. For the US, the deal would provide a measure of international oversight for India's nuclear program by requiring international inspections of some of its facilities, even though it would not bring India under the ambit of the Nuclear Non-Proliferation Treaty. It would facilitate billions of dollars worth of business agreements. And, perhaps most importantly, it would put an official stamp of sorts on India's gradual alignment of its foreign policy objectives with America's, making the one-time leader of the Cold War's Non-Aligned Movement into a full-fledged, bankable US ally.
But there's the rub, according to policy analyst Pratap Bhanu Mehta, president of New Delhi's Centre for Policy Research. India's left sees the deal as the first step in a major overhaul of India's foreign policy that will force it to take a strong position against Iran—which some see as a natural regional ally; reorient its military spending from Russia and other former principal allies toward the US; and take on a pre-scripted role as the US-friendly counterbalance to China in Asia. “Part of it is a trust deficit,” says Mehta. “The prime minister wants to say, 'Trust me, I'm not going to sell India out to the US. And the others are saying, 'Well.... you sort of are.'” Many in the left, in fact, believe it was only their opposition that prevented India from sending troops into Iraq. As a result, India's communists--who hold 59 seats in the parliament and thus have the power to bring down Singh's United Progressive Alliance coalition government if they choose—said in no uncertain terms that they will withdraw support for the UPA and force new elections if Singh moves to implement the pact. This week, the deal received a new lease on life as the left relented and agreed to allow the government to send negotiators to talks with the International Atomic Energy Agency (IAEA) on a nuclear safeguards agreement that needs to be signed before the pact can be implemented. But many observers suggest the move is designed to allow Singh to save face by conveniently letting the IAEA talks fail.
Because the question of a strategic alignment with the US is a sticky one, Singh, who has yet to give up, has of late begun to emphasize the economic benefits of the deal. India desperately needs more electrical power, the argument runs, and foreign-built nuclear plants will help meet that need while decreasing India's reliance on oil and gas imports and improving carbon emissions. "It's imperative for India to diversify its energy portfolio and enhance the share of nuclear energy because its heavy and growing reliance on [imported oil and natural gas] is going to be expensive and inflationary," argues Professor Anupam Srivastava, director of the Asia Program at the University of Georgia's Center for International Trade & Security. "The government cannot subsidize energy imports beyond a point, which makes 8-10 percent economic growth simply unaffordable. And as this growth slows down to around 5%, foreign capital and technology investment will also slow down, and in turn reduce India's ability to leverage economic gains in other strategic sectors."
To avert that problem, India plans through the pact with the US to increase the share of nuclear power in its energy mix from around three percent to as high as 20 percent by 2050—a goal that would involve building more than 40 new nuclear facilities. For US nuclear suppliers, but also for French, Canadian and Russian firms, this could mean orders running into many billions of dollars over the next several years. However, the deal's opponents argue that India's nuclear power targets may be overly ambitious, and may not even be necessary. In one recent study, for instance, the international development consultancy Dalberg found that even though India will need to increase its power generation capacity from today's 127 gigawatts to around 960 gigawatts by 2032 to meet its GDP growth target of 9%, that increase can be achieved without a dramatic increase in nuclear power production and the biggest gains in emissions will come through the use of clean coal technologies. “[The government's] projections are essentially doubling what they have done historically, so there are big questions about whether they'll be able to hit these numbers,” says John Stephenson, a senior consultant at Dalberg. “And even if they do hit these numbers, it [nuclear power] is a marginal energy source.”
However, focusing on the energy aspect of the agreement—whether to insist it is necessary or to denigrate it as trivial—is to ignore its real significance. And assuming, as do many pundits in India, that the ever closer political and economic relationship between India and the United States has attained an inevitable momentum may be a mistake. “India above all wanted to end its status as a 'nuclear outcaste,'” explains Teresita C. Schaffer, director for South Asia at Washington's Center for Strategic and International Studies. “The deal would accomplish this.” On the other hand, if Singh fails to push it through after the US has agreed to virtually all of India's demands, it could have serious consequences for India's future ability to conduct bilateral negotiations with the US and other nations. “It [India] will start to look like a country that can't take yes for an answer,” Schaffer says.
