India's newest envoys

“TO SEE SOFT POWER,” says Dudu Mazibuko, “just spot the happiness.”

“People working in Indian factories are happier overall than workers at Chinese factories,” says the mayor of Ladysmith, a city in South Africa’s KwaZulu-Natal province, around 365 kilometres south of Johannesburg. “A simple rule explains why. The Indians pay more in wages, the workers have better housing, their children go to better schools, and they have more time off.”

KwaZulu-Natal is South Africa’s second-largest economy and contributes around 17% of GDP. In recent years, this eastern province overlooking the Indian Ocean has seen a flurry of investments, much of it Chinese and estimated to be upwards of a few hundred million dollars. India’s presence is relatively muffled, save Apollo Tyres’s buyout of Durban-headquartered Dunlop Tyres for $62 million (Rs 290 crore) in 2006. Yet, perceptually, the Indians appear to be faring better, thanks mostly to Apollo’s moves. Since the takeover, it has put in another $100 million, not just to expand factories but also build a pre-school and school; set up a vocational training centre for the disabled where students repair industrial fabric from Dunlop’s factories; instituted a scholarship to Kearsney College, one of Africa’s best-known schools; created an extensive local HIV/AIDS testing programme; and so on.

Apollo’s vice chairman and managing director Neeraj Kanwar, who brushed up on the nuances of rugby when he and his father Onkar bought Dunlop, says they were clear theirs couldn’t be a “business only policy. Unlike the Chinese, we never sought to bombard the economy with the cheapest goods and labour.”

Mazibuko is a vocal India proponent. “In Chinese-controlled factories, it’s work at the minimum possible pay, nothing more. Everyone in Ladysmith will tell you that Indians are more welcome than anyone else.”

Such advocacy shows how or, more important, what is shaping perceptions towards Indians abroad. Once known through Mahatma Gandhi, who was famously thrown out of a whites-only train compartment in colonial Africa and thus embarked on his political journey, and also through traders and shopkeepers—sometimes stereotyped and, at least in Uganda, persecuted—Indians are undergoing an image makeover in many parts of the continent, Mazibuko believes. The change hasn’t been led through lessons of nonviolence preached by Gandhian apostle Nelson Mandela, but by the work of Indian companies, she argues.

From Apollo’s tyre factories and Bharti Airtel’s phone networks in Africa, to Tata cars in Europe, and Infosys’s techies in America, the pursuit of global expansion by companies mainly from the Fortune India 500 list has a new, international subtext. As they search for new markets and profits, they are emerging as a projection of the nation’s soft power. In the first six months of 2011 alone, Indian companies invested $19 billion abroad, up from $2.5 billion in 2005, according to the Reserve Bank of India.

The idea of soft power was first introduced by Joseph Nye, ex-dean of Harvard Kennedy School of Government, in his 1990 book, Bound to Lead: The Changing Nature of American Power. Nye positioned soft power as a counterpoint to hard power. Though sceptics call the notion fuzzy, the idea of being able to attract versus being able to coerce is often used to judge the march of nations in an era when economic and military might has limitations.

India has so far seen its portrayal of soft power only through the lens of history and culture. It’s been about ahimsa, yoga and spirituality, maharajas, lofty political ideals and, lately, Bollywood. But these pointers often smack of exotica and are rarely mainstream. Even Bollywood is niche, and somewhat misleading. As London-based economist and peer of Indian origin, Meghnad Desai, asks: “Should our attraction lie in the fact that we run around trees in movies, or stem from our ability to create world-class goods and services?”

The question is laced with urgency as India and China battle to influence world opinion. For both, the outcome will lead to tangible gains—access to markets, raw materials, capital, talent, partnerships, and anything else that shapes economies. While hard power often sets the stage for such conflicts, soft power can determine the outcome. The winner, ultimately, should be more acceptable.

