Why Short-Term Thinking Is Killing India’s Business Potential with Rajendra Srivastava
India’s road to sustainable growth and global competitiveness
In this Special Edition of The Core Report, financial journalist Govindraj Ethiraj engages with Professor Rajendra Srivastava, former Dean of the Indian School of Business (ISB) and the Novartis Professor of Marketing strategy and Innovation, to dissect India’s evolving business landscape and its implications for economic growth. The discussion highlights the critical need for long-term investments in product development, infrastructure, and supply chains, contrasting this with the challenges posed by a focus on short-term profitability. Srivastava emphasizes the role of resilience, or “immunity,” in building sustainable businesses, citing examples from the automotive industry and India’s technological ecosystem.
The conversation also explores the transformative impact of India’s Global Capability Centers (GCCs), their contribution to human capital development, and their potential to spur innovation and design excellence within the country. Srivastava delves into the influence of global trade shifts, including U.S. tariff policies, on Indian businesses, and underscores the economic power of the Indian diaspora and their contributions to the domestic economy.
With insights into the interplay between global policies, workforce retention, and the untapped potential of India’s engineering talent, this episode offers a nuanced perspective on the strategies required to propel India toward a resilient and innovation-driven economic future.
NOTE: This transcript contains the interview transcript done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Govindraj Ethiraj: Hi, and welcome to this Core Reports Special Edition series. I'm pleased to be joined by the current Executive Director of the ISB Centre of Business Innovation, Professor Raj Shrivastava, who spends a lot of his time thinking about innovation, thinking about growth, and particularly in the Indian context, and we're going to find out. Professor Shrivastava, thank you so much for joining me.
I'm going to talk about two or three things, but principally focus on backcasting, a theme that you've developed and worked upon in recent times, and how that applies firstly to companies like Tesla and countries like the United States, but also equally how it could apply to companies in India, and how they could maybe use that approach to become more innovative and become or produce greater products in the marketplace. So, before I do all of that, we are nearing the end of 2024 and into 2025, so what are the key trends or the big trends that you've taken away from the way business has performed or evolved in the last year or so?
Rajendra Srivastava: Well, thank you for inviting me to your show. It's wonderful to be here, and it's also actually wonderful to be part of the growth story in India, and I think it's important to understand what is happening, and we keep seeing numbers, growth rates of 6.5%, 7%, somewhere in that range, but it's important to understand how that is spread. If we take urban India as an example, urban India is not growing at 7%, it's growing closer to 10%, and when you start looking at the middle class, that tends to be growing at 12% to 15%, and then when you start looking at products and services that are consumed by let's say the upper crust of the middle class, you're seeing, you know, growth rates in the range of 18% to 20%, and when it comes to things like the airline industry or the hotel industry, and I'm sure you travel a lot, Govind, you'll see that the growth rates are now hitting close to 20% to 25%.
In this kind of an environment, if you're looking at compound growth, it doesn't matter which sector you look at. I don't have numbers for 24, but I did look at numbers for 23, and for example, in 23, healthcare was increasing at 22% a year. If I look at white goods, refrigerators and so on, that was 16% a year.
When I look at FMCD, that was growing at 24% a year, and I can keep going on, you know, hospitality and tourism are about 11%, aviation 24%, real estate almost 24.5%. So the question is, you know, why is this happening? And obviously, it's largely the India growth story. And the growth story has actually been fuelled by multiple factors.
One factor really has been how the infrastructure has been improving. And we talk about the India stack, for example, in fintech and how that has enabled digital India. But what we are forgetting is that digital India was actually enabled by the telecom sector.
So without Jio and without Bharti, you know, the fintech revolution would not have reached into all the corners of India. So one is the purchasing power and the income is increasing, the infrastructure is improving. India has had the big dividend of actually not having legacy systems that prevent the growth.