Meanwhile, this deal could be a “now or never” proposition. President George W. Bush's status as a conservative hawk who was willing to invade Iraq over the perceived threat of the proliferation of nuclear weapons grant him an authority to revisit the usefulness of the NPT in much the same way that former President Richard Nixon's anti-communist credentials made rapprochement with Mao Zedong politically feasible. If India blinks now, the deal will run into next year's American electoral campaign—guaranteed to put it on hold—and whatever president succeeds Bush will likely have neither the desire nor the mandate to put it back on the table. “I genuinely doubt that any successor, whether Republican or Democratic, would be in a position to make the same offer,” says Sumit Ganguly, a professor of political science at the University of Indiana.
Likely, that's music to the ears of India's communists.
Newsweek Japan (published in Japanese)
Not long back, Indian Prime Minister Manmohan Singh told a group of executives that his fractured mandate has made it difficult for his government to do “what is manifestly obvious” to maintain his country's impressive economic growth. For Singh, who is renowned, and sometimes even criticized, for his humility, that was as acerbic as it gets. But the message hidden between the lines is the one that international observers should heed: If doing the obvious is difficult, then achieving the unexpected and controversial is well-nigh impossible. And unfortunately, by pushing forward a nuclear deal with the United States, that is exactly what the man often called India's weakest prime minister in history has set out to do.
To many, the nuclear pact, which was clinched between the two governments in August, does indeed seem obvious. For India, it is essentially an invitation to come in from the cold without substantially altering its nuclear policies. The pact would finalize the rollback of sanctions imposed when India tested its first nuclear device in 1974, allowing for the free transfer of technologies classified as “dual use” because they can be used for both peaceful and military projects. That in turn would spark a boom in the construction of nuclear power plants in a country which desperately needs more electrical power to meet its future targets for economic growth. For the US, the deal would provide a measure of international oversight for India's nuclear program by requiring international inspections of some of its facilities, even though it would not bring India under the ambit of the Nuclear Non-Proliferation Treaty. It would facilitate billions of dollars worth of business agreements. And, perhaps most importantly, it would put an official stamp of sorts on India's gradual alignment of its foreign policy objectives with America's, making the one-time leader of the Cold War's Non-Aligned Movement into a full-fledged, bankable US ally.
But there's the rub, according to policy analyst Pratap Bhanu Mehta, president of New Delhi's Centre for Policy Research. India's left sees the deal as the first step in a major overhaul of India's foreign policy that will force it to take a strong position against Iran—which some see as a natural regional ally; reorient its military spending from Russia and other former principal allies toward the US; and take on a pre-scripted role as the US-friendly counterbalance to China in Asia. “Part of it is a trust deficit,” says Mehta. “The prime minister wants to say, 'Trust me, I'm not going to sell India out to the US. And the others are saying, 'Well.... you sort of are.'” Many in the left, in fact, believe it was only their opposition that prevented India from sending troops into Iraq. As a result, India's communists--who hold 59 seats in the parliament and thus have the power to bring down Singh's United Progressive Alliance coalition government if they choose—said in no uncertain terms that they will withdraw support for the UPA and force new elections if Singh moves to implement the pact. This week, the deal received a new lease on life as the left relented and agreed to allow the government to send negotiators to talks with the International Atomic Energy Agency (IAEA) on a nuclear safeguards agreement that needs to be signed before the pact can be implemented. But many observers suggest the move is designed to allow Singh to save face by conveniently letting the IAEA talks fail.
Because the question of a strategic alignment with the US is a sticky one, Singh, who has yet to give up, has of late begun to emphasize the economic benefits of the deal. India desperately needs more electrical power, the argument runs, and foreign-built nuclear plants will help meet that need while decreasing India's reliance on oil and gas imports and improving carbon emissions. "It's imperative for India to diversify its energy portfolio and enhance the share of nuclear energy because its heavy and growing reliance on [imported oil and natural gas] is going to be expensive and inflationary," argues Professor Anupam Srivastava, director of the Asia Program at the University of Georgia's Center for International Trade & Security. "The government cannot subsidize energy imports beyond a point, which makes 8-10 percent economic growth simply unaffordable. And as this growth slows down to around 5%, foreign capital and technology investment will also slow down, and in turn reduce India's ability to leverage economic gains in other strategic sectors."
