Cover Story: Business/Living, Surging South

Is the Buzz for Real?
It's as real as the future of the knowledge economy. And that means the buzz is beyond infotech and beyond the gloss that expatriate business and presence inevitably brings. It means that southern metros are by far cheaper to live in and work in than traditional hot-spots like Mumbai and Delhi. It means that in Chennai, for instance, even as Ford Motors, Hyundai, Toyota and Mitsubishi are driving business as much as the opening up of American, Korean and Japanese-style restaurants and entertainment complexes, traditional big names like spic, the Murugappa group and MRF still call many shots. Andhra Pradesh and Karnataka too have large investment commitments from both infotech and non-infotech companies. Infotech has the greatest gloss -- and the more obvious wealth creation surrounding it -- but each of the states' investment count is more than 90 per cent in manufacturing, heavy industry and infrastructure.

KERALA: HOT DESTINATION

Kayakalpachikitsa and njavarakkizhi are Dutch words. Okay, so it seems that way because of the ease with which Marc Van Heerden rolls the words in his mouth. The first is a Kerala-style ayurvedic longevity and immunisation treatment; the second a "perspiration treatment" with "medicinal pudding". Marc's New Zealander girlfriend Kate waits her turn at a small "ayurvedic hut" on Papanasam beach at Varkala. There are aficionados crowding similar spaces from north Kerala to south, from Varkala to Poovar or Chowara -- villages near Kovalam beach off Thiruvananthapuram -- paying between Rs 250 to Rs 70,000 for various treatments in establishments ranging from dingy huts to top-end floating cottages.
Kerala is ruled by a left-wing Government that goes ballistic every time someone says "capital". It's years behind the pro-business approach of neighbours Karnataka and Tamil Nadu. But recently, the state has studiously worshipped and marketed a God of Seven Letters: Tourism. And it's making a killing.
A National Geographic Traveler issue last October described Kerala as "Paradise Found" and picked it among the 50 "must see" destinations of the world. Soon after, Lonely Planet, the global tourists' bible launched a Kerala guide. In April Time recommended, "Afoot and afloat, Kerala is worth the journey."
Evidently, many agree. Drawn by relatively uncrowded beaches and backwaters and the lure of ayurveda, in the past decade the number of foreign tourists to Kerala has grown from 66,000 to almost two lakh a year, revenue from tourism from Rs 27 crore to more than Rs 500 crore. In fact, says Kerala's Tourism Minister E. Chandrasekharan Nair, his Government is "game" for any amount of private investment. Meanwhile, the Government has boosted its annual budget for tourism from Rs 10 crore in 1995 to Rs 40 crore last year, aggressively selling Kerala worldwide. It has just launched -- internationally -- a slick series of tv ads shot by movie ace Santosh Sivan at a cost of Rs 70 lakh.
Kerala offers a Goa-like budget spread, from Rs 150 a night room for backpackers to Rs 5,000+ for premium backwater dives, but to many the flipside of the state is its poor infrastructure like bad roads. More worrisome are fast-buck hunters in ayurvedic "resorts" of which about 150 have mushroomed. Says Dr V. Franklin who runs Panchakarma Institute and Research Centre, a major clinic near Kovalam: "Quacks and hoteliers have commercialised ayurveda to such an extent that if not monitored, it can die fairly soon." Recently the state Government closed down 25 iffy ayurvedic massage parlours after a Swiss tourist ended up with a broken neck during a thirummal for his cervical spondylosis. As Kerala is fast discovering, a boom needs nurturing.

-M.G.Radhakrishnan

Two distinct demographical characteristics of the south help keep the business flowing in. A higher literacy, especially mathematical literacy and wider usage of credit transactions. Compared to the national average literacy rate of 52.2 per cent, Tamil Nadu's literacy rate is 63 per cent and Karnataka's 56 per cent. Andhra has some catching up to do. Its endemic rural illiteracy, has kept the overall literacy rate at 44 per cent. But it too has higher than average urban literacy. That means better media networking, more effective advertising and stronger brand awareness. Says Shekar Swamy, president, RK Swamy BBDO, a major advertising and market research agency: "The south is far ahead in terms of retailing, media consumption, circulation trends and newspaper readership. Which is why consumers are more brand-aware than they are in the north."

High media penetration helps driving a consumer -- and business -- boom. According to the irs-99 figures, the reach of press, television and radio in households with annual income up to Rs 1 lakh stood at 85 per cent in Andhra Pradesh, 91 per cent for Tamil Nadu, 91 per cent for Karnataka, 88 per cent for Maharashtra and 82 per cent for Gujarat. This is one of the reasons why the south has always been big on retailing. From the Chennai-based food chain like FoodWorld that offer "value-added food and convenience without a price penalty" to Kids Kemp in Bangalore, super stores have traditionally entered India from the south. Says Probir Mukherjee, general manager, Marketing, Philips India: "The south has always been a stable market and appreciative of branded goods." It's just that now the south is simply too much in on the action, from credit cards and apparel to big ticket items like cars and housing not to take notice. Essentially, the south is building a future on a solid past.

What's the Future Buzz?
The self-regenerating nature of the infotech industry should ensure a prolonged boom for the south. Yet there are handicaps that could limit and even severely hamper the dream run. Severely squeezed infrastructure -- especially power -- is one such bottleneck. Though much better than the northern and eastern states, infrastructure in the south has not kept pace with business expansion. Warns Arun Bharat Ram, president, Confederation of Indian Industry: "The south has done better than other regions, but the states have a lot more to do, be it the creation of more infrastructure or toning up of administration."

Karnataka still lives with chronic power shortages and a pre-historic Bangalore airport. Roads around Bangalore were so bad that Infosys Chairman N.R. Narayana Murthy created history first by symbolically picking a spade and filling potholes on the Bangalore-Hosur highway. The state aims to add as much as 5,000 MW of power between 1998 and 2003, but not a single MW has materialised so far. Andhra is in a similar situation, where power reforms and privatisation have lost momentum even as Naidu drums up business. "Investment will not come overnight," admits Naidu. "We will work on improving infrastructure." He has no choice.

Faced with the criticism of being obsessed with infotech, he is now looking beyond. Naidu has appointed a committee headed by the former Reserve Bank of India governor M. Narasimhan to prepare a blueprint for developing Hyderabad as a financial hub. The state is also lobbying to get the proposed national commodities exchange, planned on the lines of the Chicago Mercantile Exchange. A free trade zone is also under consideration.

Karnataka has identified four growth corridors for focused and planned growth of certain key industries. These are Hubli-Belgaum (for engineering, auto component, agro-processing and textile), Raichur-Bellary (steel, cement, power), Mangalore-Karwar (petrochem, sea food) and Bangalore-Mysore (infotech, biotech, food procession and floriculture). Tamil Nadu needs to tone up its ports and roads and restructure its state electricity board.

But more than anything else, the southern states will need to work more in tandem than in self-destructive competition chasing after fool's gold. The three have more going for them than perhaps any other region in India's short history. "The south will perform better as a cluster, a network, than as different states," suggests Venu Srinivasan, managing director of Chennai-based Sundaram-Clayton. "That will convert our weaknesses into opportunities." He talks about a golden triangle, a silicon triangle with Chennai, Bangalore and Hyderabad as its vertices, which could truly rival Silicon Valley. Then, education, business and wealth spreads from these cities to every point right down to the coasts and with luck, even nudge Kerala from its relative somnolence. With all the faults and problems, the future looks good. The good news is: few dispute it.

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	May 29, 2000