Ratan Tata, who runs the Tata Group, one of India’s two biggest conglomerates, is buying into a history of trouble with his $2.3 billion cash deal, announced today,  to acquire the Jaguar and Land-Rover companies from Ford (F). Transfer of ownership to Tata Motors is due to be completed by the end of June, and the  question is whether Tata can then break a cycle of decline.

It’s been 40 years since the British government, in a bid to rebuild the country’s automobile industry, cobbled together ailing car brands such as Jaguar, Rover, Austin, Morris and Riley into a giant called British Leyland. BL, as it became known, was a failure, mainly because of endemic labor problems, uninspired products and poor quality. Since 1968, there have been many rescue attempts, but only rare short bursts of success. Several of the once proud names are long forgotten and none is British-owned; the iconic MG brand was bought three years ago by China’s Nanjing Automobile to make sports cars in China and the U.K., and the Morris Mini cult car is with BMW.

So could Tata succeed where others have failed? Market and industry analysts have their doubts, fearing the companies do not fit and that Tata’s optimism about growth could be hit by worsening economic problems in the United States and elsewhere. Tata Motors shares lost 4.4% on the Mumbai stock market today as brokers awaited the announcement.

But there is some reason for optimism. Ratan Tata isn’t expected to treat Jaguar and Land Rover like a traditional takeover: He says he’s not planning to overhaul senior management, close factories in Britain, or cut workers. He said today: “We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.” Ford will continue to supply Jaguar and Land Rover with powertrains and other components, in addition to a variety of  environmental and other technology and support services.

Tata also doesn’t seem all that concerned about instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. He’s been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004 and steel giant Corus (previously British Steel) last year.

Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans.

This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.

Tata has said that Land Rover and Jaguar will benefit from India’s low-cost design and IT ability - and boost sales in Asia. His company will “add value in co-operating on engineering and development which are considerably cheaper (in India) than in the West,” he said. Tata Technologies, the group’s advanced industrial design house, is based in Pune and operates in twelve countries, with international headquarters in Singapore. It has been involved in the design of Tata Motors’ cars and vans, but does about 75% of its work for foreign clients, including Chrysler, General Motors (GM), Boeing (BA) and Airbus.

There’s another question hanging over the deal: Tata’s future once its 70-year old patriarch retires. He is not due to step down until he’s 75 - in December 2012 - but has said he would like to go earlier, and there are rumors it could be at the end of this year.

That seems unlikely, if only because there is no clear successor. From inside the Tata family there is a reclusive cousin, Noel Tata, who runs some of Tata’s retail businesses, but there is no sign of him being groomed for the corporate and public life that goes with the top job. One or two top executives from outside the family, and even outside the Tata Group, have also been rumored, but none has been publicly held out as a successor.

It is Tata who has provided the personal drive and leadership to turn Tata Motors into a business that can produce the Nano and buy two world famous brands - in the same year. There’s a big job waiting for someone – and Tata is not yet saying who. Until it does, the era of uncertainty at Land Rover and Jaguar won’t be over.

Ratan Tata, who runs the Tata Group, one of India’s two biggest conglomerates, is buying into a history of trouble with his $2.3 billion cash deal, announced today,  to acquire the Jaguar and Land-Rover companies from Ford (F). Transfer of ownership is due to be completed by the end of June, and the  question is whether he can then break a cycle of decline.

It’s been 40 years since the British government, in a bid to rebuild the country’s automobile industry, cobbled together ailing car brands such as Jaguar, Rover, Austin, Morris and Riley into a giant called British Leyland. BL, as it became known, was a failure, mainly because of endemic labor problems, uninspired products, and poor quality. Since 1968, there have been many rescue attempts, but only rare short bursts of success. Several of the once proud names are long forgotten and none is British-owned; the iconic MG brand was bought three years ago by China’s Nanjing Automobile to make sports cars in China and the U.K., and the Morris Mini cult car is with BMW.