To avert that problem, India plans through the pact with the US to increase the share of nuclear power in its energy mix from around three percent to as high as 20 percent by 2050—a goal that would involve building more than 40 new nuclear facilities. For US nuclear suppliers, but also for French, Canadian and Russian firms, this could mean orders running into many billions of dollars over the next several years. However, the deal's opponents argue that India's nuclear power targets may be overly ambitious, and may not even be necessary. In one recent study, for instance, the international development consultancy Dalberg found that even though India will need to increase its power generation capacity from today's 127 gigawatts to around 960 gigawatts by 2032 to meet its GDP growth target of 9%, that increase can be achieved without a dramatic increase in nuclear power production and the biggest gains in emissions will come through the use of clean coal technologies. “[The government's] projections are essentially doubling what they have done historically, so there are big questions about whether they'll be able to hit these numbers,” says John Stephenson, a senior consultant at Dalberg. “And even if they do hit these numbers, it [nuclear power] is a marginal energy source.”
However, focusing on the energy aspect of the agreement—whether to insist it is necessary or to denigrate it as trivial—is to ignore its real significance. And assuming, as do many pundits in India, that the ever closer political and economic relationship between India and the United States has attained an inevitable momentum may be a mistake. “India above all wanted to end its status as a 'nuclear outcaste,'” explains Teresita C. Schaffer, director for South Asia at Washington's Center for Strategic and International Studies. “The deal would accomplish this.” On the other hand, if Singh fails to push it through after the US has agreed to virtually all of India's demands, it could have serious consequences for India's future ability to conduct bilateral negotiations with the US and other nations. “It [India] will start to look like a country that can't take yes for an answer,” Schaffer says.
Meanwhile, this deal could be a “now or never” proposition. President George W. Bush's status as a conservative hawk who was willing to invade Iraq over the perceived threat of the proliferation of nuclear weapons grant him an authority to revisit the usefulness of the NPT in much the same way that former President Richard Nixon's anti-communist credentials made rapprochement with Mao Zedong politically feasible. If India blinks now, the deal will run into next year's American electoral campaign—guaranteed to put it on hold—and whatever president succeeds Bush will likely have neither the desire nor the mandate to put it back on the table. “I genuinely doubt that any successor, whether Republican or Democratic, would be in a position to make the same offer,” says Sumit Ganguly, a professor of political science at the University of Indiana.
Likely, that's music to the ears of India's communists.
Tuesday, October 16, 2007
in the comfort zone
India has wealth-building consumers rather than export riches. In today's market, that's a good thing.
By George Wehrfritz and Jason Overdorf
Newsweek (October 21, 2007)
By many measures, the economic picture in Asia looks pretty good. Despite subprime-induced global recession worries, stock markets from Hong Kong to Mumbai hang at dizzying heights and today's growth rates are faster than they've been in a decade. Of course, this prompts the question of whether the region is headed for a big fall—there's no avoiding the fact that cash-strapped American shoppers still undergird all the major economies. With one exception: India. As a credit crunch unfolds in the world's financial centers, the country of 1.1 billion is arguably Asia's most sheltered economy. The reason: "India is the only economy in Asia driven primarily by domestic demand," says Christopher Wood, chief strategist of the Hong Kong-based brokerage CLSA.
In short, India's weaknesses have become its strengths. The country's oft-lamented inability to challenge the Chinese manufacturing juggernaut means that today's growth isn't as tied to ever-increasing toy, apparel and electronics exports. The relatively high cost of borrowing in India is one reason its roads and bridges are so bad, but that looks almost like a plus compared with China's near-zero interest rates and widespread overinvestment. And India's vibrant service sector is more insulated against a global slump than Chinese manufacturing. Services historically fare better in down markets, because of their lack of inventory issues.
Not that India set out to become recession-proof. While China's boom was planned from the center and executed by state companies, India's welled up from the private entrepreneurial and business classes, set loose by market reforms in the early '90s. Unlike China, India never forced consumers to funnel their savings to state export industries. The result is more flexibility and more balance, with India's GDP growth running at a 9 percent pace in 2007 for the third year running, sustained mainly by domestic consumption and a burgeoning middle class.
