Posts Tagged ‘India’

Ancient Harappan Civilization a Victim of Climate Change

Wednesday, July 11th, 2012

Climate change isn’t new. A recent study found that it destroyed an ancient civilization approximately 4,000 years ago. The gradual eastward movement of monsoons across Asia at first supported the formation of the Harappan civilization in the Indus Valley by allowing large-scale agricultural production, then wiped out the civilization as water supplies disappeared.  This the initial reasoning behind why the Indus valley flourished for 2,000 years, became home to large cities and an empire the size of modern Egypt and Mesopotamia, then dwindled to small villages and isolated farms.

The Harappan civilization, named after its largest city, Harappa, evolved approximately 5,200 years ago and reached its pinnacle between 4,500 and 3,900 years ago, occupying what is now Pakistan, northwest India and Eastern Afghanistan.  An urban society with major cities, a distinctive style of writing and extensive trade, the society accounted for roughly 10 percent of the world’s population at its height and equaled Egypt in its power.  The Harappans’ downfall came because they did not attempt to develop irrigation to support agriculture but relied on the yearly monsoons.  The civilization was largely forgotten until the 1920s when researchers began studying it in depth.

Antiquity knew about Egypt and Mesopotamia, but the Indus civilization, which was bigger than these two, was completely forgotten until the 1920s,” said Liviu Giosan, a geologist at Woods Hole Oceanographic Institution in Massachusetts.  “There are still many things we don’t know about them.”

Nearly 100 years ago, researchers found many remains of Harappan settlements along the Indus River and its tributaries and in a vast desert region.  There were signs of sophisticated cities, sea links with Mesopotamia, internal trade routes, arts and crafts, and writing that has not yet been deciphered.  “They had cities ordered into grids, with exquisite plumbing, which was not encountered again until the Romans,” Giosan said.  “They seem to have been a more democratic society than Mesopotamia and Egypt — no large structures were built for important personalities like kings or pharaohs.  Until now, speculations abounded about the links between this mysterious ancient culture and its life-giving mighty rivers,” Giosan said.

“Our research provides one of the clearest examples of climate change leading to the collapse of an entire civilization,” Giosan said.  The researchers first analyzed satellite data of the landscape influenced by the Indus and neighboring rivers.  Between 2003 and 2008, the researchers gathered samples of sediment from the Arabian Sea coast, the irrigated valleys of Punjab and the northern Thar Desert to find their source and ages and create a timeline of landscape changes.  “It was challenging working in the desert — temperatures were over 110 degrees Fahrenheit all day long,” Giosan said.

After collecting the necessary data, “we could reexamine what we know about settlements, what crops people were planting and when, and how both agriculture and settlement patterns changed,” said researcher Dorian Fuller, an archaeologist with University College London.  “This brought new insights into the process of eastward population shift, the change towards many more small farming communities, and the decline of cities during late Harappan times.”

The insolation — the solar energy received by the Earth from the sun — varies in cycles, which can impact monsoons,” Giosan said.  “In the last 10,000 years, the Northern Hemisphere had the highest insolation from 7,000 to 5,000 years ago, and since then insolation there decreased.  All climate on Earth is driven by the sun, and so the monsoons were affected by the lower insolation, decreasing in force.  This meant less rain got into continental regions affected by monsoons over time.”

For the next several centuries, Harappans seem to have fled along an escape route toward the Ganges basin, where monsoon rains remained reliable.  “We can envision that this eastern shift involved a change to more localized forms of economy — smaller communities supported by local rain-fed farming and dwindling streams,” Fuller said.  “This may have produced smaller surpluses, and would not have supported large cities, but would have been reliable.”

Who Wants To Be a Millionaire?

Tuesday, July 10th, 2012

Wobbly economies that shook up markets in 2011 took their toll on the world’s rich, though fast-growing Asia for the first time had more millionaires than North America.  According to the report, the global personal wealth of people worth $1 million declined in 2011 for the second time in four years, a side effect of the Eurozone crisis and economic sluggishness in developed markets.  Several emerging markets also suffered, with the number of millionaires in India and Hong Kong falling by nearly 20 percent.  With Europe’s debt crisis bedeviling the continent, the outlook for wealth creation in 2012 remains weak, according to a report prepared by Capgemini and RBC Wealth Management.