So no matter which area you look at, whether you're looking at telecom or you're looking at fintech, or you're looking at FMCG, what is happening is the legacy systems are not fighting the new ways of doing business. And so, you know, that is that is leading to the growth. And of course, you know, when you start looking at opportunities to grow globally, you know, there's the U.S. When you take Europe, Europe is a little bit of a slow horse at the moment. And with the geopolitical events going on, India also happens to be an economy that people are investing in. And so whether it is also the availability of of capital, 10 years ago when I was in Singapore and I used to travel to India, I ran into people and saying, look, you got a good business model. What's preventing?
Why are you growing at only 10 or 15 percent? And the response was, we don't have working capital. Now, the people who do not invest in stock, you know, they've missed the opportunity.
If you look at the Bombay stock market, you know, Nifty or Ausinsex, it's quadrupled in the last decade. And so now what we have is capital is also available. The government sometimes does not get enough credit, but GST has taken 29 India's and made it to one India.
And so it's a single the unification, the single market is also contributing to the growth rate. And we just wrote an article which we refer to India as the perfect storm. There was a movie, Perfect Storm, where everything that could possibly go wrong went wrong.
And I think in India, things that could all the things that could possibly go right, you know, have been going right, mostly on the economic sense. We still have a long way to go in terms of the growth potential. We're still at the front end of the S-curve in many industries.
So there's plenty of scope there for growth. We do have challenges. Challenges are sometimes related to ease of business, sometimes rules that are a hundred years old.
But the future, I think when I look at 2025, I look at it in a very positive setting because of the growth in the market, the availability of capital and now the inclination to get things done.
Govindraj Ethiraj: Right. And let me pick on a few points there before we come to backcasting. So you talked about how legacy systems are not fighting the new systems.
And that's a very interesting point. And I think you use the example of fintech. And are you saying this because you've seen this as a problem or a challenge in other markets and India seems to have got around this?
Rajendra Srivastava: No, it actually holds across products. So if I go back, let's say 30 years in the U.S. when cellular phones, mobile phones were coming into the market, there was a perfectly adequate system where you had the wireline phones or you look at the education system in the U.S., it was perfectly adequate. And then when you look at online education in the U.S., it has to fight the existing way, which is face to face and with so many universities with extra capacity. But when you start looking at India, you know, we have inadequate services, let's say, related to education. We've had inadequate services related to airline business. And so the old business is not there, like the old education system in the U.S. is there to kind of say, look, you know, face to face is better than online. Online is definitely much better when there is no other option. If there's no face to face, then online has no competition. And the same thing happened in the in the phone market.
So it's not just India. You go to Thailand, you go to Southeast Asia, and you'll see that the adoption of technologies, you know, such as telecom has been much faster in those countries where there wasn't an existing alternative.
Govindraj Ethiraj: Right. OK, so let's come to the theme of backcasting, which you've talked about recently. So walk us through why backcasting as a concept is distinctive from, let's say, the strategic approach to zeroing in on a market, identifying a gap and then trying to plug it.
And the example that you've used in your own research is Tesla.
Rajendra Srivastava: OK, the reason why backcasting is important is that we need to understand that just as you engineer a product, you really have to engineer a business. You know, you need to look at all the components of the business. And if I simplify matters, I'd say two components.
One component is we need to develop the product and then we need to, you know, to develop the market around it. So that is an oversimplification. But at least you need these two components to be managed simultaneously.
A big difference these days is really the vertically integrated organisation has vanished. So if we look at many of the rules that we learned, let's say, in the work done by Michael Porter, and to be fair, those rules were developed in the 1970s, because I think Porter published his book in 1974 on comparative strategy. In those days, the companies that won were vertically integrated.
Nowadays, you know, if you're going to introduce a new product, it's going to have to be supported by the marketplace. So whether we're talking about Microsoft or we're talking about Tesla, what we need is an ecosystem. So without the network of charging stations, you're not going anywhere.