So could Tata succeed where others have failed? There’s reason for optimism. Ratan Tata isn’t expected to treat Jaguar and Land Rover like a traditional takeover: He says he’s not planning to overhaul senior management, close factories in Britain, or cut workers. And he doesn’t seem all that interested in instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. His been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004, and steel giant Corus (previously British Steel) last year.

Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans.

This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.

Tata has said that Land Rover and Jaguar will benefit from India’s low-cost design and IT ability - and boost sales in Asia. His company will “add value in co-operating on engineering and development which are considerably cheaper (in India) than in the west,” he said. Tata Technologies, the group’s advanced industrial design house, is based in Pune and operates in twelve countries, with international headquarters in Singapore. It has been involved in the design of Tata Motors’ cars and vans, but does about 75% of its work for foreign clients, including Chrysler, General Motors (GM), Boeing (BA) and Airbus.

There’s another question hanging over the deal: Tata’s future once its 70-year old patriarch retires. He is not due to step down until he’s 75 - in December 2012 - but has said he would like to go earlier, and there are rumors it could be at the end of this year. That seems unlikely, if only because there is no clear successor. From inside the Tata family there is a reclusive cousin, Noel Tata, who runs some of Tata’s retail businesses, but there is no sign of him being groomed for the corporate and public life that goes with the job. One or two top executives from outside the family, and even outside the Tata Group, have also been rumored, but none has been publicly held out as a successor.

It is Tata who has provided the personal drive and leadership to turn Tata Motors into a business that can produce the Nano and buy two world famous brands - in the same year. There’s a big job waiting for someone – and Tata is not yet saying who. Until it does, the era uncertainty at Land Rover and Jaguar won’t be over.

The American government is rightly pleased about a $1 billion order that has just been agreed with India for six of Lockheed Martin’s Super Hercules C-130J military transport planes that will be used by the Indian army and air force. This is India’s first large order with an American defense company and it comes at a time when its traditional - and massive - defense ties with Russia are under increasing strain.

India has for decades been reluctant to buy defense equipment from America, fearing Congress’s power to block deliveries if it did not approve of Indian military activity or policy at some time in the future. This attitude has been changing in the past couple of years when ties between the two countries have improved dramatically – notably with talks on a nuclear deal, though that is now making little progress.

“With this sale, India is telling us it’s ready to buy top-quality U.S. equipment on its merits,” says James Clad, the Pentagon’s deputy assistant U.S. secretary for South and Southeast Asia. “It positions us to be in the Indian defense market for years to come”. But India’s worries remain, and they will affect how it behaves on other orders, and especially on a $10 billion fighter jet contract where Russian and European companies are bidding against America’s Boeing (BA) and Lockheed (LMT).

The significance of the C-130 order as a breakthrough in defense sales should not be over-stated because there was no rival aircraft on the market. India urgently needs the four-engine C-130 because it does not have a medium-sized transport aircraft that can land on short airstrips. Currently it relies on large and cumbersome Russian IL-76 transport planes and smaller AN32s, whose limitations were demonstrated during the mountainous border conflict with Pakistan in 1999 at Kargil. So it decided to negotiate a government-to-government deal without going out to international tender for the C-130s, which will be delivered from 2011, subject to final price negotiations.

For Lockheed, the deal is important, not only because it brings in $1 billion of business, but because the company will be able to demonstrate to the Indian government and air force how it handles orders. This will include meeting Indian government offset arrangements, which require a supplier to spend 30% of a contract’s value in India. There could also be further orders for two or more aircraft.

Boeing hopes to be in a similar position soon if it can clinch an order for its P-8 maritime reconnaissance aircraft. Other American companies such as Honeywell (HON), GE (GE), Raytheon (RTN), Northrop Grumman (NOC), Pratt & Whitney, United Technologies (UTX), Bell Helicopter Textron, and General Dynamics (GD) are actively chasing orders and tie-ups with Indian defense companies.