For example, this year, the Central Committee of the Chinese Communist Party decided that its focus would be enhancing China’s soft power. One key weapon it plans to deploy is the 322 (and growing) Confucius Institutes located across 96 countries to disseminate the idea of China. In 2009 alone, 9,000 Chinese programmes were held at these places, involving 260,000 participants. Last year, the Chinese also announced a Confucius Prize to rival the Nobel, some say angered by the Nobel Prize committee’s decision to award the Peace Prize to Chinese dissident Liu Xiaobo. The first award went to Taiwanese politician Lien Chan who did not collect it. The future of the award is currently under debate.

Indians have no such plans. In his 2010 essay, India’s Soft Power: Prospects and Limitations, Christian Wagner of the Stiftung Wissenschaft und Politik, a German think-tank, wrote that the cultural-political approach to soft power itself seems dated in India’s context. “Compared to China, India looks like a soft power by default … a closer look also reveals the limitations of India’s soft power capabilities.”

Nye, however, argues that much of a country’s soft power comes from society, not government. “In the case of the U.S., soft power is generated by entities as different as Hollywood, Harvard, and Google. People in other countries have far more contact with American companies and brands than with the American government. I suspect this is true of most countries, including India,” he says.

That may explain why Desai says that India’s soft power is now all about the primacy of business. “So, a brand like Tetley is far more important for the soft power of India than the Nehru Centres [the Indian equivalent of the Confucius Institutes].”

IT MAY BE PREMATURE to say that Indian soft power will, henceforth, be wielded only by its corporations. Bollywood and yoga will continue to shape perception. But, increasingly, the role of big corporations will become more apparent. Think of this. Nearly 50 million people in Africa use Bharti Airtel’s network every day to talk to friends and family. The Tata group is now Britain’s largest employer with 42,000 people on its rolls. The Indian tech industry employs nearly double that number, and they interact with clients overseas daily. Now imagine all the millions of interactions Indian brands have with foreigners, what Desai tags the “everyday encounter of India” and how that can shape attitudes. This, in many ways, is the Golden Arches moment for India Inc.

Says Nye: “Tata, with its efforts to bring automobile purchases within the range of a broad set of consumers, has captured much attention, as have various Indian leaders in information technology.”

Back home, the foreign office, which once pushed cultural jamborees abroad, is beginning to note the shift. Former foreign secretary Kanwal Sibal says that missions overseas often leverage the gains made by Indian companies. He points to how the government managed to swing some critical energy negotiations its way in Central Asia, thanks to the good work done by a few Indian companies.

Dr. Prathap C. Reddy, founder of Apollo Hospitals, believes that commerce is the first stand for diplomacy—he set up a hospital in Mauritius to honour a commitment made by Prime Minister Manmohan Singh. He displays a letter he recently wrote to Commerce Minister Anand Sharma in which he suggested that the government engage Indonesia to open opportunities for Indian health care there. “It all goes hand in hand,” says Reddy, “We need opportunities to expand and in such expansion we carry the torch for India. Good work by us has a deep impact on ties.”

Some caution against such optimism. Rajiv Sikri, a former diplomat who was one of the prime architects of India’s Look East policy between 2002 and 2006, points to giant Chinese strides in ties with southeast Asian countries—many of which have a history of hostility with China—while India’s progress has been painfully slow. “Most of these countries are export oriented and have production chains integrated with China, which is not true of India.” He believes people ultimately respond by keeping national interests in mind.

Equally, India’s soft power is more acceptable because its hard power is still questionable and New Delhi is seen as less of a threat than Beijing.

The everyday encounters with India is at once an opportunity and a threat. Nye points to the recent reactions against Chinese mining companies in Zambia and cautions: “Investments accompanied by imperious attitudes may destroy soft power.” In November, a Human Rights Watch report accused Chinese copper mine owners of mistreating workers. Among the accusations made were disregard for health and safety, 12-hour to 18-hour shifts, etc. Former journalist, China watcher, and author of two books on the Middle Kingdom, Smoke and Mirrors and Chinese Whispers, Pallavi Aiyar, says that Chinese companies are also viewed with suspicion because they are seen as extensions of the state.

