Indian Business History - Madhukar Shukla, XLRI Jamshedpur

Indian Business History madhukar shukla

Madhukar Shukla

Indian Business History: Phases • Pre 1947 – The Roots of Indian Business

• 1947 - Mid60s – Experiments & Beginnings

• Mid60s - Early80s – Economic Radicalism

• 1980s – Making of a Snowball

• 1990s... – Liberalization & after Madhukar Shukla

Pre - 1947: The Roots of Indian Business

Madhukar Shukla

Pre-1947: The Players Managing Agencies: •Andrew, Yule & Co •Duncan Brothers •Shaw Wallace & Co etc

The Marwaris •Birlas (textile, jute) •Goenkas (trading) •Jhunjhunwalas (broker, cotton) etc Madhukar Shukla

The Parsis •Wadias (shipbuilding, textile, paper, etc.) •Tatas (textile, steel) •Godrej (locks, soap) etc The MNCs •Lever Brothers •Philips etc

Pre-1947: the scenario • Major Business Centers: Bombay & Calcutta • BSE (1875); CSE (1908) • Large Scale Industries – Sugar, Cement, Matches, Iron & Steel, Paper, Cotton, Jute, Woolen

• • • • • •

Local Markets Traders & Middlemen Railways => Engineering Workshops Post W W I Boom Formation of FICCI (1924) Laissez Faire Economy

Madhukar Shukla

Why Business Did Not Develop During British Raj...

• POPULATION Low Income Levels Low Demands Low Scales of Economy

• LOCAL MARKETS Low Demand

Madhukar Shukla

• CHEAP LABOUR Deterrent to Technology

• FLOW OF FDIs into Sectors Useful to Advanced nations, Not to Local Economy

Swadeshi as USP • 501 (1927): “Our Very Own Soap” • Hamam (1931): “Made in India with Indian Capital and Management” • Panama (1940s): “The Taste of Freedom” • Duckback (1920) • Margo (1924) • Raymonds (1931) • Camel (1931): “Art Must Not Depend on Foreign Material” Madhukar Shukla

Largest Indian Companies: 1947

• Tata Iron & Steel Co • Burmah Shell • Calcutta Electricity Supply Co • Associated Cement Co • Scindia Steamship Navigation Co • Indian Iron & Steel Co • Bombay Dyeing • Steel Corpn of Bengal Madhukar Shukla

• Delhi Cloth & General Mills • Tata Power Co • India United Mills • Madura Mills • British India Corpn • Jivajirao Mills • Andhra Valley Power Corpn • Century Cotton Mills

Did India Stagnate till 1990s? - Viewpoint 1 …in July 1991… with the announcement of sweeping liberalization by the minority government of P.V. Narasimha Rao… opened the economy… dismantled import controls, lowered customs duties, and devalued the currency… virtually abolished licensing controls on private investment, dropped tax rates, and broke public sector monopolies…. We felt as though our second independence had arrived: we were going to be free from a rapacious and domineering state…“ - Gurucharan Das (India Unbound), 2000 Madhukar Shukla

