Siemens has been in India for about 150 years now. The company has been through turbulent times, although today it is on a much better wicket. That may be why Klaus Kleinfeld, President & CEO, Siemens AG, makes no bones about India being one of his favourite investing destinations. "India seems ideally placed for sustained growth," gushes Kleinfeld, 47, in this exclusive interview with BT's Krishna Gopalan during a recent visit to India. Excerpts:

It has been a very good year for Siemens in India with healthy growth rates. How would you describe the year that was in terms of what went right for the company?

Yes. It indeed has been a remarkable year for Siemens. We have recorded a robust growth in sales, turnover and profits. Our order value has also jumped during the fiscal. What is most heartening is the fact that our growth is spread across all our business segments and we have grown faster than the market in each of the businesses. There have been a number of reasons that contributed to our good performance during the year. The favourable Indian economy with GDP at 7 per cent played a crucial role. The continued thrust by the government on infrastructure development was another factor that supported our performance, especially in areas like the railways. We have been steadily consolidating our market position over the last few years, and we were in an ideal position to take better advantage of the growing market. This was backed by a very clear strategy for profitable growth. Our plan in order to achieve growth was to grow both organically and inorganically. I would certainly call this a new phase of our existence, primarily because the expectations of our stakeholders are higher.

There have been impressive numbers in terms of orders generated (over 4,000 crore). Which sectors are you most bullish about as far as getting new orders is concerned?

Our order book has increased by 37 per cent this year (financial year October-September 2004-05) as compared to the previous year. With the continuing and increased thrust on infrastructure, we expect this demand to continue. While we have specific competencies due to our local expertise, we are also part of a global company, which again gives us a global perspective, and a resource and skill base. A recent example is the winning of a contract from the Qatar General Electricity and Water Corporation (Kahramaa) for the development of power transmission network in Qatar. As you are aware, there is a huge power shortfall in India. We see the thrust from both the public and private sectors culminating in mega projects. Also, we have bagged some mega orders in this sector from the Middle East. This could also be a growing market for us.

During the year, you have made progress through acquisitions too. Are we likely to see both organic and inorganic growth contributing significantly to the company's progress?

Yes, during the year what we did was to use a combination of both organic and inorganic means to achieve our growth plans. Our inorganic growth, through the M&A route, has been undertaken in order to consolidate our portfolio. We did this in the power and telecom sectors and in the it offerings. While two of our acquisitions in the power sector-Demag Delaval Industrial Turbomachinery (DDIT) and Pimac Engineering & Services Ltd-give us a distinct advantage in the turbines business; the realignment of Siemens Public Communication Network Ltd (SPCNL) and Siemens BPO Services gives us more focus in the telecom and it space. During the coming years, we will continue to use our existing strategy of growing through a mix of both organic and inorganic means.

India is undoubtedly one of your key markets in this part of the world. How would you view your progress in the Indian market as compared to other markets in Asia?

Our commitment to India has been solid and consistent, right through the years. There are a number of factors that work in favour of India emerging as a favourite business destination-not only for us, but for other global companies too. India is very clearly Asia's second economic giant and is one of the fastest growing markets in the world. As far as comparisons are concerned, till a few years ago, while China and India were bunched together, it was always China first, then India. Now of course, this has changed. It's China and India. Every country has its own unique challenges-and India is no different. It, too, has its unique sensitivities. For instance, the Indian market is very price sensitive-so, that is a factor that needs to be borne in mind while formulating local manufacturing and marketing plans.

On the progress of the Indian operations, I can only say we are very satisfied. For instance, our Indian operations are already contributing significantly in the area of software and research through its it arm, Siemens Information Systems Ltd (SISL). At present, the company has about 3,300 software professionals, of which nearly 1,200 are engaged alone in healthcare software development.

We have also continuously invested in our manufacturing operations in India and today have 14 manufacturing facilities. We are also in the process of further augmenting our manufacturing capacities and are setting up a new transformer factory at Kalwa in Maharashtra. As a result, on the manufacturing front, we see our Indian operations emerging as an export platform to Asia and the Middle East.

"Siemens India is now recognised amongst the top performing companies within the Siemens World. I also see this contribution steadily increasing in the coming years"

Over time, how much do you expect India to contribute to Siemens' revenues worldwide and in Asia? Where do you expect the increase in revenues to come from?

Over the past few years, the contribution of Asia to the global business volume has increased dramatically. This has been the case with Siemens too. And now, within this larger pie, the contribution of Siemens India to the global business has consistently gone up. In fact, Siemens India is now recognised amongst the top performing companies within the Siemens World. I also see this contribution steadily increasing in the coming years.