Similarly, if I go back even to older technologies, let's say colour television, colour television was developed in the mid-30s by the RCA division of General Electric. But it took 35 years for it to get to 50% market penetration in the U.S. market. And the reason is very simple.
The prices were too high initially, and who the hell needs the colour television if there's no colour programming? So who needs an electrical vehicle if there are no charging stations available? And the other element to understand is that technology generally triggers new changes in the marketplace.
So as an example, if you take Tesla, your Tesla is essentially a drivetrain on wheels, which is powered by a motor, which is run by a battery, which is managed by a computer. And essentially, in the old days, when you took your car for tuning, somebody had to change the spark plugs and do this and that. Today, an EV can be updated, just as software programmes can be updated through the Internet.
An electrical vehicle can be updated through the Internet. And what happens then is that you don't need the dealership network. And when you don't need the dealership network and you're selling directly, what then happens is that the margin is falling into the manufacturer's pocket.
Anyway, to make a long story short, there are lots of changes that take place in the market. You have to engineer your business, therefore you have to develop the product, you have to develop the market. Developing the market means you develop the ecosystem, and also you may be introducing an entirely new distribution system, as was the case in Tesla.
So you have to visualise the future, and then you kind of work it backwards. So that's the reason we're calling it backcasting. And by the way, if I go to an entirely different area, backcasting can also be integrated with vision.
You know, we all have a North Star. So people like Mahatma Gandhi and Subhash Chandra Bose, they also had their vision of the future, except they had a different path towards how to get to the future. So we have to worry about also the paths that we're taking towards the future.
And so you, yeah, go ahead. No, I'm sorry, this is a problem with academics, you ask a short question, and we give you a long answer. Sometimes when you have two academics, you have three opinions.
Govindraj Ethiraj: So, you know, you talked about audacity, which I guess is a driving force for most entrepreneurs. I mean, actually, all entrepreneurs in some way or the other, but obviously some more than the other. And that clearly distinguishes Tesla as well.
If I were to move on to the other point that you've talked about, which is parallel development, where you say, you know, product development and market development going simultaneously, and that does seem a little unusual. But in the context of parallel development, and let's say the whole approach to launching a high-end roadster first, which I've seen, by the way, I think a decade ago, I had seen, including, I think it was at the Tesla factory in Fremont. And but then moving on to, let's say, the mid-range, more affordable cars, is that, I mean, did the company and its founder and team think this through right in the beginning?
Or were they just continuously improving and course correcting? I mean, how do we know that precisely today?
Rajendra Srivastava: Well, we'd have to talk to Elon Musk to get the real thing, but this is my interpretation. And see, when you have small volume initially, and the car, if I go back to 2004, was very different. The battery range was very short, maybe 70, 80 miles somewhere in that range.
But what the car did have is power. Now, if you turn on your ceiling fan and you put it on high, it revs up in three seconds, right? It doesn't take three hours to get there.
So the electrical motor had an advantage that it would rev up faster than the internal combustion engine. Now, what that meant is that it could pick up speed. And what Mr. Tesla did was very smart. He said at the beginning, when the volume is small, you need a high price. And who could afford the price? And what would the car look like?
It turns out that if you have a car that has a lot of speed, it has a lot of oomph in it, so to say, the people who were willing to pay for that car would be Hollywood and Bollywood. And who could afford it? Now, what has been done by the companies sequentially since then is they've followed something that we call the experience curve pricing 40 years ago.
What an experience curve is that for every doubling of volume, what is the cost reduction that you can expect? So 7% experience curve means that you expect the cost to come down by 7% for every doubling of volume. So what Tesla has done since then is that it has anticipated the growth and it had priced, it has improved product and cut prices simultaneously almost every year.