Did India Stagnate till 1990s? Viewpoint 2

Madhukar Shukla

Pre-90s: Growth of Indian Economy Infrastructure

Madhukar Shukla

Power Generated (bn KWH) 300

264.3

250 200 150

110.8

100 50

55.8 5.1

16.9

0 50-51 Madhukar Shukla

60-61

70-71

80-81

90-91

Road Length (SH & NH) '000Km 200 161 150

126 81

100 50

22

24

50-51

60-61

0

Madhukar Shukla

70-71

80-81

90-91

Crude Petroleum (mt) 35 30 25 20 15 10 5 0

33

10.5 6.8 0.3

0.5

50-51

60-61

Madhukar Shukla

70-71

80-81

90-91

Bank Branches ('000) 70 60 50 40 30 20 10 0

59.76

62.35

80-81

90-91

51.38 31.42 8.26

50-51 Madhukar Shukla

60-61

70-71

Telephones ('000) 6705

8000 6000 2785

4000 2000

168

483

50-51

60-61

1293

0

Madhukar Shukla

70-71

80-81

90-91

Pre-90s: Growth of Indian Economy Essential Items

Madhukar Shukla

Paper & Paper Board (mt) 2432

3000 2000 1000

350

755

1149

0 60-61 Madhukar Shukla

70-71

80-81

90-91

Chemical Fertilizers (mt) 10000 8000 6000 4000 2000 0

9146

3006 150 60-61

Madhukar Shukla

1059

70-71

80-81

90-91

Diesel Engines ('000) 1863.2

2000 1500 1000 500 44.7

65

60-61

70-71

173.9

0

Madhukar Shukla

80-81

90-91

Machine Tools (Rs mn) 6990

8000 6000 4000 2000

1859.5 58.6

372.3

60-61

70-71

0

Madhukar Shukla

80-81

90-91

Pre-90s: Growth of Indian Economy “Luxury” Items

Madhukar Shukla

Cars ('000) 364

400 350 300 250 200 113

150 82

100

51

50 0 60-61 Madhukar Shukla

70-71

80-81

90-91

Two-Wheelers ('000) 1863.2

2000 1500 1000 500 19.4

97

60-61

70-71

317.1

0

Madhukar Shukla

80-81

90-91

Refrigerators ('000) 1400 1200 1000 800 600 400 200 0

1184

290 11 60-61

Madhukar Shukla

87 70-71

80-81

90-91

Bicycles ('000) 8000

6764

7000 6000 4489

5000 4000 2042

3000 2000

1071

1000 0 60-61 Madhukar Shukla

70-71

80-81

90-91

Pre-90s: Growth of Indian Economy Economy

Madhukar Shukla

GNP ('000crores) 461.3

500 450 400 350 300 250 200 150 100 50 0

122.7 15.2 60-61

Madhukar Shukla

39.4

70-71

80-81

90-91

per Capita Income (Rs) 5471

6000 5000 4000 3000 1630

2000 1000

328

675

0 60-61 Madhukar Shukla

70-71

80-81

90-91

Exports (Rs crores) 32553

35000 30000 25000 20000 15000 6711

10000 5000

642

1535

60-61

70-71

0

Madhukar Shukla

80-81

90-91

Growth of GDP across Decades Average GDP Growth Rate among Developing Countries during 1950-80

Madhukar Shukla

1947 - Mid60s Experiments & Beginnings

Madhukar Shukla

What we had in 1947... • 30cr Population • 15% Literacy (9% women literacy) • Average Longevity of 32yrs (15% infant mortality) • 8.5 mn Refugees

Madhukar Shukla

Madhukar Shukla

What we had in 1947... • 30cr Population • 15% Literacy (9% women literacy) • Average Longevity of 32yrs (15% infant mortality) • 8.5 mn Refugees • 40% of Landmass belonging to 562 princely states

Madhukar Shukla

Madhukar Shukla

What we had in 1947... • 30cr Population • 15% Literacy (9% women literacy) • Average Longevity of 32yrs (15% infant mortality) • 8.5 mn Refugees • 40% of Landmass belonging to 562 princely states • Ethnically, Culturally, Religiously HyperDiverse Country (1549 “mother tongues” – 1961 Census) Madhukar Shukla

Non-Scheduled languages with >1mn speakers • • • • • • • • •

Bhojpuri Chhatisgarhi Magadhi Manipuri (Maithei) Marwari Santhali Rajasthani Gondi Dogri/ Kangri

Madhukar Shukla

• • • • • • • •

Garhawali Pahari Bhili Oraon (Khurukh) Komaoni Lambadi (Lamani) Tulu Bagri

Hyper-diversity • “How can one approach the India of snow peaks and tropical jungles, with 17 major languages and 22,000 distinct "dialects“… inhabited by nearly 940 million individuals of every ethnic extraction known to humanity? How does one come to terms with a country whose population is 51% illiterate but which has educated the world's 2nd-largest pool of trained scientists and engineers… How can one portray the present, let alone the future, of an ageless civilization that is the birthplace of 4 major religions, a dozen different traditions of classical dance, eighty-five political parties and 300 ways of cooking the potato? • Madhukar Shukla

-Shashi Tharoor

Hyper-Diversity • India lives in several centuries at the same time. We progress and regress simultaneously.” •

