Nov. 25--MUMBAI -- India will primarily serve as a source of low-cost, high-technology solutions for General Electric Co. (GE) until infrastructure activity picks up in the country, John Rice, vice-chairman and head of global growth and operations, said in an interview on 22 November, underlining the US conglomerate's slow progress in expanding its presence in Asia's third biggest economy. Rice, who is based out of Hong Kong to emphasize the multinational company's interest in emerging economies, also spoke on how its new Pune factory, which will manufacture aviation components and wind turbines among other products, will become a model for the firm globally. Edited excerpts:
How do you find the present business environment in India?
It is better than what the headlines suggest. When I talk to our team, customers and officials in India, I see a case for optimism that doesn't always come across in what's reported by the traditional news media.
Are you happy with what GE has been able to achieve in India since the country still accounts for a small part of its global revenue?
There is no question that I would like to be bigger in India in terms of topline -- orders and revenues. As a percentage of our total industrial revenues, we'd like India to be larger. But we don't have an insignificant position. We have some very significant positions in businesses like aviation.
We are quite happy with some businesses and want to make others bigger. But that's not the whole story. The other side of the story is what happens in Bangalore where our 5,000 engineers are working on solutions for India as well as rest of the world.
The multi-modal manufacturing facility that we are building in Pune is going to benefit our company in significant ways. So you cannot just draw a conclusion about whether you are happy or not in India based on revenues and orders.
Which are GE's businesses in India where you think there is room for improvement?
Some of our oil and gas-related businesses, some of our energy management businesses like transmission and distribution, within our healthcare business, there are pieces that can be bigger. It also depends on how you define the market.
The traditional ways of defining the market in businesses like healthcare or power generation don't really work in a country like India, because they leave out the underserved. So the population in India that doesn't have access to electricity today would be out of a traditional market metric and your share calculation. I prefer to define a market share based on what it would look like if everyone in the country had electricity and then figure out how to help with that.
The main transmission and distribution grid isn't going to reach everyone in India in my lifetime. So how do you come up with distributed power of small generation sizes that can run off fuel other than diesel to facilitate electricity for people who don't have it? But in the future they will have it and how do we get to the point where we've got exactly the right products and technology to reach that?
I tend to define a smaller market share in some of our business segments because it will force us to allocate the resources needed to find the growth opportunities that get you to the next 100 million people whom you can get power generation to in a cost effective way.
What are your investment plans for India?
We have invested several hundred million dollars in Pune ($200 million for the multi-modal plant that will cater to different business lines within GE from a single location). We are investigating phase II of this project, which could be the same size as phase I.
We are not afraid to invest in India. We have invested in India and will continue to invest in India. I suspect in terms of magnitude, the phase II of Pune will probably the most significant thing we are considering. In addition, we also pick up equity positions in projects... so that is also a kind of investment that we will be making.
Is India more important as a hub in your global supply chain than as a market for your products?
In the short term, with the government in the pre-election period and in the absence of big decisions on infrastructure, preference will go to work that we do here that supports activities in lots of other places.
That is not to diminish what we do to sell our products here. But after the election or at some other point when the infrastructure decisions start to flow and capital coalesces around important infrastructure projects, then the balance will shift back to India as a prime market.
When it comes to challenges in policymaking or infrastructure bottlenecks, how does India compare with the other countries GE operates in?
We operate in 160 countries. I bet you can use the same adjectives to describe a 100 of them: governments are not moving fast enough, decisions are not being made, and there is a need for big infrastructure investments. So that's business today. It is an issue in India too.
The infrastructure here is not what it needs to be. The government knows that, the population of the country knows it. So we can't just accept it. Yet the fact is that these end up being difficult matters to decide on and governments have to go through a process. But the fact that infrastructure investments and the decisions that facilitate them are not being made fast enough doesn't cause us to not want to be committed to India or be an investor in India.
I don't think we have the luxury of being a fair weather participant in the economy. You have to be around when the decisions aren't being made in order to be ready when they are being made. We are a long-term investor in India. We are committed to this country. Certainly we wish things were moving faster and we will do everything we can to be an honest voice in that process. It is not as simple as we will just pack up and come back when the bids are out.
A lot of global investors appear to suggest that a change of guard in the Indian government after the next general elections may boost investor sentiment. What is your take on this?
Whether it happens directly as a result of the next elections or not, we believe India will be best served if whatever government is in power makes decisions in the best interest of the population of this great country. There are two other countries we operate in, Mexico and Japan, where they have new leaders. I mention them because they are leaders who are taking actions.
They are not popular actions, criticized by some and applauded by others; but I say these are two countries that will benefit because they have leaders that are making decisions and taking actions. So I think the world needs government leaders who will take on the hard stuff. Whatever you think about the prime minister's policies in Japan, the country feels differently today than it did a year ago and that's a really good thing. It will end up being good for our company and the other companies that do business there. I think to the extent that that happens in India with whatever government is in power, it will be a good thing.
How important is the success of the Pune plant? If it is successfully implemented, can it be a model for GE globally?
Absolutely. So far we believe it will be that model. We will know a lot more next year at this time.
Why did you choose India for your first plant of this kind?
We felt that the businesses that are going to be part of phase I (at the Pune plant), would benefit from localizing their supply chain in India -- both in terms of serving the Indian market and also for serving other markets. There will be a significant portion of exports from the Pune plant. So we thought it worked for both purposes -- to access and serve the Indian market with a better cost position and to take advantage of global markets from an Indian manufacturing base.
You are based out of Hong Kong and not your US headquarters. How does it influence GE's policy of expanding its global footprint?
When we did this almost three years ago, I was the first vice-chairman to ever sit outside the US. It's a combination of symbol and substance. Moving me to Hong Kong was a way of sending a message to the organization that we are serious about global growth -- and that is the symbolism.
The substance piece is the fact that I spend 70-80% of my time outside the US. The work that I do and places I visit helps to shift the centre of gravity and make sure we are putting resources where needed to address global market needs.
We are active in 160 countries and it is impossible to sit in the US and know everything you need to know about all of them.
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