Now, what the reason for the big growth in terms of market cap and people don't understand it sometimes when I say Austin, Texas, that's where Tesla is in the headquarter, that Austin, Texas is worth more than Detroit and Stuttgart and Toyota combined. And what I'm saying is Tesla is worth more than General Motors plus Ford plus Daimler, Benz, and BMW and Volkswagen and throw in Toyota for loose change. So now, why is that happening?
The reason it is happening is that, number one, it is cheaper to produce an electrical vehicle than an internal combustion engine. It has fewer parts. Secondly, because they don't have to pay the dealer, the margins on in 2022 for a Tesla were $9,700 per car and about $1,850 for a Toyota.
In 2023, I think it came down to $8,000 per car when Toyota was still about $1,700. Today, I think it is close to $7,000 per car and Toyota is still less than one quarter of the margin per car. So number one is the margin that is there.
The more important part is the growth rate. So I don't know the exact numbers, but in the U.S., Tesla is holding on to a very high market share and people talk about subsidies. The biggest subsidy that Tesla got or that electrical vehicles got in the U.S. was the right to drive in the high occupancy lane. Now, if you were an executive and you were thinking of buying an internal combustion engine car for $50,000 and you could save 20 minutes each way by driving in the HOV lane and the Tesla was priced at $60,000. So for $10,000, if you could save 40 minutes a day, that 40 minutes would translate into let's say 20 days a week, that's 800 minutes and you divide it by 60 and that's about 12-14 hours a month. And so what people were doing is they were willing to pay a premium for something, having something unusual, which at the same time was helping them in a really safe time on the road.
So the biggest subsidy from the U.S. government was the ability to drive in the high occupancy rain. And of course, also to keep BYD out of the U.S. markets with a very high tariff.
Govindraj Ethiraj: So, you know, if we were to fast forward to today and I'm going to come to the India universe in a moment, things are not working out that well for Tesla or for that matter, all electrical vehicle companies, because sales have slowed down at least, and maybe we went through a high adoption phase, but now sales have slowed down in countries like India, where we've had strong sales in EBITO. India is a much smaller market, at least for passenger vehicles. We are now seeing hybrid cars overtake passenger vehicles in electric vehicles in sales and rate of sales.
So we are at a slightly newer phase of evolution or challenge of evolution in electric cars. So how do you see Tesla coping with this phase and whether what you've talked about as strategy and strategic approach applies to this phase as well?
Rajendra Srivastava: All right. So in most cases, it's going to be the, what I would call is the evolution of standards. Now, Tesla had been very smart in letting all the other electrical vehicle manufacturers say, you can use up our talent, our patents.
And so if there were other companies that were sitting with their patents, were sitting on top of Tesla patents, then Tesla had the same advantage that Texas Instruments had 40 years ago, because many semiconductor designs are sitting on top of TI designs. And so therefore, TI used to make a lot of money simply by licencing. So this is what Tesla was trying to do to drive standards.
It's very similar to Microsoft lending a lot of technical and financial support for developers of apps. Now, in those days, we call them independent software vendors. So the computer became more useful with more applications.
Now, what is going on at the moment is, I would say in India, there's going to be a battle between electrical vehicles and hybrids. Okay. So now the government had favoured electrical vehicles.
And what is beginning to emerge is that hybrids have certain advantages. And one advantage is that they are self-charging. And so you don't need the charging stations on the highway because the car itself will be self-charging.
So I don't know how the standards issue is going to work out in India, but that's going to be a major component. The advantage that a hybrid has is that it's able to use the existing system for petrol distribution. So, you know, that is an advantage.
Now, when it comes to the electrical vehicles, it will come to who else is competing. And in India, what we see is that BYD for the Chinese companies is a fairly fierce competitor. The Chinese company is actually vertically integrated and they are doing the batteries, et cetera.
Tesla is dependent on the Chinese for the moment, you know, for the battery technology and for the resources, for the raw materials, the rare earths that are needed there. So to make a long story short, the electrical vehicle story is not over yet because in part it's going to be competing with the hybrids. And I don't see the hybrids going away in Asia.