Madhukar Shukla

- Arundhati Roy

“…Personally I feel that the biggest task of all is not only the economic development of India as a whole, but even more so the psychological and emotional integration of people of India.” - Jawaharlal Nehru (1957)

Madhukar Shukla

What we had in 1947... • 30cr Population • 15% Literacy (9% women literacy) • Average Longevity of 32yrs (15% infant mortality) • 8.5 mn Refugees • 40% of Landmass belonging to 562 princely states • Ethnically, Culturally, Religiously HyperDiverse Country (1549 “mother tongues” – 1961 Census) • 57% Population below Poverty Line Madhukar Shukla

A Government Ad

Madhukar Shukla

What we had in 1947 - agriculture • 83% rural population; 70% dependent on agriculture • 70% cultivated land owned by landlords & moneylenders • Rs 1800cr rural debt • 28% landless agricultural labour • Low investment in modernization – 0.9mn iron ploughs vs. 31.3mn wooden ploughs – 27% irrigated land – 9 agricultural colleges; 3000 students Madhukar Shukla

What we had in 1947- manufacturing • 3% (8.8 mn) employed in manufacturing • Somewhat developed Core Sector Industries – Sugar, Cement, Matches, Iron & Steel, Paper, Cotton, Jute, Woolen

• 55% of total value added from Jute and Cotton (30% of total industrial employment) • Low value added: – 9% contribution of organized mfg. to economy – 70% export of raw material; 65% import of finished goods – 90% machine tools imported – 7 Engineering colleges; 2217 students Madhukar Shukla

What we had in 1947- assets & liabilities • • • • •

65,000 miles of paved roads 42,000 miles of railway tracks 73% market share by indigenous enterprises 80% deposits in Indian-owned banks A reasonably large pro-development Indian capitalist class with independent capital base

Madhukar Shukla

Largest Indian Companies: 1947

• Tata Iron & Steel Co • Burmah Shell • Calcutta Electricity Supply Co • Associated Cement Co • Scindia Steamship Navigation Co • Indian Iron & Steel Co • Bombay Dyeing • Steel Corpn of Bengal Madhukar Shukla

• Delhi Cloth & General Mills • Tata Power Co • India United Mills • Madura Mills • British India Corpn • Jivajirao Mills • Andhra Valley Power Corpn • Century Cotton Mills

What we had in 1947- assets & liabilities • • • • •

65,000 miles of paved roads 42,000 miles of railway tracks 73% market share by indigenous enterprises 80% deposits in Indian-owned banks A reasonably large pro-development Indian capitalist class with independent capital base • A mature press • Rich-poor divide • Legacy of Laissez faire Economy Madhukar Shukla

Indian Economic Blueprint • IPR 1948: “Socialist pattern of society as objective of the social and economic policies.”

Madhukar Shukla

Indian Economic Blueprint – the consensus • Multi-pronged economic development based on self-reliance • Rapid industrialization based on importsubstitution • Prevention of foreign capital domination • Growth with equity/ Reformist welfareoriented model through land reforms • Positive discrimination • Proactive role of government in economic development Madhukar Shukla

Indian Economic Blueprint • IPR 1948: “Socialist pattern of society as objective of the social and economic policies.” • Bombay Plan (1945): state-led strategy for “creating basic industries in as short a time as possible.” • FICCI: “the economic front of Indian nationalism.” • Mixed Economy

Madhukar Shukla

Mixed Economy: the original vision

“I think it is advantageous for the public sector to have a competitive private sector to keep it up to the mark... I feel that, if the private sector... is abolished completely, there is a risk of the public sector becoming slow, not having that urge and push behind it.”

Jawaharlal Nehru (1956) Madhukar Shukla

Guess???… • Who was the Industry Minister in the interim government in 1948 when the IPR was drafted? • Who was once described as “the Doyen of Indian Communists” in the West? • Who laid the foundation of Indian Space program in 50s-60s? • Where were the engineers of the public sector steel plants trained in 50s-60s? • Who provided professional staff to stateowned Ashoka Hotel?… etc. Madhukar Shukla

