Can you name India’s biggest hotel chain?

This chain started in India, expanded to China and has now invested heavily in Indonesia. It is called OYO (On Your Own) and was started in 2011 by then 18-year old Ritesh Agarwal. It is like the “Uber” of hotels – acquiring and setting standards for previously struggling hotels.

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The group now has more hotel rooms in India than Taj Hotels – of course, Taj is at the top end while OYO has been a big provider of budget rooms.

Within three months of its foray into Indonesia, the company has launched the first phase of expansion in 16 cities and witnessed a 5x growth. It aims to expand to 100 cities by the end of the year.

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The company is adding on an average 70 hotels in Indonesia every month.

OYO created a uniquely Chinese identity for its local Chinese business and is localising in Indonesia.

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OYO is in over 280 cities in China, with about 5,000 hotels, and over 260,000 rooms.

The company has already started operations in Malaysia and will enter Philippines soon.

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It plans to have a pan-southeast Asian presence by the end of the year, before it starts making a move towards Europe.

The Labor Market in India: Structure and Costs

Something different today – I am posting a complete piece from a reputable source (see bottom of article) on a specialist topic – the labor market. Hope you find it useful.

India possesses a large labor pool as almost half its population of 1.2 billion is of working age. Naturally, the structure of India’s labor market is diverse; foreign companies need to understand this structure to benefit from India’s demographic dividend.

A majority of the working population is engaged in the unorganized, or informal sector, working for small businesses or manufacturing units that employ less than ten individuals. Businesses that don’t need skilled labor can source employees with some ease.

The expansion of higher education has created a larger skilled talent pool, but it still only amounts to about ten percent of the country’s overall labor market. Companies seeking skilled labor need to be prepared to compete to recruit from this comparatively small pool.

Structure of labor in India

The government’s labor laws usually classify employees on the basis of skill and area of operation. In terms of skill, employees are categorized as unskilled, semi-skilled, skilled, and highly skilled. In terms of area of operation, employees are categorized as managerial personnel and workmen. This defines their job roles, wages, disbursal of benefits, and their rights and obligations.

Labor costs in India

Firms entering the Indian market often choose to make the decision after assessing the comparative costs of labor. India offers competitive advantages with its lower wage structure and access to a vast labor market. For instance, the average minimum wage for contract workers in India is US$148 per month (Rs 10,000) and US$234 in China.

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Employers should note that the minimum wage in India is indicative; it is often utilized as a benchmark, especially in the employment of unskilled and semi- skilled labor in the manufacturing sector.

Labor costs also vary by region in India; wages in tier two and three cities are much lower than tier one due to lower costs of living and affordable real estate. The difference in salary pay scale can be up to 25 percent as the city compensatory allowance and employee conveyance allowance is a much smaller portion of paychecks in tier two and three cities when compared with tier one cities. This is why, for instance, the average salary of a software engineer in New Delhi is US$7,632.53 while in Mysore it is US$6,621.47.

Hiring costs in IT and auto manufacturing

Information technology (IT) and auto manufacturing are the two most prominent sectors in India’s organized economy – they receive the bulk of foreign investment and are the biggest employers. The IT sector in India accounts for 67 percent of the global outsourcing market. While the overall manufacturing sector constitutes about 17 percent of India’s economy, automotive manufacturingis the largest contributor at 22 percent of the manufacturing GDP and seven percent of India’s overall GDP.

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Within the IT sector, new technology segments like artificial intelligence (AI), data analytics, and machine learning are changing the nature of jobs and professional service capabilities. Firms are ready to pay higher salaries to software developers and engineers with skills in these new technology areas, but the competition to recruit is intense as the majority of the labor market is educated in the use of legacy technologies. As such, the sector is witnessing some disruption due to lay-offs and reskilling drives, which in turn may benefit foreign firms looking to hire labor at competitive rates in legacy industries like business process outsourcing (BPOs).

In the manufacturing sector, the federal Make in India initiative anticipates expanding industrial investments and domestic operations, which will boost the creation of technical jobs and factory and assembly work.

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Regional manufacturing hubs are centered on major tier two and three cities in the northern, western, and southern parts of the country, where a majority of India’s skilled labor resides. For instance, Pune (Maharashtra) in the west, Gurgaon (Haryana) in the east, and Chennai (Tamil Nadu) in the south.

Proximity to large urban cities allows companies to tap into skilled talent located nearby, while also reducing operational costs due to reliable logistics networks.