The world’s millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion.  Only the Middle East experienced no decline in wealth.  It was the first global decline in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell 15 percent and their wealth declined by 20 percent.

Families worth $30 million or more saw their collective wealth fall 4.9 percent and their ranks shrink by 2.5 percent to just 100,000 individuals.  This decline reflects holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.

“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said.  The Toronto banking giant began sponsoring the widely watched report in May.  Lewis pointed out that the number of high net worth individuals rose even as overall wealth fell.  “It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.

Curious about how many millionaires live in nations around the world?  Read this:  Singapore toppled Hong Kong as home to Asia’s wealthiest in 2011 as declining stock markets hit the former British territory significantly harder than its Southeast Asian rival.  Hong Kong, whose stock market capitalization fell by 16.7 percent last year, saw a bigger decline in the ranks of people with more than $1 million to invest as a larger proportion of that wealth was tied up in equity.  Southeast Asia also has shown stronger signs of resilience to global turmoil than the rest of Asia as domestic spending offset struggling exports.  The number of millionaires in Hong Kong fell 17.4 percent to 83,600 last year, compared with a decline of 7.8 percent to 91,200 people in Singapore, according to RBC Wealth’s head of emerging markets Barend Janssens.  Hong Kong took the lead from Singapore in 2010 after falling behind in 2008.

China still is home to the most high net worth individuals in Asia Pacific, with a population of 562,000 millionaires.  The top five countries by population of high net worth individuals are the US (3.07 million), Japan (1.82 million), Germany (951,000), China and the United Kingdom (441,000).  According to RBC, this significant concentration of high net worth individuals is why wealth managers are attracted to Asia even if they have to contend with competition from domestic banks.

Are the troubles in the Eurozone likely to impact Asia?  Lessons learned from the 2008 financial meltdown show that while Asia tends to get hit when the world economy stumbles, the severity varies depending on which countries have the biggest trade and financial linkages, and are best-prepared with big currency reserves, overflowing government coffers and central banks with the ability to cut interest rates.  Generally speaking, Asia has more room than the West to react with interest-rate cuts and government spending.  But some things have changed since 2008, and some countries, primarily India, Vietnam and Japan, may not be in shape to survive another financial jolt.  “As we saw with Lehman, when you get a seizure in the global financial system, nobody can hide from that in the short run,” said Richard Jerram, chief economist at the Bank of Singapore.  In that type scenario — which analysts say could still occur if Greece doesn’t live up to its commitments and leaves the Euro, or Spain and Italy require a bailout that Europe can’t afford — Asian stocks and currencies would fall, shipping lanes would see less business, and lending to consumers and businesses would dry up, slowing world economies.

Bonn Climate Change Summit Has Its Own Storm Clouds

Monday, June 4th, 2012

Disagreement emerged early during the latest round of international climate change talks in Bonn, with the European Union (EU) and developing countries clashing over the future of the Kyoto protocol.  Under the terms of last year’s Durban Platform, the EU had agreed to sign an extension of the Kyoto protocol before it lapses at the end of this year in return for an agreement from all nations that a new binding treaty will be completed by 2015 and enacted by 2020.

Climate negotiators want to build on the progress achieved in Durban last year, like the agreement on a second commitment period for the Kyoto Protocol, a treaty which limits the emissions of most developed countries but which expires at the end of this year.  The length of the second commitment period is one of the issues under discussion in Bonn.  Unfortunately, Kyoto plays an progressively more marginal role in the climate-change issue because it doesn’t include the biggest emitters of carbon dioxide and other gases that contribute to global warming.  The United States exited Kyoto, claiming it was unfair because it didn’t impose any emissions reductions on fast-growing developing nations such as China and India.  Canada also said it would withdraw from the treaty last year.