Industrial Policy Resolution: 1948 • Defense & Strategic (Munition, Atomic Energy, Railways, etc) • Key & Basic (Telecom, Shipbuilding, Aircraft, Iron & Steel, Coal, Petroleum, etc.) • Private Industries (Consumer Goods, Automobile, Engineering, Chem & Fertilisers, Non-Ferrous Metals, Power, Textile, Food, Transport & Pharmaceuticals) • Residual Industries

Madhukar Shukla

1950s-mid60s: The Foundations of Economy

• Socialist (/Mixed) Economy – 5 Year Plan – Licensing – Nationalism – STC • Govt vs. FICCI vs. “Bombay Plan” • Public - Private Sector Split

Madhukar Shukla

Nurturing Growth: 1950s-mid60s

• • • • • •

“Temples of Modern India” Trade Unionism Employee Welfare Indian Managers IIMs & IITs Professional Bodies (NPC, NITIE, IFT, etc.) • Formation of ISRO, BARC, CSIR, etc • Subcontracting & Ancilliarisation • Small Scale Entrepreneurs Madhukar Shukla

Mid60s - Early80s Economic Radicalism

Madhukar Shukla

mid60s-70s: The Growth of Economic Radicalism • Wars, Political Instability & Famines

Madhukar Shukla

A News Item

Madhukar Shukla

mid60s-70s: The Growth of Economic Radicalism • Wars, Political Instability & Famines • Mixed => Socialist Economy • Focus on Import Substitution – Indigenous technology (Space, Computers, Pharmaceuticals, etc.) – The success of Green Revolution

Madhukar Shukla

Green Revolution 70 60

63.9 Land under HYV seeds (mn hectares)

50

43.1

40 30

15.4

20 10

1.9

0 1960 Madhukar Shukla

1970

1980

1990

mid60s-70s: The Growth of Economic Radicalism • Wars, Political Instability & Famines • Mixed => Socialist Economy • Focus on Import Substitution • Technology vs. Employment • MRTP

Madhukar Shukla

MRTP.... •

1969: Top 10 Business Houses owned 32% of Total Private Assets

Madhukar Shukla

Monopoly & Restrictive Trade Practices Act (MRTP, 1969) • Limitation on Size – Rs 20cr Assets (raised to Rs 100cr in 1985), or – One Third of Industry Capacity

• Restrictions on: – – – – –

Issue of Fresh Capital Installation of New Machinery Replacement of Old Machinery Floating new Company Mergers, Acquisitions, Takeovers

• Govt Control through Mandatory Licensing Madhukar Shukla

MRTP APPLICATON for Foreign Collaboration The Entrepreneur ÔSecretary, Company Law ÔPlanning Commission ÔOffice of Technology Development ÔIndustry Ministry ÔFinance Ministry ÔForeign Investment Board ÔMinistry of Commerce ÔDevelopment Commissioner, Small Scale Industries Madhukar Shukla

1970s: MRTP & After ƒ ƒ

Abolition of Managing Agencies Nationalisation ¾ ¾ ¾ ¾ ¾ ¾ ¾

ƒ ƒ

Coal Cotton Textile Copper IISCO Banks Insurance Wholesale Wheat Trade

SSI Reservation List (180 => 907) Growth of PSUs: 86 (1970) => 185 (1980)

Madhukar Shukla

mid60s-70s: The Growth of Economic Radicalism • Wars, Political Instability & Famines • Mixed => Socialist Economy • Focus on Import Substitution • Technology vs. Employment • MRTP • Proliferation of Public Sector

Madhukar Shukla

Public Sectors • What Went Wrong

250

215 185

200

1 50

– Industrial Infrastructure – Industrial Culture – HR Breakthroughs

50

5 0

1951

Madhukar Shukla

‘Employment Generation’ Transient Top Mgt Over Regulated Low Profitability

• Contributions

85

1 00

– – – –

1966

1980

1984

1970s.... •

1969: Top 10 Business Houses owned 32% of Total Private Assets

•

1969-76: Top 10 Business Houses got 50% of all MRTP approvals

•

Industrial Unrest: •

•

1971:16.5mn mandays => 1979:37mn mandays

Wasteful Government Policies

Madhukar Shukla

1970s: Economic Radicalism

• 1978: Salary Ceiling (Rs6000 + 25%perks) • 1979: Move to Nationalise Automobile, Transport, Aluminium, TISCO • Indirect Corporate Taxes: – Public Ltd (74%) – Private Sector (77%) – MNCs (88%) Madhukar Shukla