Already, India's domestic market is larger than South Korea's, at about $370 billion. By 2025, concludes a recent study by the McKinsey Global Institute, its consumer class will swell tenfold from today's tally of 50 million, making it the fifth largest market on the planet. This year India's per capita income will break through the $1,000 threshold on its way to tripling by the late 2020s. "India's lower level of investment relative to GDP has meant that consumption has played a bigger role in its growth story," says the McKinsey study. "Consumption in India is closer, proportionally, to developed countries such as Japan and the United States than it is to China."
China's spending on construction of roads, factories, condos and other infrastructure is approaching 50 percent of GDP, compared with India's healthier 32 percent. China's trade surplus is also roughly twice India's in percentage terms and, in 2006, China took in $63 billion in foreign direct investment to sustain its manufacturing boom, whereas India grew slightly slower but needed just $16 billion from abroad to do it. The net effect is that India's economy will feel less pain should the global economy weaken. "India's exposure to the global trade cycle is one of the lowest in the region," concluded a Morgan Stanley report to clients, issued in mid-September, "and therefore the impact of slower foreign trade [on India's economy] is likely to be one of the lowest."
Policymakers deserve some credit. Reserve Bank of India has kept the economy on a lean burn, setting interest rates in the 6 percent range, which is low enough not to stymie economic activity but high enough to discourage profligate investments. Elsewhere in Asia, ultralow rates—be they 2 percent mortgages in Hong Kong or near-zero loans from China's state banks—have driven overinvestment in both real estate and industry. And whereas India's passbook savings rates of 3 to 4 percent encourages household savings, negative returns in China have driven money into the only high-yield option available to average households: speculative stock and real-estate plays. Because India's boom has not been driven by dirt-cheap money, analysts argue, it is therefore more resilient to global credit tightening.
Recent forecasts back up the picture of Indian economic resiliency. One from Citibank in September analyzed the likely impact of a U.S. recession on Asia's two giants. The bank estimated that its 2008 GDP growth forecast for China would fall from the 11 percent level to 8.5 percent, whereas India's would dip about half that amount, from 9.4 to 8.1 percent. A new study by the Organization for Economic Co-operation and Development concluded that, by further liberalizing its labor markets, India could push its sustainable growth rate above 10 percent by 2011. Pai Panandikar, president of the the RPG Foundation, a prominent economic think tank in Mumbai, wrote last week that a U.S. recession would hit goods exporters hardest, while driving American companies to cut costs with further use of Indian software and technology services. "It is possible that the growth of merchandise exports may dip, but the [demand for] service climb," he argues.
What comes next in the resilient India story? Ironically, it could be a manufacturing boom akin to China's in the 1990s. India's huge domestic market, ultralow average wages and potential as an export platform to the Middle East, Africa, and Europe are attracting interest like never before, as manufacturers seek to limit their vulnerability to future political or economics changes in China. A handful of foreign carmakers such as Ford, General Motors, Hyundai and Suzuki have already opened plants, aiming to service customers abroad, as well as India's own large and rapidly growing domestic market for small cars. Lucrative Korean electronics and white-goods ventures already dominate the local market. In a new survey of more than 300 global manufacturing companies released last week, European consultancy Capgemini found "very keen interest" in India as a manufacturing base, says Roy Lenders, the report's author, who predicts that "India could challenge China as the manufacturing center of the world in the next three to five years." Such a shift would soak up millions of surplus rural workers, thereby widening the country's already formidable consumer base. "Thinking of China as a benchmark for successful development is still very strong in India," says Shankar Acharya, an economist with the Indian Council for Research on International Economic Relations. China has been growing much faster than India, for much longer. But the eventual lesson of this period of global uncertainty may be that India should just build on its own strengths, not worry about China's.
URL: http://www.newsweek.com/id/43340
By George Wehrfritz and Jason Overdorf
Newsweek (October 21, 2007)
By many measures, the economic picture in Asia looks pretty good. Despite subprime-induced global recession worries, stock markets from Hong Kong to Mumbai hang at dizzying heights and today's growth rates are faster than they've been in a decade. Of course, this prompts the question of whether the region is headed for a big fall—there's no avoiding the fact that cash-strapped American shoppers still undergird all the major economies. With one exception: India. As a credit crunch unfolds in the world's financial centers, the country of 1.1 billion is arguably Asia's most sheltered economy. The reason: "India is the only economy in Asia driven primarily by domestic demand," says Christopher Wood, chief strategist of the Hong Kong-based brokerage CLSA.