Last year’s United Nations (U.N.) climate talks in Durban supported a package of measures which would ultimately force the world’s polluters to take legally binding action to slow the pace of global warming.  Delegates agreed on the “Durban Platform for Enhanced Action” – a process that would apply to all parties under the U.N.’s climate convention.  A clear timetable and targets have not yet been set.  “Parties need to think between now and Doha how they want to organize their work between now and 2015 and how they will move towards that legal agreement,” Christiana Figueres, executive secretary of the U.N.’s Framework Convention on Climate Change, said.  “My hope is they will establish milestones along the way so they are able to measure their progress.”

Figueres cited new research that predicts that the Earth’s temperature could rise by as much as five degrees Celsius (41 degrees Fahrenheit) from pre-industrial levels on current pledges.  “We still have a gap remaining between intent and effort,” Figueres said.

Additional issues discussed in Bonn and at a larger climate change conference in Qatar later this year include implementing an extension to the Kyoto Protocol; how long that will last; how to raise ambition on emissions cut pledges, as well as raising long-term financing to help vulnerable countries adapt to the harmful effects of climate change.

The treaty currently being negotiated would require all nations to curb warming.  Identifying those requirements is the primary challenge, which is why negotiators are focusing on solving incremental, less contentious issues before moving on.  “First and foremost we have to ensure that there is no backtracking on what was agreed in Durban,” said Christian Pilgaard Zinglersen, a Danish official representing the European Union.  Climate activists warned that potentially disastrous consequences of global warming, including floods and droughts and rising sea levels, will be impossible to prevent unless the pace of negotiations accelerates.  “If you look at the science, we’re spending time we don’t have,” said Tove Ryding, Greenpeace’s climate policy coordinator.

We have all the means at our disposal to close the gap, and the long-term objectives of governments remain attainable,” Figueres said.  “But this depends on stronger emissions reduction efforts, led by industrialized countries.  A sufficient level of ambition to support developing country action, concrete and transparent implementation, today, tomorrow and into the foreseeable future, is the answer.  Progress here in Bonn can give countries the confidence they need to push ahead with national climate policies.  In turn, many countries are beginning to adopt ambitious climate change legislation, which is sending good signals to the international negotiations.  All of this can give society and businesses confidence to act faster themselves.”

Great Recession Had Little Impact on CO2 Emissions

Tuesday, December 20th, 2011

Worldwide CO2, emissions have risen by nearly 50 percent in the past several decades, with 2010 now holding the record as the year with the most greenhouse gas emissions on record.  Burning fossil fuels released more than 36 billion metric tons of CO2 in 2010, due primarily to growth in China, India, and the United States.  Deforestation is another core cause.

Going back half a century, nothing seems to have set back emissions for many years and that includes the Great Recession that started in late 2008, according to a new study published in the journal Nature Climate Change. Other studies indicate that mankind has burned approximately 50 percent of available fossil fuels if we don’t want the climate to warm by more than two degrees Celsius.  More to the point, we’ll need zero or negative emissions and emissions to peak sometime this decade to avoid any further warming.

Emissions rose approximately 510 million metric tons of carbon to reach 9.14 billion tons in 2010, the most in records dating to 1959, according to the Global Carbon Project.  That represents a 5.9 percent increase, the largest since 2003, when they jumped six percent.  The 2010 global emissions were 33.5 billion tons when converted to carbon dioxide.

“We’re going exactly in the wrong direction for limiting global warming,” said Corinne Le Quere, co-author of the Global Carbon Project’s report and a director of the Tyndall Centre for Climate Change Research at the University of East Anglia, England.  “Governments need to develop ways to boost the economy using renewable energy,” she said.

“Global CO2 emissions since 2000 are tracking the high end of the projections used by the Intergovernmental Panel on Climate Change, which far exceed two degrees warming by 2100,” Le Quere said.  “Yet governments have pledged to keep warming below two degrees to avoid the most dangerous aspects of climate change, such as widespread water stress and sea level rise, and increases in extreme climatic events.”