1970s: The Age of Scarcity

¾Bajaj Scooter: 10-15yrs ¾Telco Truck: 2yrs ¾LPG Connection: 5-10yrs ¾Scarcity of Stainless Steel ¾3mn smuggled Wrist Watches ¾1980-Year of Tourism: 9,000 hotel rooms Madhukar Shukla

1970s: The Invisible Changes

• Rise of Professionals/ Technologists

Madhukar Shukla

Universities/ Colleges 250 202

Universties/ Colleges 200 132

150 100 100 50

45 27

0 1950 Madhukar Shukla

1960

1970

1980

1990

Active Scientific/ Technical/ Medical Personnel (mn) 4 3.5

Active Scientific/Technical/Medical Personnel (mn)

3.8

3 2.5

1.8

2 1.5

1.2

1 0.5

0.19

0.45

0 1950 Madhukar Shukla

1960

1970

1980

1990

Stock of Engineering Degree/Diploma Holders (in ‘000) 16,000 13,789

14,000 12,000 10,000 7,307

8,000 6,000 4,049 4,000 2,000

790

1,480

0 1955

Madhukar Shukla

1961

1971

1981

1991

Stock of Registered Doctors (‘000) 450 394

400

Doctors ('000)

350

297 300 250 200

172.4

150 76

100 50

18

0 1950 Madhukar Shukla

1960

1973

1984

1991

Stock of Hospitals (‘000) 11.2

12 10

Hospitals ('000)

7.4

8 5.4

6 4 4 1.9 2 0 1950 Madhukar Shukla

1960

1973

1984

1991

1970s: The Invisible Changes

• Rise of Professionals/ Technologists • Visible MBAs • New Companies (Reliance, Skypak, HCL...) • Managers turned Entrepreneurs • Women Managers • DoorDarshan: media & consumerism Madhukar Shukla

Changing Demographics 80 70 60

Post-Independence Born Indians (%)

50 40 30 20 10 0 1961 Madhukar Shukla

1971

1981

1980s: Making of the Snowball

Madhukar Shukla

India’s Real GDP Growth

Madhukar Shukla

1980s: The Economy Matures

• Growth of Manufacturing/ Service Sectors

Madhukar Shukla

Changing Structure of GDP 81-91 51-61

38.3 31.9

ce i v r Se

27.8 ct a f nu a M

17.5

ng i r u

u re t l u r ic g A

Madhukar Shukla

33.8 50.6

0

10

20

30

40

50

60

1980s: The Economy Matures

• Growth of Manufacturing/ Service Sectors • Pull of the Middle Class • Asian Games, Colour TV & Growth of Consumerism • Partial Liberalisation

Madhukar Shukla

Partial Liberalization of 80s • IPR 1980: – Automatic enhancement of licensed capacities – Regularization of “illegal” capacities – Relaxations in Capital Issue Control Act, etc.

• Abid Hussein, PL Tandon and Arjun Sengupta Committees • 1985-86: – Exemption of 27 High-Technology and Heavy Industries from MRTP – 60% reduction in import duties – Free Trade Zones & Export Oriented Units…. Etc.

Madhukar Shukla

Other Significant Milestones • Launch of Maruti – Consumer Finance “revolution”

• Technology Commissions • Changes in Banking Laws – Growth of Mutual Funds

• PCO Revolution etc.

Madhukar Shukla

1980s: The Economy Matures

• Growth of Manufacturing/ Service Sectors • Pull of the Middle Class • Asian Games, Colour TV & Growth of Consumerism • Partial Liberalisation • Rural Markets

Madhukar Shukla

Growth of Rural Market

4000

3628

3500 3000 2500 1855

2000

2083

1500 1000

733

500 0 Rural

Urban 1984 1989

Madhukar Shukla

• >50% Rural Share for: – – – – – – – –

Biscuits Cycles Motor Cycles Watches Transisters Soaps, Detergents Sewing Machines Table Fans...