The C-130 order has upset Russia, which wanted to offer an upgraded - but not comparable - AN-32 if there had been an open tender. The complaint marks the current strained relationship between India and Russia, which have been traditional allies since India’s independence.

With over $14 billion orders currently in progress for military aircraft, ships, rockets launchers, helicopters and other equipment, Russia is India’s largest defense supplier (followed by Israel), and India is its biggest customer. But the easy days, when Russia saw India as an essential customer and was prepared to meet the county’s demands for specialized equipment and knock-down prices, are over. Late last year it infuriated India by saying that it was doubling the price of an old aircraft carrier, the Gorshkov, that it is refurbishing for the Indian navy.

Russia now has other significant defense customers and wants market prices. But it is not offering India competitive back-up services on quality, training, and spare parts, and this is seriously affecting the operational efficiency of the Indian armed forces. “The Russians now want to sell arms not at ‘friendship’ but commercial prices, without providing ‘commercial’ quality of after-sales service,” Kanwal Sibal, a former Indian foreign secretary and ambassador to Russia, wrote in the Indian Express newspaper yesterday.

This leaves the door open for American companies – led by Lockheed - to show what they can do. But they will have to overcome the problem that there is no history of trust between the two countries. As Sibal put it in his article: “Russia is a trusted partner and trust in defence matters has to pass the test of time and of difficult circumstances”.

Last month I was on the road reporting for an article that appears in the current issue of Fortune magazine titled Manufacturing Takes Off. My main trip took me to factories and offices in the cities of Mumbai and Pune, but I also did other shorter journeys. One was to Noida, an industrial and residential satellite city on the eastern edge of Delhi, across the Yamuna River from the capital’s main urban areas. Noida has never been as fashionable as Gurgaon, Delhi’s other satellite city near the international airport where, for several years, stylish office buildings have sprouted that would look good on more famous Asian skylines like Hong Kong and Singapore.

But Noida is catching up fast and has several surprises. One of them is Moser Baer. In my article, I write about it making CD’s and DVD’s and solar panels for international markets in sanitized production areas. Another surprise, which I did not have space for in my article, is the Triveni group, an old family owned company that has suddenly re-invented itself as a producer of world quality engineering – proving, as I have written before that India’s manufacturing is successfully combining entrepreneurship and design skills, plus high-class production and after-sales service.

Triveni has an ultra-modern office in a shiny new building that overlooks the vast spread of the Jamuna and also houses studios producing local CNN tv content. It’s on a pleasant tree-lined but shambolic street, with chaotic car parking areas, that instantly demonstrates the old and new India. Inside the building, all is efficiency.

Triveni is an old sugar producing company – one of the three biggest in India - that moved into engineering. Now, with a $30 million investment, it has now turned itself into one of the world’s three leading producers of small (up to 18-20MW capacity) power-generation steam turbines that are in high demand as environmentally-sensitive small-scale plants become popular. It has done this in the past four years by focusing on the technology of the turbine blades, which is the key to its success.

Faced with a choice of selling out, joining up with a big player like GE that would never fully share technology, or going it alone, Triveni chose to stay independent. It went to America and hired Impact Technology Consultants of Boston to design a family of ultra fine tapered and twisted turbine blades, working to specifications set by professors from Britain and Indian universities who set milestones and provided general advice. “You can’t expect to have expertise like that in a small company,” says Dhruv Sawhney, Triveni’s chairman and managing director, who runs the company with his two sons, Nikhil and Tarun.

The turbines have a 75% market share in India and the target for this year is 80%. Abroad it has 20%. That means beating established giants like Siemens and stopping newcomers. “We’ve blocked out Chinese and other competitors from coming in,” says Sawhney. Turbine sales are growing at 30% a year and make up about a third of the company’s $315m sales. After-sales service includes a guarantee that an engineer will arrive on site within 48 hours of being called, though it usually only takes 24 hours. Sawhney makes the same point as other Indian companies that his engineers are better than the Chinese at service work and maintenance because they are far more flexible. “Our engineers go to mend something and they also understand how the whole machine works,” he says.