There’s growing evidence that 2011 will almost certainly be the 10th warmest on record, and the hottest featuring the La Nina phenomenon that brings cooler waters to the surface of the Pacific Ocean, the World Meteorological Organization (WMO).  “There’s clearly a warming trend.  That’s supported by other indicators such as disappearing Arctic sea ice, melting glaciers and rising sea levels,” Peter Stott, head of climate monitoring at the U.K. Met Office, whose own temperature estimates feed into the WMO data, said.

“The global financial crisis was an opportunity to move the global economy away from a high-emissions trajectory.  Our results provide no indication of this happening,” according to the study’s authors.  The study was issued at a planet-warming gases panelat U.N. climate talks in Durban, South Africa.

Writing on Times’ Ecocentric blog, Bryan Walsh notes that “The study underscores just how little we’ve done to slow the increase in carbon emissions. Since 1990 –the base year for the Kyoto Protocol –carbon emissions from fossil fuels have increased by 49 percent, making a mockery of that global treaty’s ambition to cut emissions by at least five percent.  And it’s getting worse –on average, fossil fuel emissions have risen by 3.1 percent a year between 2000 and 2010, three times the rate of increase seen during the 1990s, even as global warming has become a global concern.

According to a Nature blog, “What’s new in this analysis is that it puts the recovery in context with previous global crises.  It also updates a novel type of carbon dioxide accounting pioneered by lead author Glen Peters, who is at the Center for International Climate and Environmental Research in Oslo.  Usually, and under the Kyoto Protocol, carbon dioxide emissions are identified with the nation that produces them.  Yet rich countries have largely achieved cuts in CO2 emissions since 1990 by importing goods made elsewhere.  Around one-fifth of China’s emissions, for example, come from making goods demanded by consumers in other nations.  If you count the CO2 emissions embodied in final consumer demand, the study shows, Kyoto’s ‘developed’ countries are consuming more carbon dioxide now than they did in 1990 — although they report cuts in domestic production.  Even so, 2009 marked the first time that developing countries consumed more carbon dioxide than developed countries.  The crisis may not have fully passed, and it’s too early to tell whether the green stimulus packages introduced in recent years will have a positive impact, the study says.  For the moment it’s sobering to think that the pain caused by the financial crisis made but a small dent in global CO2 emissions.”

Saab Story

Thursday, July 7th, 2011

Venerable Swedish automaker Saab is unable to pay its employees and is likely headed into bankruptcy.  Saab and Zeewolde, Netherlands-based owner Swedish Automobile NV, are in talks to raise cash, the company said.  Options include selling and leasing-back the factory in Trollhaettan, Sweden.  “There can however be no assurance that these discussions will be successful or that the necessary funding will be obtained,” said Swedish Automobile, which was previously known as Spyker Cars NV.

Saab’s chances are “slim,” according to Martin Crum,  an analyst at Amsterdam’s Effectenkantoor BV.  “The company is still not able to produce cars; that’s the main concern.  If you don’t sell cars, you don’t get cash in.”  The pending property sale “can provide some badly needed liquidity for the short term, but for the longer term they of course need more,” Crum said.  Saab came close to being a casualty of GM’s brand shedding after its government-backed bankruptcy, when it stopped the production of Saturn, Hummer, and Pontiac cars.  The Swedish unit was slated to shut down after a group led by Koenigsegg Automotive AB pulled out of talks.  Spyker’s bid came after GM had already begun to shut down Saab, ultimately paying $74 million in cash and $326 million in preferred shares.

A spokeswoman for Saab admitted that approximately 2,200 office workers, designers and engineers might not be paid as Sweden goes into a holiday.  Apologizing for leaving production line staff without paychecks, she said “The last thing we want is to be forced to come with this very sad news the day before a major Swedish holiday.  We would not have done this if we were in a situation where we had an alternative.”  She said Saab was not actively preparing for bankruptcy, but the carmaker is making an eleventh-hour bid for cash by negotiating a sale-and-lease back of its Trollhättan factory with unnamed parties.  “(Bankruptcy) is not the scenario that we are working with.  We are working very intensively on securing short-term financing to improve the situation of the company, of course to pay our employees and to work with suppliers to get production going again.”