1980s: The Economy Matures

• Growth of Manufacturing/ Service Sectors • Pull of the Middle Class • Asian Games, Colour TV & Growth of Consumerism • Partial Liberalisation • Rural Markets • Strong Local Brands Madhukar Shukla

Indian Brands of 80s

Madhukar Shukla

1980s: the market boom Competition (1987) • TVs: 100 brands • Soaps: 30 new brands • Hardware: 80 mfgr • Trucks: 4 new brands • EPABX: 52 brands • Photocopier: 30 brand • VCRs... • Fabrics...

Madhukar Shukla

Growth of Brands 23

Shampoo

53 84

Edible Oil 58

Premium Soap

54 34

Popular Soap

42

31

Packaged Tea

Madhukar Shukla

93

29

Telcum Powder

1985 1990

116

0

81

50

100

150

1980s: The Economy Matures • Growth of Manufacturing/ Service Sectors • Pull of the Middle Class • Asian Games, Colour TV & Growth of Consumerism • Partial Liberalisation • Rural Markets • Strong Local Brands • Emergence of New Entrepreneurs • Arrival of MNCs Madhukar Shukla

Arrival of MNCs • Escorts Yamaha (1980) • Modi Xerox (1981) • Maruti Suzuki (1982) • DCM Toyota (1982) • Birla Yamaha (1983) • Sriram Honda (1985) • Hero Honda (1986) etc.

• RHL => P&G • Glindia =>Glaxo • Food Specialities => Nestle • Pieco => Philips • Hindustan Cocoa Products => Cadburys’ • PEPSI

Swaraj Paul Raids! Madhukar Shukla

1980s: The Economy Matures • Growth of Manufacturing/ Service Sectors • Pull of the Middle Class • Asian Games, Colour TV & Growth of Consumerism • Partial Liberalisation • Rural Markets • Strong Local Brands • Emergence of New Entrepreneurs • Arrival of MNCs • “Mega” Issues Madhukar Shukla

Money Raised from Capital Markets (Rs Cr) 6509.9

7000 6000 5000 4000 3000 2000 1000

91.5

98.4

195.8

1970

1975

1980

858.3

0 Madhukar Shukla

1985

1990

Registered Cos in India ('000) 250

Cos Listed on SEs 224.5

7000 5968 6000

200

5000

150

124.4

100 50

65.6 26.2 30.3

43.4

4000 3000 2265 1852

2000 1125

1203

1946

1961

1000

0 1960 1970 1975 1980 1985 1990 Madhukar Shukla

0 1975

1980

1990

1980s: The Economy Matures • • • • • • • • • •

Growth of Manufacturing/ Service Sectors Pull of the Middle Class Asian Games, Colour TV & Growth of Consumerism Partial Liberalisation Rural Markets Strong Local Brands Emergence of New Entrepreneurs Arrival of MNCs “Mega” Issues Awareness of Consumer & Environmental Issues

Madhukar Shukla

Global Capacities in 1990 • • • • • • •

Bajaj Auto: 3rd largest two-wheeler producer Arvind Mills: 5th largest denim producer Hero Cycle: largest bicycle producer Nirma: largest detergent producer AV Birla: largest rayon fibre producer Lupin Lab: largest anti-TB drug producer Raymond Mills: 5th largest worsted suitings manufacturer • KEC International: 2nd largest transmission tower manufacturer Madhukar Shukla

Growing National Debt (‘000 cr) 120 Domestic Debt

100

Foreign Debt

•3-times annual govt. revenue •2/3rd of GDP •Rs. 1,500/ person

Total

82.3

80 60 46.4

40

31.3 23

21.2

20

11.3

15.1 9.9

0 1980 Madhukar Shukla

1984

1988

105.3

1990s... Liberalisation & after

Madhukar Shukla

1990s: Liberalisation of Economy • New Industrial Policy • Scrapping of MRTP • New Challenges: – Quality – Customer Orientation – Global Focus – Resource Management • Emergence of Knowledge-Based Economy

Madhukar Shukla

New Realities...

• Collaborations & Partnering

Madhukar Shukla

Foreign Collaborations 900

785

800

691

700

Financial

Technical

600

472

453

500 400 300

151

200 100

194

32

73

0 Madhukar Shukla

1970

1980

1990

1993

New Realities...