I asked Sawhney why he hadn’t started this ten or more years ago. His answer echoed what many other companies have told me. “It was a lack of confidence – we didn’t realize India’s potential and I was happy with my small market share,” says Sawhney. “We didn’t realize we could reach global scale.”

India’s political crisis over its proposed nuclear deal with America appears to have gone away, at least for the time being - and with it any prospect of the deal being put into action in the foreseeable future.

This unexpected turn of events emerged this morning at a conference in Delhi where Manmohan Singh, the prime minister and primary promoter of the deal, said that “we are not a one issue government.” He said it was an ‘honorable deal” that had widespread benefits, then added: “But we are in the realm of politics and in our coalition there are divergent points of view” – and there were economic and social policies that the government wanted to pursue before holding an election.

“We are not in favor of an early election,” Sonia Gandhi, leader of Singh’s Congress Party and of the coalition, said later at the same conference that was organized by the Hindustan Times. “We are going to do all we can to go on to 2009,” she added – 2009 is when the next election is due. The Congress Party was “committed to the people to work for a full term” so there was a need to “work towards a consensus with the Left,” which had been opposing the deal. The government had to “take notice of their views.”

I was at the conference and the delegates – businessmen, journalists, and diplomats - were amazed, not least America’s diplomats who didn’t seem to have been warned in advance. It remains to be seen how Washington formally responds (after the weekend), but the administration will be far from happy that a deal struck by the two governments - after being promoted by President George W. Bush and Secretary of State Condoleezza Rice - is being unceremoniously shelved. American companies will also be upset that the prospect of rich nuclear and other contracts are fading into the distance.

Basically though, Singh and Gandhi have taken a sensible decision. The nuclear deal was going to split their coalition because of staunch opposition from Leftist parties and was likely to cause a general election – and for what? On the table was a deal that could boost nuclear power generation years ahead and might ease India’s access to sensitive technologies in the future – but which, however, might not be liked much by the next American administration. From India’s point of view, it can wait - and the government can stay in power

It is not yet clear how all this will be implemented as policy. Possibly, the government will just go slow on talks with the International Atomic Energy Agency. I said three days ago in my last post, “India’s Nuclear-induced political brinkmanship,” that it was not clear how long India would be prepared to go slow. Now it looks as if it could be indefinitely – maybe till there are new governments in both America and India.

So, unless there is another change of tack by the Indian government, I was wrong three days ago to forecast a general election early next year. But politics move fast – and chaotically in coalitions – so watch this space.

India’s politicians, media, and political analysts are in a frenzy. One day the country seems to be on the brink of an imminent general election, and the next day it is not; at least not yet and maybe not till well into next year.

There are frequent bust-ups – accidental, simulated or real - between the Congress-led government and the block of Left parties that support it in parliament. It’s real election fever stuff – maybe though not so feverish as in Britain last week before Gordon Brown chickened out of holding a general election. And, unlike Britain, the decision on having an election here is not down to one man but is dependent on the political swings of people who are fairly new to such brinkmanship politics – Manmohan Singh, the prime minister, Sonia Gandhi, the leader of the coalition, and the Left parties.

The subject that’s causing all the fuss is the proposed nuclear deal which would give India access to nuclear fuel and technology for its electric power program from America and elsewhere, and build a strong diplomatic as well as economic bond between the two countries. There would also be other benefits for Indian industry, which would gain international access to sensitive technologies as well as potential orders in the space and defense fields – all of which have been progressively denied to India since its nuclear tests in 1974 and 1998.

