November 16, 2003
Indian industry is fast transforming but the political class remains unchanged, underlines A V Rajwade
In his speech at the Asean Business and Investment Summit in Bali last month, Prime Minister Vajpayee, with his famous oratorical flourish, outlined the five revolutions that India is undergoing: the infotech revolution, a socio-economic revolution, a demographic revolution (a young country with 54 per cent of its population below 25), “a revolution of expectation” and a “psychological revolution”.
The prime minister described the last two as “truly path breaking”. He is, of course, right. There has occurred, over the past 12 years of partial liberalisation and halting globalisation, a paradigm shift from a psychology of shortages and regulation-driven business decision-making to one of confidence and enterprise.
The relaxation of a tight regulatory environment has unleashed the enterprise and energies previously devoted to evading regulations and getting licences and permits, to creating globally-competitive and innovative enterprises.
Indeed, a huge cultural transformation has taken place through restructuring of business processes, more efficient use of capital and labour (the total factor productivity is up sharply, according to a Tata Services study) and benchmarking against best practices worldwide. Remember the apprehensions about Chinese goods flooding the Indian market?
In just a couple of years, our exports to China have grown much faster than our imports and we actually enjoy a trade surplus. Remember the worries about multinationals driving Indian companies to bankruptcy? In last Monday's realignment of the Bombay Stock Exchange Sensex, four of the five companies dropped are multinationals, and they were all replaced by Indian companies.
While the software and IT-enabled services story gets the maximum publicity, we often overlook the giant strides taken by manufacturing industry. Analysts reckon that we are today the world's most competitive producers of goods ranging from televisions to vehicle ancillaries — of course, assuming a reasonable exchange rate.
After the creation of a relatively level playing field in the textile industry, there are prospects of fast growth after the quotas are removed beginning next year. Some are even talking of textile exports reaching $ 50 billion by 2020.
“Indian quality”, an oxymoron until a few years ago, has now become accepted all over the world, even in quality-conscious industries like vehicle manufacture. No wonder companies from Suzuki to Hyundai to Toyota are making India the worldwide hub for certain models, and 15 of the largest global vehicle companies have opened purchasing offices in India.The services sector story is, of course, too well-known to merit repetition. It is obvious by now that software was but a beginning, and the technological revolution heralded by the Internet and cheap telephony has given rise to a host of new services like engineering and architectural design, back-office work, research and development, equity research, call centres and so on.
No wonder companies as diverse as PricewaterhouseCoopers, Boeing, Ernst &Young, Oracle, HSBC, Siemens (SIEM.BO, news) , J P Morgan and, of course, the IT giants are rapidly expanding their presence in India to outsource more, and increasingly high-end, services. The recent research partnership between Ranbaxy and Glaxo could get repeated a number of times.
"Indian" is no longer a pejorative word. Kenneth Keniston of Massachusetts Institute of Technology (MIT) recently stated that "most of our distinguished faculty is Indian…the joke is that [MIT] is run by an IIT Kanpur mafia."
Another fallout is the growth of Indian multinationals, and not only in IT and pharma. Foreign direct investment by Indian companies could reach a $ 1 billion in the current year if some of the takeover bids currently under negotiation succeed. Tatas, Bajaj, TVS and others are also looking at establishing vehicle assemblies in south east Asia in anticipation of free trade.
Mahindra & Mahindra and other Indian companies, not all of them large, are taking over factories and mines abroad. Alok Kejriwal owns China's top content website, and is now partnering Siemens and Softbank of Japan to create China's largest SMS-based branding platform. European and Asean countries are wooing Indian investment.
In many ways, this is the result of economic reform and liberalisation taking the country away from an earlier milieu that “crippled the average Indian by teaching him to believe that all he needed to do was sit back and be a good boy (by voting Congress) and the state would take care of all his needs” (Tavleen Singh, Indian Express, October 26).
What I find strange, however, is that few politicians, including those who initiated the reform process, are willing to proudly accept its parentage. On the other hand, too many still seem wedded to bribing the voters to stay in power (watch out for the pre-election announcements), to keeping him dependent on the “Maa Baap Sarkar”, to doing everything to keep control over economic activity. To come back to the prime minister's statement in Bali, the “truly path-breaking…psychological revolution” is yet to reach much of the political class.
Tailpiece: “When I sat through the WEF [World Economic Forum] this time, I found that most Chinese leaders — whether they are in the corporate world, bureaucracy or in politics — were willing to admit that they have to learn from outside,” said Narayana Murthy of Infosys. How many of us are willing to do so?
Email: avrco@vsnl.com