Govindraj Ethiraj: Let's look at the India example, and before I come to that, you know, we talked about backcasting and you've described the Tesla story, but in a way, perhaps the flip to that is Facebook or Meta and its Metaverse initiative or Metaverse project, which obviously ran or runs into tens of billions of dollars. So tell us, what is the contrast here?
Rajendra Srivastava: The contrast between, let's say Tesla and Meta was that Tesla took the effort to make sure that the ecosystem was in place and that the applications, you know, were functional. Now, Meta has certain uses. For example, it could be used, you know, very well in the context of education and training and things like that.
But it wasn't a general, I mean, to develop Meta further, they would have to develop the applications. And that is where they kind of failed. And with the evolution of everything else that goes along Meta, so if you look at the success of Google or you look at the success of Apple, it is the applications that kind of run on it.
And it is also the acceptance of those applications, you know, from the end user. I mean, Apple, you know, great as the brand may be, but you'll see that when it comes to the Apple Pro and so on, they're using the Outlook as an operating system. And so it's really, you and I use Outlook and I could not operate without Outlook in the amount of emails, et cetera, that I have to deal with.
So it is actually the public that sets the standard and the standards are set by the applications more than just the core technology. And that was the problem with Meta. Maybe they had invested in the core technology, but there weren't enough applications to be able to permeate the market.
And so that I see as one of the key issues why it didn't succeed immediately.
Govindraj Ethiraj: Right. Let's come to India. I mean, in the beginning, you've talked about several growth industries, including in hospitality, many, a lot of services orientated industries.
You know, one of the challenges for Indian companies in general is innovation and in specific, as well as innovation, as let's say, we face a more competitive world. 2025 looks like we're going to see tariffs, maybe rise the nature of, let's say, business and competition changing. So how are you seeing Indian companies and maybe some industries apply these concepts for their own innovation cycles or innovation initiatives?
Rajendra Srivastava: A big advantage that Indian companies have is that the Indian market itself has been growing. So they are kind of, you know, if left there, depending on the nature of the industry, I lick my finger and say, well, only 10% of the industry depends, is really exports. So 90% is still there to sustain the internal growth.
And we do need to make more progress. I think we've done very well on the services sector, but we've done well at the low end of the services sector. And so what I mean by that is the harder Indian IT companies work, the bigger is the smile on companies like SAP, because we are building products on top of SAP and the applications that we develop are going to run on SAP.
So SAP is going to make money anyway. So we need to start rethinking, you know, what we do in terms of the products, the base products on which other, you know, newer generation products are going to lie. But we also need to understand the relationship between physical products and the service sector.
In today's world, in the automotive sector, somehow Maruti has miraculously held on to about a 45% market share. You would not expect that to happen in a market as competitive as India is. And we have to ask why.
And the answer, frankly, is in peace of mind. When you, you know, if I go back 30, 40 years with Maruti, Maruti did a great job in training mechanics, you know, certifying mechanics, making sure parts are available in all the villages, et cetera. So when you buy a Maruti today, it'll be, it's fixable pretty much anywhere.
And that is a competitive advantage that Maruti has. So what Maruti has done is that the product business, it has created a service business. And that is what we need to keep in mind.
And the product need not be a physical product. The product itself could be a software product on which services are being run. So going back to your question, I think the advantage that we have is we have a large market ourselves.
This market is growing and there will be others who are going to rely on the Indian market. So we see some temporary lapses in FDI and FII, but where are you going to take the money if you take it out of India, where are you going to put it? And yes, a lot of, you know, we're failing sometimes because the movement out of China has gone to Philippines and it's gone to Vietnam.
Not as much has come to India as one might have expected. Hopefully we can make some changes in that, but the big difference is going to be the Indian market itself. And when you sit, we were talking about electrical vehicles.