These are substantial benefits and they have led to the deal being generally supported by a considerable majority of politicians, bureaucrats, scientists and opinion formers in India. But the deal is firmly opposed by the Left which (not surprisingly) distrusts and opposes such a close and dependent relationship with America. The Left also fears (justifiably) that America could and would cut off the nuclear supplies and other advantages if a future government in Washington opposed something India did, despite safeguards negotiated as part of the proposed deal. Washington says that such a cut-off is unlikely because there would be a large number of powerful US companies such as Boeing, GE, Raytheon, and Lockheed Martin that would lobby against losing business - but that does not satisfy the critics. There are also questions (though, sadly, little real debate) about whether potentially expensive nuclear power is the right way to tackle the country’s power shortages, and about whether the main beneficiaries would perhaps be American contractors.

Two determined men are facing each other over the deal – and thus the future of the government. One is the prime minister who, supported by Gandhi, sees the deal as significant historically as the seminal economic reforms that he introduced as finance minister in 1991. He has even talked about resigning if the deal does not to go through. The other is Prakash Karat, the hard-line leader of the CPI-M, India’s biggest communist party that leads the block of 60 Left party MPs. Karat seems determined to withdraw support from the coalition if the deal proceeds, even though he knows that such an action would remove the government’s parliamentary majority and could lead to a general election before the due date in 2009.

The first option that I outlined in a post on August 23, 2007 - “India’s government risks being nuked” – is therefore now in play. The government is buying time with the Left by going slow on operationalising the deal through talks with international nuclear authorities. The current on-off crisis stems from uncertainty about how slow the government is prepared to go and how rigidly the Left will eventually block the deal. Specifically, in line with America’s wishes, the government wants to start talks soon on nuclear safeguards with the International Atomic Energy Authority (IAEA), the UN’s nuclear watchdog, and the Left says it will withdraw parliamentary support if and when that happens. (Mohamed El Baradei, the head of the IAEA, is in India this week on a long-scheduled visit that includes a speech on Friday at a conference dealing with India’s role in the world). The next steps would be to seek agreement from the multi-national Nuclear Suppliers’ Group, which meets in Vienna next month, and then to put a completed package to the US Congress in the New Year.

The next stage, as I outlined in August, would be for the Left to withdraw support from the government, which would then continue to operate as a minority administration till it is defeated in parliament, or until Congress decides to call for a general election. It is hard to guess when that withdrawal might take place because the Left does not want to precipitate an election. Congress on the other hand, while weak in grass roots organization, would face an election confidently because the main opposition party, the Bharatiya Janata Party (BJP) is in disarray, with no clear leader to take over from the ailing Atal Behari Vajpayee, the former prime minister. Recent opinion polls have indicated that Congress would return to power leading another coalition, and Congress activists have been energized by the recent appointment of Rahul Gandhi, Sonia Gandhi’s 37-year old son, as a general secretary of the party as her heir-apparent.

But a quick election is not in the cards. The government is being urged by America to finalize the nuclear deal as quickly as possible, ahead of the American presidential elections next November, so Gandhi and Singh would want to do that before going to the polls. In the meantime, it should be quite possible for the government to continue operating with a minority in parliament, supported by the Left on non-controversial issues – unless the Left becomes so enraged with the finalizing of the deal that it provokes an election-inducing crisis. Nothing is therefore definite - but best to bet for now on an election around March or April next year.

The Indian government will soon make defense production history by naming a small number of leading Indian private sector companies as raksha udyog ratnas – literally defense industry jewels - that will be allowed to compete for big research, development and production projects on equal terms with the public sector.

A Ministry of Defence (MoD) committee headed by Prabir Sengupta, a former secretary for defense production, yesterday (June 6) presented its report on the subject to A.K. Antony, the minister of defense. The names will be published soon, when they have been cleared by a co-ordination committee. They will include parts of the Tata group, Larsen & Toubro (L&T), Godrej, and Mahindra & Mahindra, plus a handful of others. A few are already involved in very limited sub-assembly work ranging from parts for rockets to a nuclear submarine hull.

