GERRY GRIMSTONE BUSINESS BRIEFING
June 4, 2009
BUSINESS AMBASSADOR ENCOURAGES SCOTLAND'S FINANCIAL SERVICES INDUSTRY TO LOOK AT OPPORTUNITIES IN INDIA
Speaking to Scotland's financial services industry today, Chairman of Standard Life, Gerry Grimstone, reiterated the importance of India's growing economy to Scotland and the wider UK.
As one of the UK's Business Ambassadors and UKTI's financial services "India Champion", Gerry Grimstone helps coordinate a myriad of financial services sector activities between Indian and British public and private sector representatives.
He spoke today to an audience of Scottish Financial Enterprise members in Edinburgh.
Owen Kelly, chief executive of Scottish Financial Enterprise, said:
"India is a market of growth for companies in Scotland, and it was great to have Gerry Grimstone talking to our members about developing business in a way that is mutually beneficial to companies here and in India.
"Gerry's comments on financial inclusion were particularly interesting. I think a central aspect of the UK's growing relationship with India in financial services is financial inclusion. Standard Life is a good example of how a company can contribute to the local community while doing business, whether at home or overseas."
Key topics discussed and speech extracts:
On growth and scale of business in India, Gerry Grimstone commented:
"India is today about the world's eleventh largest economy just behind Brazil and Russia. By the year 2050, Goldman Sachs believes it could be the world's second largest economy still behind China, but bigger than the US.
"This dramatic expansion growth is driven by various expectations - population change and improvements in productivity and infrastructure. There are always many uncertainties in these projections but one thing is clear. The population growth is certain.
"Over the past three years, India's economy has grown at a magnificent average of 9% a year. And the Indian private sector-whose foreign investments overseas in 2007 exceeded those made in India by foreign firms-has led the charge.
"Less certain are the improvements in productivity and infrastructure to create the economic growth but the outlook there, as I'll come to later, looks potentially better now than it has for some years."
On UK investment in India, Gerry Grimstone commented:
"The UK is one of the largest investors in India - but also India is one of the largest investors into the UK. Unlike China, it's a very young country and almost 40% of Indians are younger than 15. It is such a country of contrasts.
"Although the financial crisis has affected every country in the world, anyone travelling to India today cannot but be struck by the awesome self confidence that is present almost everywhere.
"The UK and India stand together as equals. And when Indians look at the five per cent or more of economic growth that they are still experiencing this year, you have to allow our Indian colleagues a certain feeling of supremacy.
"The UK is the third biggest investor in India but we certainly don't always have things our own way. Many Indian graduates look to the US rather than the UK and all our competitors are active there. We may have the advantage of a common language and reasonably comparable legal and other frameworks but we sometimes have the disadvantage of familiarity."
On the political landscape in India, Gerry Grimstone commented:
"The timing of today's lunch is very important because things have certainly now changed in the political landscape. Last month, in the world's largest and longest general election, the Congress Party was returned to power with what looks like a stable parliamentary majority that should last it a full five years. And what an election! In a country where one in three people are illiterate, 417 million people voted using faultless electronic voting in a 58% turnout. Around 300 political parties participated.
"During the election, serious commentators were fearful that there wouldn't be a stable Government created. And what India badly needs is stability because there is so much to do. Much to everyone's surprise, the India Electorate have delivered. Congress won 261 of the 543 available seats and with support from a few tiny regional parties and independents, they have created what looks to be a strong Coalition Government.
"The stock market was euphoric and rose by a remarkable 17% on the first post-election trading day. As always in the market, this was probably an over-reaction and there are probably some exaggerated expectations about how quickly India can return to a high-growth path. Growth there will certainly be but with the fiscal deficit currently around 12% of GDP, there is no overnight solution particularly as Congress have understandably a simultaneous pro-poor development agenda with clear social sector spending objectives."
On his position as India Champion for UKTI, Gerry Grimstone commented:
"An important theme of mine as "India Champion" is that in the area of financial services we must be seen to be giving as well as taking. Financial inclusion - bringing financial services to those currently not able to access them - is a big priority in India. British firms are certainly playing their part in this and we're trying to publicise this and to get laggards to catch up with the leaders."
On Standard Life's operations in India, Gerry Grimstone commented:
"Standard Life has two joint ventures in India - both with HDFC. Our businesses are very substantial. Our Life and Pensions Company ranks about sixth in the market with around 5% market share, has 14,000 employees and around 200,000 dedicated agents operating out of around 600 branches across India. Interestingly, all agents have to through a minimum of 50 hours training and pass an examination before being granted licences to sell. Our Asset Management Company is second with over 3 ½ million customers and a nearly 12% market share.
"What we have learnt from being in India? In our business, having a good partner is essential and we were very fortunate in this. We're not allowed to own more than 26 per cent of the business due to the past restrictive Indian legislation. There's no logic to this and there's a good chance that the new Government are going to pass a Bill that will raise this limit to 49 per cent and also to modernise Indian insurance and pension law. We're very close to our partner and, of course, as with any relationship, effort has to be put in to make it work. We try to make sure that relationships work well at the personal level as well as the commercial. This takes time and effort but has stood us in good stead."
"For businesses in this room that are not yet in India, I'd encourage everyone to develop an understanding of what will surely continue to be one of the world's great markets in the years to come and to assess what opportunities it presents."
In October 2008, Prime Minister Gordon Brown Prime Minister announced the creation of a Business Ambassadors network, who collectively offer a wealth of business experience and knowledge across a range of sectors and markets.