When you sit in a Tata Motors or you sit in a Mahindra, it's not like they're third world automotive companies. They're pretty good standards. So whether we're talking about telecom now or we're talking about automotive or we're talking about, you know, white goods, you know, you were talking about LG earlier on.
You're having a conversation about how, you know, how India is an important market for LG. And the answer simply is because in India, you know, we are still moving into, sorry, we're still trying to get families to move into housing. And when they move into new apartments, we need small refrigerators at least.
So it is, the market is being built up with the improvement in infrastructure. And I expect whether it's white goods or healthcare or even the automotive market, you know, not everybody needs a BMW. And I think Nano may have failed, but it started a revolution in the sense of low end automobiles where two or three people can go shopping and which you can park in the very tight spaces that we see in India.
So in India, we have a category of automotive vehicles that are very small that you don't normally see also in the world.
Govindraj Ethiraj: So you gave the example of Maruti as someone, I guess, has back casted in a way by looking at the manufacturing plus services model or approach, also driven by need, because in India, you cannot succeed unless you have a good service and dealership network in automobiles. What's an example of something that's not worked because in India, or has not worked to, let's say, potential because maybe of not thinking this through?
Rajendra Srivastava: Oh, what is not true? I think if I have any complaints, so to say, it's we move sometimes very slowly, you know, given the opportunity that is there. And so what has not worked is I won't go so much to a product as I would go to a mindset.
And the mindset is that we still keep thinking of EBITDA, EBITDA, EBITDA, when it comes to, you know, managing a business, we're looking at the past, we're looking at short term profits. And the growth is going to come from investing in product development, investing in the infrastructure, investing in a supply chain or what I might today call a demand chain network. So it's, we don't invest in product design, we don't invest in supply chain management, we don't invest in, in customer engagement, meaning branding or customer solutions.
So this notion of keeping costs down as a way of competing is not going to, is not helping internally in the growth, but externally, it will, it'll just keep Indian companies at bay. There are very few like Tatas that are doing it, but the majority of Indian companies just look at short term quarterly profits. And that is not the way to, to grow a business.
Just to complete what I'm saying, the research that I've done shows that the value of businesses depends on, you know, profitability, of course, but the growth rate, meaning scale, also development of scale, but it is also based on resilience, which is our ability to hold competition at bay, or I may use another word in exchange of resilience, I'll call it immunity. So what I'm saying with the earlier example of Maruti, it had built certain amount of immunity through the distribution and parts network, et cetera, that it had developed. Now, I don't know if they did it knowingly as backcasting, or that was simply the Japanese way of doing things, you know, back then, but clearly what they were able to do is to build an ecosystem, which has helped them.
But in India, we need to do more in product design and product development. I sometimes start a section on product design by showing Ambassador Mach 1, and an Ambassador Mach 2, Ambassador Mach 3, Ambassador Mach 4, and an Ambassador Mach 5, and then an Ambassador in red colour that was in the Smithsonian, where I took a picture. It was in the Smithsonian because it was the car that had the longest uninterrupted production run of 50 years.
So that's my counter example. You know, we have a lot of technology coming in, it's pretty freely available, and I think we should use technology, and particularly the human capital that is in India, the rest of the world is using that human capital, why can't we further invest in that human capital and use it? The number of people that are leaving the country, that's, anyway, I think we can't afford to keep losing all the good people, that's all.
Govindraj Ethiraj: So let me, I mean, I refer to it broadly, you know, this is, 2025 is going to be a different world, I mean, every year is new and different and challenging, but 2025 is going to be different because, among other things, the way global trade was organised so far could change, principally because the United States is saying that it wants to impose tariffs on everyone and some countries more than the others, and that can create more challenges for organisations or companies, particularly in the product space.
So how are you seeing this from your vantage point?