Neil King, an analyst at IHS Automotive, said Saab seems to have been left behind by the emerging market boom in nations such as Brazil, China and India.  “They suffered as a result of the financial crisis but unlike their peers, they have not capitalized on booming demand for premium cars in the emerging markets.”  Saab production fell sharply from 123,000 in 2007 to 33,000 in 2010.

Swedes are mourning the waning of the Saab brand,  which was established in 1937 and became one of two internationally known Swedish automakers along with Volvo.  At present, Saab appears to be on its last leg as there has been no recent talk of a government bailout or rescue plan.  Upon hearing the news, one employee said “It is dreadful.  Completely unbelievable.  I get chest pains,” worker Fredrik Almqvist said.  “How on earth are we supposed to pay our bills?”  “I have worked at the factory and know many who worked there.  You should never give up hope, but right now it looks extremely bleak,” Veli-Pekka Saikkala, a representative of IF Metall, said.

Writing on the Automobile website, Donny Nordlicht  says that Saab appears to have had a bit of a reality check, as its latest press statement says ‘There can, however, be no assurance that these discussions will be successful or that the necessary funding will be obtained.’ Saab’s newfound realistic outlook is not assuaging fears, however.  IF Metall is demanding that the automaker pay its members wages, saying it needs to resolve the short-term cash flow issues immediately.  If Saab does not pay up, IF Metall has threatened to enter legal proceedings to procure the wages, something that would most likely end only in bankruptcy for the automaker.”

Where’s Our Recovery? Job Growth and Productivity Falter

Monday, June 13th, 2011

Sluggish job growth in May could be a sign that the economic recovery is losing momentum.According to the ADP May Employment Report, a mere 38,000 jobs were added in the private sector on a seasonally adjusted basis.  That was well below consensus estimates of 170,000 new jobs.  The report also revised downwards the estimated change from March to April from 179,000 to 177,000. “A deceleration in employment, while disappointing, is not entirely surprising,” the report said.  “In the 1st quarter, GDP grew at only a 1.8 percent rate and only about 2¼ percent over the last four quarters.  This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment.”

Patrick O’Keefe, director of economic research at J.H. Cohn, said that although some seasonal factors may have been at work in the recent claims data and in the ADP estimates, the report still disappointed.  “We can put away our balloons and party hats today,” he said.  “We expected a pull back in the rate of acceleration, instead we got deceleration.  It appears that the general expansion has lost a bit of momentum and employment numbers, which were already lethargic, are slowing further.”

“This only adds fuel to the argument that the slowdown story is here in the U.S.,” said Tom Porcelli, chief economist at RBC Capital Markets.  “I am fairly confident that people are going to be scaling back their estimates for nonfarm payrolls.  While it is a good thing that small and medium-sized companies are adding payrolls, there is no doubt that the pace has slowed.  This is exactly what we do not want when other significant data shows things are slowing down as well.  Having said that, I still do not believe the Fed will initiate QE3.”

Writing in the National Journal, Jim Tankersley takes a more optimistic viewpoint. According to Tankersley, “Reality is a little more positive and a lot more complicated than that.  Wall Street analysts are fairly united in their view that the recovery has entered a “soft patch,” just like it did last year, and that sooner or later, growth and job-creation are on track to pick up again.  Several analysts and columnists have been reminding Americans that recoveries from financial crises can often feel like stop-and-go traffic on the freeway.  For now, the economic brakes seem to be pumping.  The 2010 slowdown flowed from worries over Europe’s sovereign debt crisis.  This one is likely a combination of several factors.  The spike in oil and food prices has spooked confidence — though consumers are still spending apace, dipping into their savings to keep up — and may be driving businesses to scale back hiring.”