In short, India's weaknesses have become its strengths. The country's oft-lamented inability to challenge the Chinese manufacturing juggernaut means that today's growth isn't as tied to ever-increasing toy, apparel and electronics exports. The relatively high cost of borrowing in India is one reason its roads and bridges are so bad, but that looks almost like a plus compared with China's near-zero interest rates and widespread overinvestment. And India's vibrant service sector is more insulated against a global slump than Chinese manufacturing. Services historically fare better in down markets, because of their lack of inventory issues.
Not that India set out to become recession-proof. While China's boom was planned from the center and executed by state companies, India's welled up from the private entrepreneurial and business classes, set loose by market reforms in the early '90s. Unlike China, India never forced consumers to funnel their savings to state export industries. The result is more flexibility and more balance, with India's GDP growth running at a 9 percent pace in 2007 for the third year running, sustained mainly by domestic consumption and a burgeoning middle class.
Already, India's domestic market is larger than South Korea's, at about $370 billion. By 2025, concludes a recent study by the McKinsey Global Institute, its consumer class will swell tenfold from today's tally of 50 million, making it the fifth largest market on the planet. This year India's per capita income will break through the $1,000 threshold on its way to tripling by the late 2020s. "India's lower level of investment relative to GDP has meant that consumption has played a bigger role in its growth story," says the McKinsey study. "Consumption in India is closer, proportionally, to developed countries such as Japan and the United States than it is to China."
China's spending on construction of roads, factories, condos and other infrastructure is approaching 50 percent of GDP, compared with India's healthier 32 percent. China's trade surplus is also roughly twice India's in percentage terms and, in 2006, China took in $63 billion in foreign direct investment to sustain its manufacturing boom, whereas India grew slightly slower but needed just $16 billion from abroad to do it. The net effect is that India's economy will feel less pain should the global economy weaken. "India's exposure to the global trade cycle is one of the lowest in the region," concluded a Morgan Stanley report to clients, issued in mid-September, "and therefore the impact of slower foreign trade [on India's economy] is likely to be one of the lowest."
Policymakers deserve some credit. Reserve Bank of India has kept the economy on a lean burn, setting interest rates in the 6 percent range, which is low enough not to stymie economic activity but high enough to discourage profligate investments. Elsewhere in Asia, ultralow rates—be they 2 percent mortgages in Hong Kong or near-zero loans from China's state banks—have driven overinvestment in both real estate and industry. And whereas India's passbook savings rates of 3 to 4 percent encourages household savings, negative returns in China have driven money into the only high-yield option available to average households: speculative stock and real-estate plays. Because India's boom has not been driven by dirt-cheap money, analysts argue, it is therefore more resilient to global credit tightening.
Recent forecasts back up the picture of Indian economic resiliency. One from Citibank in September analyzed the likely impact of a U.S. recession on Asia's two giants. The bank estimated that its 2008 GDP growth forecast for China would fall from the 11 percent level to 8.5 percent, whereas India's would dip about half that amount, from 9.4 to 8.1 percent. A new study by the Organization for Economic Co-operation and Development concluded that, by further liberalizing its labor markets, India could push its sustainable growth rate above 10 percent by 2011. Pai Panandikar, president of the the RPG Foundation, a prominent economic think tank in Mumbai, wrote last week that a U.S. recession would hit goods exporters hardest, while driving American companies to cut costs with further use of Indian software and technology services. "It is possible that the growth of merchandise exports may dip, but the [demand for] service climb," he argues.