Rajendra Srivastava: Well, I think there's going to be a limit to what the U.S. will impose, because as you increase tariffs, so it also increases the prices, you know, for the U.S. consumers, and that is going to trigger inflation. So what is being said is going to be implemented in some, not in an unlimited way, it's going to be implemented, you know, with some controls on it, because you don't want to drive our economy into an inflationary environment. The art that I think is going to continue in 2025 is going to be the investment that we'll see in the Indian market.
See, a large part of it is actually coming from the Indian diaspora. We keep talking about, you know, FDI. I think FDI has been in the range of 60 to 80 billion dollars, depending on the year in the last three years.
But the Indian diaspora has been sending over 100 billion. And we tend to forget that source of money that is also coming in. So what is going to be important is that India not going to defreeze on spending.
We have a habit of saving more than perhaps we need to, but we do need the savings for growth. But we can't, you know, if we don't fall into this trap of cutting back on spending, then the economy, you know, ought to be okay. If I go back to the U.S. economy, and then let me draw an analogy. In India, we have about, the last number I saw, 850,000 students who go abroad for education. The average expenditure is close to about 55,000 per student, including tuition, living, transportation, etc., etc. To make a long story short, it's about 45 billion dollars that is being spent.
Now, education is a service industry. And where is this 45 billion going? It's going to the U.S., number one. Then probably Canada, UK, and Australia, and the Middle East. So this is where this money is going. Now you take GCCs in India.
What are GCCs? These are the competency centres. But you have companies like Wells Fargo with 35,000 employees in India.
Medtronic has a research centre in Hyderabad. So and so, you know, Daimler-Benz has the research centre in Pune. Now, there are about 1900 GCCs in India, and they keep employing people.
Now, what we have, therefore, is a service industry out of India, which is actually an export industry. So you may stop H-1B visas or whatever in the U.S., but the jobs are still coming here. And what we have seen happen in ISB, as an example, is that people are turning down jobs in Europe.
A job in India with the Indian salary, and you multiply whatever it is by three, because that's the purchasing power parity, you can live better in India than you can live in Germany. And so what we are seeing is because of that opportunity, we're seeing more talent retention happen in India. And I expect that the GCCs will continue to grow, and with the GCCs will be the capability growth.
So when you take a company like Daimler-Benz, they rely on their Indian operations for access to engineers who are essential to design electrical vehicles and hybrid vehicles. And so this part of India is going to also continue to grow. And some of it, some of these GCCs are going to spill over into Indian businesses, which will hopefully start doing what the GCCs are doing in India, and use that same talent for engineering design and going up the value ladder.
Right, and that could well be happening already. Oh, it's happening, because if I look at it, they're about, I don't know the numbers, I'll pull them out for you in a day or two, but I suspect with 1900 GCCs, we must be employing, you know, at least a million people. And the numbers should be freely available, we can do a calculation later.
But let's say that about 300 million, sorry, 300 billion is the value that is coming out of it. Why? Because, you know, if you look at the human capital cost, it may represent, as an example, about 10% of the total value generated.
So when you take a company such as Applied Materials in India, or Texas Instruments India, these are the engineering design companies. What we know is the human capital cost out here. But if we go to the West and look at the ratio of market value to human capital, you'll see that that ratio is significant.
So if the human capital cost in India, I'm just licking my fingers saying, let's pretend that there's about, you know, 30 billion, then if the market value to human cost ratio is 10 to 1, that means we are producing, you know, 300 billion, which is 10% of our GDP. So those numbers are not being added in terms of what India produces. And over a period of time, they will start trickling into the Indian GDP.
And so, so putting restrictions on, on visas for Indians may actually be a good thing for India, because these will be design engineers who design out of India and not design out of Palo Alto.
Govindraj Ethiraj: Right, Professor Srivastava, it was a pleasure speaking to you. Thank you so much for joining me.
Rajendra Srivastava: Well, thank you for having me. And it's good. I didn't realise I was touching base with you after nine years. Yeah. But thanks for having me again.
Govindraj Ethiraj: Take care. I look forward to seeing you soon as well.