As all the businesses are growing faster than the market, it would be difficult to single out any business. Nevertheless, as an "infrastructure" company, the power, transportation and telecom businesses definitely offer many opportunities. As an "industry" player, our businesses have separate dynamics, which are driven more by private investments and demand. Finally, as an infotech and a service company, our IT and communication and medical businesses have interesting times ahead. Increased revenues will come from overall growth in all the areas, apart from new areas like water management. Globally, we have acquired us Filter, a leader in this area. In India, we feel there is a substantial potential, especially since the need of the hour is to treat water and make it potable.

You have spoken of opportunities in India like Mumbai's rail network, Bangalore's airport project and mining related assignments. In that context, the Indian infrastructure story appears to be big. How bullish are you on this sector?

On the population front, India is expected to add 400 million people in the next 20 years. As far as urbanisation goes, India is poised to have nearly 50 per cent of its population living in cities by the early part of the present century. Another interesting statistic is that by 2015, India will have the largest number of mega cities. These developments will surely stimulate the need for basic infrastructure facilities like energy, transportation facilities, healthcare services, water and telecommunications. The need for higher infrastructure investments is well known and it is important that the government, too, realises this. There is an increasing recognition that India's capital investment on electricity, roads, airports, seaports, and telecom-at 3.5 per cent of the GDP, as compared to more than 10 per cent of the GDP in case of China-is not yet sufficient.

Do you visualise a situation, for instance, when India becomes a manufacturing base for your projects in the rest of the world?

We have over the years built our domestic base diligently. We have localised global products according to the market needs and ensured acceptance for our products. For example, there are cases like that of localisation of miniature circuit breakers (MCB) for local power conditions or underslung inverters for the Indian Railways' air-conditioned coaches. We have also steadily built on our local innovations. The next step would then be to look at the export market, particularly the neighbouring countries

We have bagged huge orders from Qatar in the power transmission sector. There has been a steady increase in our export performance and we see this trend continuing. India's manufacturing capabilities are now increasingly being acknowledged at the global level. We see India, along with China, being a major hub in the Asian region in catering to the markets in this region.

"Till a few years ago, while China and India were bunched together, it was always China first, then India. Now, of course, it's China and India"

The other areas that you seem optimistic about are those of healthcare and energy. What is your game plan for these?

Whilst there is increased government intent and spending in areas of basic amenities such as water, healthcare and energy, it is the booming population that makes the demand even higher. This being the case, the economy being on an upswing, investments are moving into the country and private players are finding these areas lucrative. We have been associated with India since the 1860s and are familiar with its environment and are committed to this country. We are also looking at leveraging some of our global tie-ups and skills to make the most of these emerging opportunities.

Telecom is one sector where you have been going slow. What is the reason for that?

We have been present in this segment for a number of decades now. However, given the cyclical nature of this business, we have had to realign and reorient the business portfolio. This is a reality for any business. In India, we are strong in the enterprise networks segment. We are a leading provider of converged communication solutions and services across the entire spectrum from small-home offices to large networked enterprises. We also have a presence in the carrier business through Siemen's Public Communication Networks Ltd, which is now a 100 per cent subsidiary of Siemens Ltd. Moving ahead, we will definitely look into the market needs and strengthen those areas where we see opportunities.

To your mind, how would you describe the last 15 years for Siemens India (ever since the government announced its reforms process), and what are the lessons Siemens has learnt in the close to 150 years it's been in India?

Siemens 15 years ago and today is a very different story. In this time, we have not only grown manifold but have added many new businesses and entered new fields. Business, no doubt, has to continuously respond to the market needs and this is what we did. Depending on the market needs, we have forayed into areas such as information technology and its variants like the BPO business. We also recently ventured into the building technology segment.

The key lesson I would say is first to understand the domestic markets and its dynamics. Each country, each market, has its own, unique characteristics and concerns. This has to be respected and understood from that country's viewpoint. India, being a democracy, may run slower than others in the decision-making process, but steadier in the long run. What we have learnt is to be consistent and not have a knee-jerk reaction to every situation.

How convinced are you about India's growth story today? Also, do you see India emerging as an engineering giant over time?

I think the India story is here to stay. The process of liberalisation has been in place for well over a decade now, and has been gathering increased momentum of late. However, since India started off the blocks quite late, there is quite a bit of catching up that needs to be done. With the favourable macro-economic scenario and India now being identified as a high potential market, the time is opportune to push ahead faster. India is indeed now being increasingly seen as an emerging manufacturing base. There are a number of global automobile giants that have set up manufacturing facilities right here. In auto ancillaries, forgings and other such areas, too, there are shining examples of Indian competencies. Now, we have all the mobile phone giants beginning to set up manufacturing facilities here. Given India's intrinsic strengths, one expects this trend to continue and even hasten with a number of global players wanting a piece of the action in one of the fastest growing economies of the world.