In the IT sector, lower tier cities such as Ahmedabad (Gujarat), Chandigarh (Punjab), and Mangalore (Karnataka) are emerging as prominent hubs besides the tier one cities of Mumbai (Maharashtra), Bangalore (Karnataka), and Gurgaon (Haryana). In the automotive sector, hubs have emerged in the states of Gujarat, Maharashtra, Haryana, Tamil Nadu, and Andhra Pradesh.

Industry experts note that the average salary increment in the IT and manufacturing sector for 2017-18 was projected at seven and 10.1 percent, respectively. We highlight the average annual remuneration for skilled positions in the IT sector and the auto component manufacturing industry.

About the Source

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write india@dezshira.com for more support on doing business in India

 

Happy Republic Day for all in India, land of the “freedom fighters”

Today is Republic Day in India, celebrating 26 January, 1950, when the Indian Constitution came into effect.

India’s other major national event is Independence Day, a celebration of 15 August, 1947, when India became independent of the United Kingdom.

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The two days that created the “world’s largest democracy” really came about because of hundreds of years of “freedom fighters”. I am going to list some names – and apologies for all the great names I have not been able to include.

Most of us would think of Mahatma Gandhi (Mohandas Karamchand Gandhi 1869-1948) who became an inspiration to many around the world – including Martin Luther King, Nelson Mandela and The Dalai Lama.

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But other greats include Pandit Jawaharlal Nehru (India’s first Prime Minister), Subhas Chandra Bose and Sardar Vallabhbhai Patel.

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Picture above – Rajkumar Amrit Kaur

Indian women played a strong and vital role for freedom, including Sarojini Naidu, Rajkumar Amrit Kaur and Kasturba Gandhi.

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Above – Kasturba Gandhi

Inspirational for many of these was the example of courage and self sacrifice shown by the young Bhagat Singh who lost his life in the cause.

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Above – Indian Prime Minister Modi hosts USA President Obama in 2018 at Republic Day celebrations in New Delhi

India – you have earned the right to celebrate! Have a great day.

India’s Bajaj Auto to jump into electric vehicles next year

Pune-based Bajaj Auto is planning to make a foray into electric vehicles (EV) next year and is hoping to build market share in India, its Managing Director Rajiv Bajaj said Monday. The new marketing slogan is “The World’s Favourite Indian”.

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The company plans to launch electric version of its quadricycle Qute along with electric three-wheelers next year.

He also said the company would bring KTM-owned ‘Husqvarna’ motorcycle brand to the Indian market this year with “half a dozen” products in the pipeline.

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Bajaj said the company has leadership positions in over 20 overseas markets such as 70 per cent share in Bangladesh and around 50 per cent in Nepal and Sri Lanka and it would like to replicate this in India.

“We would like to be a little more successful in the domestic market than we have been so far in the motorcycles market,” he said.

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In India: “We have only 20-21 per cent share. We think now the time has also come that after having done a good job overseas, after having huge dominant position in India in three-wheelers, it is about time we make the same impact in the domestic motorcycle segment in India as we have done across the world.”

Other big motorcycle makers in India are Yamaha, TVS and Honda.

Bajaj also has a partnership with British niche bikemaker Triumph.

Indian economy to pass the UK in 2019 to become 5th in the world – PwC

India is likely to pass the United Kingdom in the world’s largest economy rankings in 2019, becoming number 5, according to a report by global consultancy firm PwC.

The report said: “While the UK and France have regularly switched places owing to similar levels of development and roughly equal populations, India’s climb up the rankings is likely to be permanent.”

PwC’s report projects real GDP growth of 1.6 per cent for the UK, 1.7 per cent for France and 7.6 per cent for India in 2019.

PwC’s Global Economy Watch is a short publication that looks at the trends and issues affecting the global economy and details its latest projections for the world’s leading economies.

Really engaging with India becomes a smart step for anyone in business, politics or education – but start with the right strategy.

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Kerala – great tourism but also good for innovative business

India got its largest startup ecosystem Sunday when Kerala Chief Minister Pinarayi Vijayan inaugurated a facility housing incubation set-ups across a string of segments in modern technology.

The Integrated Startup Complex under the Kerala Startup Mission (KSUM) includes the ultra modern facilities of Maker Village that promotes hardware startups, the BioNest that promotes medical technologies, BRINC which is the country’s first international accelerator for hardware startups; BRIC which aids developing solutions for cancer diagnosis and care, and a Centre of Excellence set up by industry majors such as UNITY.

