Jeremy Butler: India still bubbling with ambition

Oct 22 2008 By Jeremy Butler

According to the latest figures from the National Bureau of Statistics, China’s economy is slowing, and much more quickly than was anticipated.

In the third quarter of 2008, GDP dipped to nine per cent from 10.1 per cent in the second quarter, providing the first clear indication that China does not have the level of economic immunity that was first thought.

India, too, is feeling the impact, despite claims that its growth was not dependent upon the West.

The withdrawals of funds invested through the Bombay Stock Exchange by foreign investors has resulted in significant falls.

It is also probable that India’s service sector could see a detrimental impact as Western clients cut back on projects. Credit availability is also tight as fiscal deficits increase and the private sector competes with the government for capital.

Yet among these negatives, there is also a clear sign that India has not lost any of its ambition. Its merger and acquisition spending spree remains largely intact although the bulk of the transactions are in the SME segment. Much of the activity is domestic but many corporates see huge opportunity to buy western assets at currently depressed values.

Through rapid growth, strategic investment and conservative management, Indian businesses have built up cash reserves which have placed them in a better position to continue their plans despite the global conditions.

With Indian companies looking to invest, joint ventures and mergers could be on the cards, but so too could be the possibility of a local company looking to progress their plans to set up a presence in one of these nations.

The current climate certainly provides food for thought, but managers must ensure they do not stall their plans or they could find themselves in a situation where it is simply too late – no one is immune to global competition.

* Jeremy Butler is associate partner at KPMG's High Growth Markets Practice.