What comes next in the resilient India story? Ironically, it could be a manufacturing boom akin to China's in the 1990s. India's huge domestic market, ultralow average wages and potential as an export platform to the Middle East, Africa, and Europe are attracting interest like never before, as manufacturers seek to limit their vulnerability to future political or economics changes in China. A handful of foreign carmakers such as Ford, General Motors, Hyundai and Suzuki have already opened plants, aiming to service customers abroad, as well as India's own large and rapidly growing domestic market for small cars. Lucrative Korean electronics and white-goods ventures already dominate the local market. In a new survey of more than 300 global manufacturing companies released last week, European consultancy Capgemini found "very keen interest" in India as a manufacturing base, says Roy Lenders, the report's author, who predicts that "India could challenge China as the manufacturing center of the world in the next three to five years." Such a shift would soak up millions of surplus rural workers, thereby widening the country's already formidable consumer base. "Thinking of China as a benchmark for successful development is still very strong in India," says Shankar Acharya, an economist with the Indian Council for Research on International Economic Relations. China has been growing much faster than India, for much longer. But the eventual lesson of this period of global uncertainty may be that India should just build on its own strengths, not worry about China's.
URL: http://www.newsweek.com/id/43340
bowling for big bucks
A burgeoning middle class is giving the nation's beloved slow sport, cricket, new sex appeal
By Jason Overdorf
Newsweek (October 21, 2007)
By today's sports logic, cricket should be dead. In its purest form, the game takes five days to play. Its upper lip remains so stiff that a batsman who declares himself out when the umpire blows the call gets cheers instead of boos. Its heroes aren't giants, either of height or girth. Some players, like Australian spin bowler Shane Warne, look like they have just set down a plastic cup of beer and climbed out of the bleachers.
But strangely, cricket is thriving. Over the past month or so, two new cash-rich professional leagues have been unveiled, ESPN Star Sports has launched a 24-hour cricket channel and a new, faster-paced version of the Cricket World Cup is gaining steam. Based on sponsorship rights being paid to the International Cricket Council, it's likely that cricket over the next few years will earn well in excess of $2 billion, twice what it has since 2000. The reason: new competitive forces within India, and a cricket-crazed Indian middle class, are making the sport big business. Australia may have won the last two World Cups. But James Fitzgerald, ICC spokesman, says, "It's no secret that India is becoming the sport's financial powerhouse."
Cricket is the cultural unifier of India, the most populous and most passionate of the cricketing nations (which also include England, Australia, New Zealand, Pakistan, South Africa and Sri Lanka). Even bigger than Bollywood, televised cricket matches can capture 60 percent or more of the Indian viewing audience, some 450 million people. Yet the country has won a World Cup only once, thanks in part to the sclerotic Board of Control for Cricket in India, which has been failing to promote talent over the past few decades. Political concerns dictate the selection of the national team, and local and state feeder teams are chronically underfunded.
Media tycoon Subhash Chandra, chairman of India's largest listed television company, Zee Entertainment, aims to change all that. Last month he unveiled plans for a breakaway Indian Cricket League, with a $1 million prize for the champions and player salaries as high as $400,000 (top players in domestic leagues currently make about $32,000 in India, and rarely more than $80,000 even in England).
The Board of Control responded swiftly, threatening to ban players who join the new league from the international squad. When that proved unsuccessful, it announced 40 percent raises and revealed plans for its own new conference—the Premier Cricket League—which will include players from many nations and pay out $3 million to the winning team.
The new leagues will be backed by global advertisers, including Unilever, LG, Hutchison, Honda and others eager to reach Indian consumers. Average Indian incomes will triple by 2025, making India the fifth largest consumer market in the world, according to the McKinsey Global Institute. Cricket, notes Guru Prasad Rao, vice president of the Mumbai-based media-buying firm Network Media, "is the one language that unites the country." Ad rates for matches are skyrocketing. Spots for a recent India-Pakistan championship game sold for $25,000 for 10 seconds (prime-time movies net $5,000).
Sponsorship rates are rising, too. Indian mobile operator Reliance Communications and PepsiCo India have reportedly paid between $60 million and $100 million apiece for rights to various contests over the next eight years, more than double what was paid between 2000 and 2007. Similarly, ESPN Star Sports is reported to have paid $1.1 billion for the broadcast rights for a package of games including two Cricket World Cups between 2007 and 2016.
What will it all mean for the sport? Just as football's English Premier League attracts the world's top players through powerful franchises backed by fanatical fans, the future could well see India displace both England and Australia as the home of the biggest cricket matches and best players.