On the MarketWatch website, Rex Nutting says that “If you recall that government employment is declining by almost that much every month, the ADP report implies only a very small increase in total employment.  This is no way to get the unemployment rate down from nine percent.  The economy has been buffeted by both natural and man-made forces.  Extremely bad weather earlier in the year depressed activity, as did the surge in commodity prices, especially for energy and food.  Then the Japanese earthquake and tsunami knocked out vital supply chains.  Global economic growth, which had given a big boost to U.S. exporters, is slowing. Europe is dead in the water, so is Japan.  The fast-growing developing nations such as China, India and Brazil are downshifting to avoid overheating.  The strongest sector of the U.S. economy — manufacturing — is still growing, but the momentum is fading.  The Institute for Supply Management’s closely watched diffusion index (Defined by Investopedia as “A measure of the breadth of a move in any of the Conference Boards Business Cycle Indicators (BCI), showing how many of an indicators components are moving together with the overall indicator index) plunged by 6.9 points to 53.5 percent in May, the largest one-month decline since 1984.

Companies may need to start hiring again as a new report from the Department of Labor is showing that the productivity of American workers slowed in the 1st quarter and labor costs rose as companies boosted employment to meet rising demand.  The measure of employee output per hour increased at a 1.8 percent annual rate after a 2.9 percent gain in the prior three months, revised figures from the Labor Department showed today in Washington, D.C.  Employee expenses climbed at a 0.7 percent rate after dropping 2.8 percent the prior quarter.

Productivity measures the amount of output per hour of work.  A slowdown in growth is bad for the economy if it persists.  But it can be good in the short term when unemployment is high because it can mean that companies are reaching the limits on how much extra output they can get from their existing work forces.  Output grew 3.9 percent in 2010, the biggest increase since 2002.  But many economists believe it will slow to 50 percent of that rate this year.  The expectation is that companies will hire new workers to further boost output.

Despite Great Recession, the Rich Grew Richer

Thursday, July 29th, 2010

Even with the recession, the world’s millionaires grew to 10 million and their wealth 19 percent to $39 trillion.  It’s ironic that — even in the depths of the Great Recession — the number of millionaires around the world grew by 17 percent to 10 million.  Their collective wealth surged 19 percent to $39 trillion, according to the latest world wealth report from Merrill Lynch-Capgemini.We are already seeing distinct signs of recovery and, in some areas, a complete return to 2007 levels of wealth and growth,” said Bank of America Corporation wealth management chief Sallie Krawcheck.

India, China and Brazil are home to the majority of the world’s newest millionaires, despite the fact that they were some of the hardest hit markets in 2008.  Asia now has three million millionaires – meaning it has caught up with Europe – thanks to a 4.5 percent economic expansion rate.  Their combined wealth soared 31 percent to $9.7 trillion, outstripping Europe’s $9.5 trillion.

North America’s wealth grew by 18 percent, while the number of individuals considered rich climbed 17 percent; their wealth totals $10.7 trillion.  Last year, the United States boasted the most millionaires – 2.87 million.  Japan was next with 1.65 million; Germany had 861,000; and China 477,000.  Switzerland boasts the highest concentration of millionaires, with approximately 35 for every 1,000 adults.

According to Lyle LaMothe, Merrill Lynch’s U.S. wealth management chief, “The wealthy allocated, as opposed to concentrated, their investments.”  In other words, they put their money into fixed-income investments that provided predictable cash flow.  The trick now is to convince the wealthy to return to higher risk investments that have a higher income potential.  “There is still a hesitancy,” LaMothe notes.  “Liquidity is incredibly important and people need cash flow to preserve their lifestyle – but they want to replace that cash flow in a way that does not increase their risk profile.  Investors are open to areas they hadn’t thought about before as they try to preserve their ability to be philanthropic, to preserve their lifestyle.  To me, the report underscored that clients are involved and they’re not inclined to stay in one percent savings accounts.”