• Collaborations & Partnering • Consolidations

Madhukar Shukla

Mergers & Acquisitions M&As 500

450

450 400 350 300 250 156

200 114

150 100 50

15

18

25

33

30

1988

1989

1990

1991

1992

0

Madhukar Shukla

1993

1994

1995

New Realities...

• Collaborations & Partnering • Consolidations • The New Worker

Madhukar Shukla

1990s: Declining TU Militancy Strikes

No of Strikes & Lockouts 2000

1810

1800

18

1714

16

1201

1400

16.12

1200

1110

1000

14.68

14

14

1393

1600

Lockouts

14.33

15.31 10.57

12 10

12.42

8

800

6

600

5.61

4

400

6.65

5.72

2

200

0

0 91 Madhukar Shukla

92

93

94

95

91

92

93

94

95

New Realities...

• Collaborations & Partnering • Consolidations • The New Worker • Managing Investors & Capital

Madhukar Shukla

New Realities...

• Collaborations & Partnering • Consolidations • The New Worker • Managing Investors & Capital • Working across Cultures

Madhukar Shukla

Outbound India Proposals Approved for Overseas Investments 330

350

• By 1994, Indian Companies had – 524 overseas JVs – 300+ wholly-owned subsidiaries abroad

300 250

198

• Mid-late 90s:

200 150

Overseas Takeovers

107

100

• Global Indian CEOs (StanChart, US

50 0 1992

Madhukar Shukla

1993

1994

Air, McKinsey, Infospace...)

Impact of Liberalised Environment ƒ The structure of business environment has changed

Madhukar Shukla

Sales 1992

Market Capitalisation 1999

1992

1999

1

Telco

Reliance

ITC

HLL

2

ITC

HLL

HLL

ITC

3

Tisco

ITC

Tisco

Reliance

4

Reliance

L&T

Reliance

Wipro

5

HLL

Tisco

L&T

Bajaj

6

L&T

Telco

Telco

Infosys

7

Grasim

M&M

Hindalco

Telco

8

ACC

Grasim

Century

Nestle

9

Bajaj

Bajaj

Grasim

NIIT

10

M&M

ACC

Colgate

L&T

Madhukar Shukla

Impact of Liberalised Environment ƒ The structure of business environment has changed ƒ …some have emerged as Winners

Madhukar Shukla

Winners • Bharat Forge: – World’s largest single-source forging facility – Supplier to: Toyota, Dailmer Chysler, Honda, Volvo, Cummins…

• Asian Paints: – Production facilities in 22 countries – Market leader in 11/ 22

• Essel Propack: – World’s largest laminated tube manufacturer – Manufacturing facilities in 11 countries – Sole supplier to P&G worldwide; 40% share in Unilever supplies

• Moser-Baer: – World’s 3rd largest CD-Recorder manufacturer – Supplier to top 7 Global companies Madhukar Shukla

Winners • Hero Honda: – World’s largest motorcycle manufacturer

• Hindustan Inks: – World’s largest integrated facility – 100% subsidiary in US and Austria

• Tata Motors: – Only indigenously developed car outside US, Japan ad Germany

• Ranbaxy: – Exports to 100 countries – Ground presence in 25 countries – Manufacturing facilities in 7 countries

Etc. Madhukar Shukla

Impact of Liberalised Environment ƒ The structure of business environment has changed ƒ …some have emerged as Winners ƒ but large number of companies have lost out to competition

Madhukar Shukla

Indian Scenario 1990-2001 120

120

100 100

80

60

Top 100 Indian Companies (by sales) 47

100

80

Top 100 Indian Companies (by market cap)

60

33

40

40

20

20

0

0 1990

Madhukar Shukla

100

2001

1990

2001

Impact of Liberalised Environment ƒ The structure of business environment has changed ƒ …some have emerged as Winners ƒ but large number of companies have lost out to competition ƒ … India is emerging as a global sourcing hub

Madhukar Shukla

India as global research/ sourcing hub • 100 of the Fortune500 companies have their R&D facilities to India

Madhukar Shukla

Madhukar Shukla

India as global research/ sourcing hub • 100 of the Fortune500 companies have their R&D facilities to India • 15 of the globally largest automobile manufacturers source parts from Indian companies