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After the completion of three more projects, Kerala will have startup and incubation space of 5 lakh sq ft, which will be the largest of this type in the world.

No less than 30 applications for patent has gone from startups with the 13.5-acre TIZ, the CM noted, lauding it as a sign of the high-quality work in the zone. Simultaneously, Kerala was sensing increasing optimism in boosting software export from the state.

M Sivasankar, secretary, IT (Kerala), pointed out that the entire space at the TIZ facility has been sold out.

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“This has never happened in our country, where it usually takes a couple of years for an incubator to get the whole area occupied,” he said. “The first three floors of the new complex have been furnished, while the rest of the floors have already got allotted to various startups.”

“The campus has another incubator complex coming up and it will be opened early next year,” Sivasankar said.

Besides the Maker Villager with its 30-odd startups, the facility has nascent firms working in fields such as biotechnology, computer-aided design, augmented/virtual reality and advanced communication.

So – Kerala is “gods own country” for tourism but also a magnet for innovative business. Worth a visit.

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Can Australia make Asia a top priority?

A new study shows that three of the world’s top five economies by 2033 will be Asian, with China number one, India third and Japan fifth. The US will be second and Germany fifth.

This suggests Australia’s trade and investment focus for the next 15 years needs to swing more sharply to Asia.

The study is the World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London.

It would be timely for Australia to radically change its approach to diplomatic appointments – our “plum” diplomatic postings remain Washington and London, but should now shift to Beijing, New Delhi and Tokyo.

We need to boost our presence in other Asian economies too – South Korea is set to become the 10th-largest, Indonesia (12th), Thailand (21st), the Philippines (22nd), Bangladesh (24th) and Malaysia (25th), all making the top 25.

On top of this, one of the world’s greatest transformational projects is on our doorstep – China’s Belt and Road Initiative might be controversial but is a growth driver. Infrastructure spending is set to increase from US$11.5 billion, or 13.5 percent of global GDP last year, to US$27.4 billion, or 15.5 percent, by 2032, largely due to this initiative.

While China is high profile, quietly building a supersized economy is India which in 2018 remained ahead of China to retain the world’s fastest growing large economy status.

Yet Australia has largely put India on the backburner, unable to complete the kind of trade agreements that we have with China and other Asian countries. This low focus on India needs to shift over the next 15 years of growth there.

David Morris, and Australian who chairs the United Nations Asia Pacific Business Forum, agrees that Asia is now vitally important to the global economy. His consistent message is: “We are in the midst of the biggest global economic shift in memory, with East Asia now driving growth in the world economy”.

The Australian specialist India advisory firm India Avenue Investment Management points out that Indian equity markets performed quite well relative to their emerging market and developed market peers – yet our focus has been on three regions which fared particularly poorly in 2018 – China, Australia and Emerging Markets (which China dominates).

Granted, Australia has shifted focus to Asia, as shown by the 2016 opening of our largest and most expensive embassy in Jakarta, Indonesia at a cost of A$415 million and hosting 500 staff.

Despite this, one of Australia’s major research houses, the Lowy Institute, has long claimed that our Department of Foreign Affairs and Trade is “under-resourced over a period of several decades”.

The symbolism at the very top suggests we are struggling against the shift to Asia – former Ministers and Prime Ministers almost salivate at the chance to take the top post in London or Washington.

It is time to shift this focus to New Delhi, Beijing and other parts of Asia – while these are the epicentres of our future, it is unlikely ex politicians will pursue them as vigorously as they chase the old world.

Perhaps appointing Julie Bishop as our Ambassador in a major Asian country would send better signals?

Symbolism is important, especially for investment and trade, so sending top ranking former politicians into Asian posts could have a powerful effect – so long as we give them the resources to do the job.

Knowledge of Australia remains dangerously low across the whole of Asia, including Commonwealth partners such as India and Malaysia. We are variously seen as a “kangaroo nation” or a giant mine and even a “white enclave” (admittedly said more in private these days), showing ignorance of our major multicultural achievements. This ignorance is dangerous for diplomatic and defence relationships and is restricting our trade.

Education and tourism are the two sectors that can really turn this around, giving Asians a first-hand experience of what a great country Australia is. We are boosting efforts in both, but do we really grasp the vast potential size of the market?

Only by shifting our diplomatic resources more and more to Asia will we gain a true understanding of these markets and how we can build a positive future together.