The ratnas will be allowed to design and manufacture major weapons platforms and systems including equipment developed by the DRDO, the country’s leading but unproductive research establishment which has previously worked with the public sector. They will also be allowed to manufacture foreign defense systems and to carry out government-funded research and development. This is a big step forward, though it remains to be seen how quickly and effectively India’s massive and powerful public sector defense establishment mobilizes to obstruct progress and protect its jobs and booty.

The country has a huge defense budget, including an allocation of $10.5 billion this year for capital expenditure on military equipment - $4 billion for the air force, $2.8 billion for the army and $2.5 billion for the navy. About 70% of the budget is spent abroad because the Indian public sector cannot deliver in terms of quality or speed on either research or production. And only about 30% of the orders placed in India - or 9% of the total - goes to the private sector. Indian companies have consequently been wary of undertaking large-scale investment programs because they have been uncertain about what the MoD would actually let them do.

Only two primary contracts have been awarded so far. They went last year to Tata Power and L&T, when each company won a $20 million rocket launcher order for the army’s Pinaka defense missile system. Till then, primary integration work had been done by the public sector with some components supplied by the private sector. Russia is India’s biggest foreign supplier followed by Israel, then other European countries, with the U.S. having only a tiny role because of restrictions on what it can sell. A major effort is now being mounted by the U.S. to replace Russia as the lead supplier, especially if current talks between the U.S. and India on a nuclear pact lead to restrictions being relaxed. More than 20 U.S. companies exhibited four months ago at the biennial Aero India air show in Bangalore. Names such as Boeing (BA), Lockheed (LMT), Honeywell (HON), General Electric (GE), Raytheon (RTN), Northrop Grumman (NOC), Pratt & Whitney, United Technologies, Bell Helicopter Textron, and General Dynamics are among the most active. Some have already tied up with Indian companies such as Tata and L&T, or are talking about doing so - and the new ratnas will be prime targets, because of their privileged roles.

India’s defense private sector has been left behind by the wave of liberalization and deregulation that has affected virtually every other area of manufacturing in the past 15 years. Moves to change that began in 2002, when it was announced that the private sector would be allowed to do more work, and that foreign investment stakes of up to 26% would be allowed in joint ventures.

But only about 30 private-sector manufacturing licenses have been issued to around 20 companies and little work has been awarded. And only a handful of small foreign joint ventures have been signed. Foreign companies are not prepared to hand over new technology when they are only allowed 26% stakes - though one joint venture for aero engine components, between Snecma of France and government-owned Hindustan Aeronautics (HAL), has been allowed as a 50-50 split. The MoD now has a chance to introduce real reforms, though opposition from trade unions and leftist political parties is beginning to appear. Whatever happens, those vested interests will have to be appeased, and that will slow the pace of reform – as always.

Jeff Immelt, GE’s chairman and CEO, is in India on one of his regular mid-summer visits, braving as he has done before, 40^oC-plus pre-monsoon temperatures. This time though it’s not just the usual round of government ministers and officials, businessmen and journalists because tonight (June 1) he will be hosting a dinner in Delhi to mark the retirement of Scott Bayman, India’s longest-serving expatriate company boss. Bayman has headed GE here for 14 years, starting in 1993 with $100 million turnover and a few hundred employees, and reaching $3 billion and over 13,000 employees this year, with all GE’s global businesses present in the country. He’s handing over to Tejpreet Chopra, who currently heads GE Commercial Finance in India. Last night Immelt said that GE is on track to reach targets of $8 billion for both turnover and assets by 2010.