Australia Rules In Market Transparency

Tuesday, July 13th, 2010

Australia’s office market is the most transparent, according to report.  Jones Lang LaSalle and LaSalle Investment Management have noted reasonable improvement in global market transparency, according to their recently released 2010 Commercial Real Estate Transparency Index.

According to the Index, Australia ranks as 2010’s most transparent market.  Canada is next in line, and improving markets include China, India, Poland, Portugal, Romania, Greece and Hungary.  Market transparency had fallen in Pakistan, Venezuela, Dubai and Bahrain.

“The 2010 Global Real Estate Transparency Index reveals a notable slowdown in the progress of real estate transparency over the past two years,” said Jacques Gordon, LaSalle Investment Management’s global head of strategy.  “It suggests that the recent turmoil in global financial, economic and real estate markets has impacted on market behavior, with real estate players focusing on survival rather than market advancement.”

Where Do You Look for Innovation? Not the U.S. Anymore

Monday, June 21st, 2010

Where do you find innovation?  Try the developing world.  Breakthrough ideas that change industries are increasingly coming from the developing world rather than the United States or Western Europe.  Part of this is due to the fact that the West is outsourcing more research and development to emerging markets.  Currently, Fortune 500 firms have 98 research-and-development facilities in China and an additional 63 in India.  IBM’s staff in emerging nations is larger than its U.S.-based workforce.

According to The Economist, “But it is also because emerging-market firms and consumers are both moving upmarket.  Huawei, a Chinese telecoms giant, applied for more international patents than any other firm did in 2008.  Chinese 20-somethings spend even more time on the internet than do their American peers.  Even more striking is the emerging world’s growing ability to make established products for dramatically lower costs:  no-frills $3,000 cars and $300 laptops may not seem as exciting as a new iPad but they promise to change far more people’s lives.”

Dubbed “frugal innovation”, this trend redesigns products and processes to eliminate unnecessary costs.  For example, Indian telecom provider Bharti Airtel has dramatically cut the cost of providing mobile phone services by creating unique partnerships with its competitors and suppliers.  The firm shares radio towers with competing firms and outsources network construction, operations and support to companies such as Ericsson and IBM.

2010 to be Marked by M&A in Outsourcing

Tuesday, February 2nd, 2010

India's economy is expected to grow at an eye-popping 7.5 percent this year.India is expected to grow at 7.5 percent this year, up from 6 percent in 2008 — a rate that is the envy of most of the world.  To buoy its economic prospects, the Indian Government has raised more than $100 billion over the last four quarters to finance a stimulus package, pushing the country’s debt to 50 percent of the total GDP.  One place that’s feeling the optimism is India’s IT industry.  As 2010 gets underway, recruiting will reach a peak with spikes in salary hitting pre-recession levels, according to advisory firm Gartner’s India regional VP, Partha Iyengar.

In terms of outsourcing, this year is likely to be characterized by an inflow of low-end projects off-shored to Indian vendors to achieve cost savings.  Speaking in an interview with Financial Express, Iyengar said that 2010 will also reveal consolidation in the software sector along with spiked IT spending by Indian firms.

Off-shoring is likely to witness what Iyengar calls a “back to the future syndrome”.  The next year will see industry growth pushed forward by cost savings, which is how the outsourcing sector initially began.  Most outsourcing projects are expected to be related to maintenance support and application development.

For global firms, outsourcing often provides 80 percent of a company’s cost savings.  Consequently, more low-end work will come in to India.  More complex projects are likely to follow in 2011.

Additionally, 2010 is likely to be marked by mergers and acquisitions.  Giants in the Indian outsourcing business like Infosys, TCS, and Wipro will make more acquisitions in Europe in order to acquire onsite capacity.  They will also expand to near-shore destinations to tap markets in Latin America, Eastern Europe and elsewhere.  Meanwhile, global firms, particularly Tier II firms that have not developed off-shore capacities, will make acquisitions in India and other top outsourcing countries.

Jacob Cherian is the India correspondent for AlterNow.  His work is featured on SourcingLine, a leading source of data and news about offshoring.