So, what prevents some Indian companies from botching it up? Member of Parliament and former minister of state for external affairs Shashi Tharoor argues that Indians are wired differently. “Indians and Indian companies apply hard power the soft way, while the Chinese apply even soft power the hard way.” He points to Liberia, where both Chinese companies and the Tatas sell buses. Chinese buses, when they break down, are difficult to repair because of a lack of spare parts. “But the Tatas not only send ample spares, they also teach locals how to maintain their buses,” says Tharoor. That may explain why, during his stint as minister, he got requests from as far away as Peru, seeking Indian investment.

THE INDIAN WAY NEVER varies. R. Gopalakrishnan, director, Tata Sons, says when Tata Chemicals bought British soda ash and sodium bicarbonate maker Brunner Mond from Wayland Investments and Barclays Bank in 2005, there was a feeling that the existing management would be axed. That didn’t happen. “The decision to keep the management intact helped the company get a better deal, and completely transformed local perceptions about India and Indian companies.” Similarly, during the acquisition of Daewoo’s facilities in Korea, some Tata executives shaved off their moustaches to integrate better. Even the Mittals of ArcelorMittal, who are of Indian origin, have tried to inculcate an inclusive approach in most of their takeovers in Europe.

Arun Maira, former chairman of the Boston Consulting Group and currently a member of the Planning Commission, says this approach has often been “pooh-poohed” globally by consultants who believe that Indians are not sharp businesspeople. But it’s worked in India’s favour, he adds. “In Germany, where companies such as Bharat Forge have acquired firms, the overwhelming impression has been that Indians are the good guys—and that’s why India is admired.”

Harvard Business School professor Tarun Khanna says Indians are able to “deal effectively with diversity and erode boundaries between society and commerce”. Bharti Enterprises deputy group CEO and managing director Akhil Gupta says that even before the business starts, there has to be a sense among the people that “we are Indians, that’s why we are different. For instance, unlike the Chinese or the Americans, I don’t feel alien in Africa. I am very much at home.” Bharti has already funded 20 schools in Africa, where 11,500 study.

IT’S DIFFICULT TO pinpoint when companies began influencing attitudes towards India. It may have begun with the Tatas and the Birlas, who traded with the world even in the pre-liberalisation era. But as Infosys founder N.R. Narayana Murthy says, the wider perceptions may have begun changing when Indian IT firms engaged the West. The sum of interactions began altering opinions.

Thirteen years ago, when Infosys was working on a big project with a Canadian company, the visas for some engineers did not arrive on time. “But we had committed to a deadline, so we had to keep it,” says Murthy. Infosys suggested that the client go with its competitor, who had been second in the bidding, and paid the difference in costs. “They were amazed. It changed the game completely,” says Murthy. While they remain Infosys’s clients, Murthy says it positioned India as reliable.

Murthy also says he knew he could not compete in size with his global peers. “So we decided that it was best to be known as the most respectable company in our field. That was, and continues to be, our biggest differentiator,” he says. This could well be true of other Indian corporations.

The global journey of Indian companies is now well established and accepted. And in a country which lacks a well-articulated vision about its global rise, is neither as rich nor as strong as the U.S. or China, routinely suffers from internal policy contradictions, and yet aspires to be the world’s third-largest power, the burden of positioning the nation may well fall elsewhere.

When Apollo Tyres went to Africa, its owners visited dealers Paul Bosman and Steve Rundel in Pretoria. “When both Neeraj and Onkar Kanwar came to meet dealers and asked for feedback, it really made us feel like there was interest right at the top of the company,” says Bosman. Rundel adds: “There is absolutely no other example of the owners of companies coming and talking at the dealer level in South Africa, especially when the owners are from a different country.”