Madhukar Shukla

Indian Auto-Component Exports (in$mn) 1600

1500

1400 1200 1000 800 600 400

375

200 0 2002

Madhukar Shukla

2003

India as global research/ sourcing hub • 100 of the Fortune500 companies have their R&D facilities to India • 15 of the globally largest automobile manufacturers source parts from Indian companies • Maruti is the sole supplier of small cars under Suzuki brand worldwide • Ford India is the sole global source for Ikon brand and components • International Tractors (ITL) is the sole 40-85hp tractors for Renault • Tata Motors is supplying 1lac cars to Rover to be marketed under Rover brand Etc. Madhukar Shukla

Impact of Liberalised Environment ƒ The structure of business environment has changed ƒ …some have emerged as Winners ƒ but large number of companies have lost out to competition ƒ … India is emerging as a global sourcing hub ƒ But being a part of global network has its own challenges Madhukar Shukla

India’s Global Competitive Advantage • Multi-cultural Experience • History of Foreign Collaborations • Industrial Culture • Technically Qualified Manpower • Resource Rich Country • English-Speaking Workforce • IT Competency

Madhukar Shukla

Before we close…. A Summary

Madhukar Shukla

India: from the beginnings… What we had in 1947- manufacturing What we had in 1947 - agriculture • 3% (8.8we mn)had employed in manufacturing What in 1947... 83% rural population; 70% dependent on

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• • Somewhat developed Core Sector Industries agriculture 30cr Population – Sugar, Cement, Matches, Iron & Steel, Paper, Cotton, Woolen • 70% cultivated landliteracy) owned by landlords & 15% Literacy (9% Jute, women • 55% total(15% valueinfant added from Jute and Averagemoneylenders Longevity ofof 32yrs Cotton mortality) • Rs 1800cr rural (30% debt of total industrial employment) • Low value added: 8.5 mn • Refugees 28% landless agricultural labour – 9% contribution of organized mfg. to economy 40% of Landmass belonging to 562 princely • Low investment in modernization – 70% export of raw material; 65% import of finished states – 0.9mn irongoods ploughs vs. 31.3mn wooden ploughs – 90%Religiously machine toolsHyperimported Ethnically, Culturally, – 27% irrigated land – 7 Engineering colleges;–2217 Diverse Country (1549 “mother tongues” 1961students Census) – 9 agricultural colleges; 3000 students Madhukar Shukla 57% Population below Poverty Line Madhukar Shukla

Madhukar Shukla Madhukar Shukla

India: we have come a long way • Food surplus (second largest) • Among 3 countries (besides USA and Japan) to build it own Super Computer • Among the 6 nations to have space technology • One among the BRIC countries • 2nd/3rd largest technical manpower • Among the fastest growing economy Madhukar Shukla

India: there is a long way to go….

Some points to ponder….

Madhukar Shukla

India: there is a long way to go • Per capita income = Rs 38084/annum – …but 836mn live on a daily income of >Rs.20/day • Part of BRIC nations – … but 134th rank on 2009 Human Development Index (out of 182 countries) – …but 65th rank on 2009 Global Hunger Index (out of 84 countries

Madhukar Shukla

India: there is a long way to go

• Top 10% of the society own 48% of assets • While the bottom 10% own >1% assets

Madhukar Shukla

Interview with KV Kamath, ICICI • Useem: As you look ahead over five years, many things can go wrong. What do you most fear in the Indian economy and the global economy that could derail your plans? • Kamath: I guess in the Indian context, I would say something that is unforeseen, like social strife, because we are living in a world of haves and have nots. And there is a divide. Now is this going to be something that could bother us? To me, this is the single most important thing which could impact business.

Madhukar Shukla

Chetan Ahya (Exec Dir, Morgan Stanley) The worrying aspect of the trend in globalisation and capitalism is the rising social challenges on account of increasing inequality. We believe the rise in inequality, when absolute poverty levels are still very high, poses a major political challenge. The inequality gap in wealth is even starker. … our analysis indicates that India has witnessed an increase in wealth of over $1 trillion (over 100% of GDP) in the past four years — and that the bulk of this gain has been concentrated within a very small segment of the population. Madhukar Shukla

Madhukar Shukla

That’s All Folks! Thank You!

Madhukar Shukla