In the short term, there will simply be more cricket—a lot more. In a country where replays of classic cricket matches draw better ratings than live broadcasts of other sports, ESPN Star Sports recently launched a 24-hour cricket channel—which will show domestic matches from Australia and England—to supplement its two existing sports channels. "I did not know how to fulfill the demand for cricket with just two channels," explained ESPN Star Sports' managing director Jamie Davis. "Forty-eight hours of cricket a day is not enough." Not for India.
URL http://www.newsweek.com/id/43341
By Jason Overdorf
Newsweek (October 21, 2007)
By today's sports logic, cricket should be dead. In its purest form, the game takes five days to play. Its upper lip remains so stiff that a batsman who declares himself out when the umpire blows the call gets cheers instead of boos. Its heroes aren't giants, either of height or girth. Some players, like Australian spin bowler Shane Warne, look like they have just set down a plastic cup of beer and climbed out of the bleachers.
But strangely, cricket is thriving. Over the past month or so, two new cash-rich professional leagues have been unveiled, ESPN Star Sports has launched a 24-hour cricket channel and a new, faster-paced version of the Cricket World Cup is gaining steam. Based on sponsorship rights being paid to the International Cricket Council, it's likely that cricket over the next few years will earn well in excess of $2 billion, twice what it has since 2000. The reason: new competitive forces within India, and a cricket-crazed Indian middle class, are making the sport big business. Australia may have won the last two World Cups. But James Fitzgerald, ICC spokesman, says, "It's no secret that India is becoming the sport's financial powerhouse."
Cricket is the cultural unifier of India, the most populous and most passionate of the cricketing nations (which also include England, Australia, New Zealand, Pakistan, South Africa and Sri Lanka). Even bigger than Bollywood, televised cricket matches can capture 60 percent or more of the Indian viewing audience, some 450 million people. Yet the country has won a World Cup only once, thanks in part to the sclerotic Board of Control for Cricket in India, which has been failing to promote talent over the past few decades. Political concerns dictate the selection of the national team, and local and state feeder teams are chronically underfunded.
Media tycoon Subhash Chandra, chairman of India's largest listed television company, Zee Entertainment, aims to change all that. Last month he unveiled plans for a breakaway Indian Cricket League, with a $1 million prize for the champions and player salaries as high as $400,000 (top players in domestic leagues currently make about $32,000 in India, and rarely more than $80,000 even in England).
The Board of Control responded swiftly, threatening to ban players who join the new league from the international squad. When that proved unsuccessful, it announced 40 percent raises and revealed plans for its own new conference—the Premier Cricket League—which will include players from many nations and pay out $3 million to the winning team.
The new leagues will be backed by global advertisers, including Unilever, LG, Hutchison, Honda and others eager to reach Indian consumers. Average Indian incomes will triple by 2025, making India the fifth largest consumer market in the world, according to the McKinsey Global Institute. Cricket, notes Guru Prasad Rao, vice president of the Mumbai-based media-buying firm Network Media, "is the one language that unites the country." Ad rates for matches are skyrocketing. Spots for a recent India-Pakistan championship game sold for $25,000 for 10 seconds (prime-time movies net $5,000).
Sponsorship rates are rising, too. Indian mobile operator Reliance Communications and PepsiCo India have reportedly paid between $60 million and $100 million apiece for rights to various contests over the next eight years, more than double what was paid between 2000 and 2007. Similarly, ESPN Star Sports is reported to have paid $1.1 billion for the broadcast rights for a package of games including two Cricket World Cups between 2007 and 2016.
What will it all mean for the sport? Just as football's English Premier League attracts the world's top players through powerful franchises backed by fanatical fans, the future could well see India displace both England and Australia as the home of the biggest cricket matches and best players.
In the short term, there will simply be more cricket—a lot more. In a country where replays of classic cricket matches draw better ratings than live broadcasts of other sports, ESPN Star Sports recently launched a 24-hour cricket channel—which will show domestic matches from Australia and England—to supplement its two existing sports channels. "I did not know how to fulfill the demand for cricket with just two channels," explained ESPN Star Sports' managing director Jamie Davis. "Forty-eight hours of cricket a day is not enough." Not for India.
URL http://www.newsweek.com/id/43341
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