The piracy problem that no amount of military hardware is going to solve

As Barack Obama patiently watches today’s three-hour military marchpast in Delhi, the centrepiece of India’s 66th Republic Day celebrations, he may be forgiven if his thoughts drift away from the vast procession along the monumental Rajpath Road and towards the commercial hub of Connaught Place a few blocks away.

Here, bargain-hunters can stock up on cheap pirated DVDs of recently released Hollywood movies, Microsoft XP software, knock-off Nike running shoes and copycat versions of drugs developed by American pharmaceuticals giants. And it is here, rather than at India’s freshly repainted but ageing Soviet military hardware, where corporate America has focused its attention.

Narendra Modi’s eyes are on a very clear, and clearly stated, prize. India’s prime minister wants to use the parade as a chance to impress on Mr Obama his “Make in India” sales pitch, a plan designed to attract hundreds of billions of dollars in foreign investment to transform the nation into a China-style global manufacturing hub.

Yet the president’s response is likely to be cool. With copyright infringement in India costing American business an estimated $12 billion in 2012, Mr Obama, who heads to Saudi Arabia tomorrow, is expected to deliver a polite but firm: “Why should our companies invest billions to ‘Make in India’ if you won’t stamp this out?”

There are obvious reasons why India desperately needs a manufacturing boom. This is a vast country with a soaring population of 1.26 billion, where 700 million people live on less than $2 a day, where 12 million young people join the workforce every year, with inadequate infrastructure, restrictive labour laws and endless red tape. Its share of global manufacturing is marooned at a measly 1.4 per cent, compared with China’s 13 per cent. But Mr Modi, accomplished salesman that he is, may have to work hard to persuade some American chief executives accompanying Mr Obama to buy into his patter. After all, it’s not only piracy that’s the problem; US officials have other reservations, too, about plans to Make (more products) in India.

Although the country has implemented some welcome reforms, concerns remain about Indian protectionism in the pharmaceuticals, IT and solar power industries. Critics believe, also, that more needs to be done to show that India has lost its restrictive, bureaucratic mindset, an approach that can drive western businessmen to distraction.

In short, although the leaders of the world’s two biggest democracies have many common interests — above all, a desire to push back against their joint rival China — Mr Modi has a lot of work to do to persuade Mr Obama to fully back his Make in India plan, which many Americans naturally suspect to be at the expense of jobs back home.
Virtuous circle
Its thriving IT industry is better known for outsourcing groups that churn out software and provide back-office services to big companies in the United States and Europe, but Twitter’s acquisition of the Bangalore-based start-up ZipDial last week threw fresh light on something else: the city’s booming entrepreneurial culture.

Bangalore, an IT hotspot since the 1970s, now ranks fifth in the world for venture capital funding for technology companies, attracting $2.6 billion last year. Although well behind San Francisco, which topped the list with $13 billion, the southern Indian city’s start-up sector has some enormous and compelling advantages, not least the availability of low-cost staff, office space and plenty of highly experienced coders.

Many of India’s most successful tech start-ups, including ZipDial, have been founded by Americans, or Indians who have worked in the US and returned home with bright ideas and the knowledge that they can be developed in the sub-continent at a fraction of the cost. Although India’s start-ups face well-known problems (think red tape and unreliable infrastructure), many believe that a “virtuous circle” is now in place, with successful entrepreneurs investing in new businesses.

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