The story began in 1992 when Jack Welch, Immelt’s predecessor, declared India, along with China and Mexico, a priority GE country. Bayman arrived a year later and says he has “survived two GE Chairmen; six (Indian) governments and five prime ministers.” Through it all, he has remained an optimist. Fourteen years is a long spell for anyone, and it is especially remarkable (if I may say so as a Brit) for American businessmen, whose patience with what Bayman tactfully describes as a “confusing and difficult place to quickly enact change and make rapid progress” usually runs out quickly. But instead of bemoaning the struggles with successive government policies, Bayman says: “You know what? In those years no one - not one prime minister, not one government - has turned its back on liberalization. Sure, each has its own priorities or its own spin, but the general direction and the commitment has not changed.” He’s had great successes and some setbacks. He was in at the start of India’s massive call center and business processing wave with the creation in 1998 of GECIS – “a roaring success from the beginning”. The business was hived off in 2004 and now, known as Genpact, has 27,000 employees in ten countries and has filed for an IPO on the New York stock exchange. In 1993, GE Capital was set up as a non-banking finance company but the government’s unbending banking regulators have prevented it from becoming a full bank. He’s especially proud of GE’s Jack F. Welch Technology Center that was opened in Bangalore in 2004, where 5,000 people are now employed plus another 1,200 in Hyderabad. That has been built, he says, with “great engineers and scientists and people with great capacity for work”. His “greatest disappointment” was GE’s withdrawal from the household appliance market eight years ago when he had to face up to the fact that its products were uncompetitive.

Bayman also had to sort out (with Bechtel) the future of a famously blighted power project at Dabhol in Maharashtra after the collapse of Enron, the lead partner. He negotiated a deal with the Indian government that enabled GE to recover its $150 million equity investment, which may make it easier for him to see the bright side of India’s biggest inward investment disaster. He admits, in a neat under-statement, that Enron “did too good a job at negotiating a contract that was going to be difficult to live with,” but says that the compensation “could not have happened in other countries, where we wouldn’t have got any dollars back.”

Speaking at a business conference last week, Bayman remembered how difficult it was working in India when he arrived. “You never knew if you would have a dial tone when you picked up a telephone receiver. If you had a dial tone, there was a question of whether the connection would be made to the number dialed. If connected, you never knew how long you would stay connected.” Cars were in scarce supply and required a full down payment nine months before delivery. Color televisions had to be purchased on the gray market and were not available in any significant quantity or variety. Computers and laptops attracted high duties and had to be registered in a traveler’s passport when taken in and out of the country.

Now he rates India’s ”telecom revolution” as one of four “big events” that have happened in his 14 years - “a poster child for privatization and deregulation”. His second “big event” is the creation of a new class of consumers, driven by the emergence and growth of software, backroom processing, technology and financial services industries. “Employees in these industries are highly educated and relatively younger than the workers in other industries. Ten years ago, this group likely would have lived in their parents’ homes and been under-employed or unemployed. Today, this group earns a good wage and has a propensity to spend. And, with the opening up of the economy, now has a wide choice of products and services to buy.” Third, he picks Indian industrialists’ massive growth in self confidence about their ability to compete on the global stage. Fourth is civil aviation. “Today, we are experiencing the benefits of open skies agreements with increased non-stop flights from more Indian cities to more cities around the world. Choice has brought competition and the consumer is benefiting.” Here his overwhelming optimism that all is – or quickly will be - well gets the better of his judgment, and he dodges the chaos and massive delays at most of India’s airports, saying: “Watch the impact as public-private partnership goes to work. This is India. We wait for the demand, for the crisis before we respond. Once we strike out on a course of action, we know how to get it done,” he says. Perhaps his optimism comes from the fact that GE plans to invest in consortiums developing the airports.

He hasn’t always been so optimistic. In 2002, he slammed India’s manufacturing industry saying: “Manufacturing is not India’s core competency. Can it be? Probably not, at least in the short run. Let’s face it, there are just too many barriers that all of us cannot control. Don’t get hung up in thinking manufacturing can be a core competence of India. It isn’t going to happen.” He now admits he “was wrong - dead wrong.” Indian industrialists “no longer worry about multinational companies; they are or want to be MNCs…..They no longer talk of level playing fields. They argue for open markets, free trade and view the globe as their marketplace. Indian companies now think globally.” His main lesson? “You need patience and persistence. This is a difficult place to get things done quickly”.