Predominantly, Indians are also quick learners. We have learned the art of adapting to global business dynamism. Today India joyfully rides the global trend in each of its business categories and the effect of open economic policy and globalization is visible. But the situation was dismal even a few years ago and our incompetence in developing long-term strategy has taken its toll.
In the old days of self-sufficiency, the Indian auto industry emitted massive pollutants without a second thought. But competition with global producers in the domestic and export markets forced them to adopt Euro emission norms. In 1990 the Bombay Stock Exchange was a den of thieves, where crooked brokers and companies rigged prices and duped small investors. But once foreign investors entered the Indian market, they marked down the price of dodgy companies while paying high prices for companies with good standards. For the first time, honesty actually paid. With a thorough reform, now Indian capital markets are among the best in the Third World. All of the top drug companies want to become multinationals, and have raised their standards hugely. Indian pharma is now a big global player, with strengths ranging from reverse engineering to contract R&D, contract ingredient production, clinical trials, and basic research for new drugs. None of this would have happened without strong patent rights for drugs, something the government opposed tooth and nail and was finally forced to accept in the Uruguay Round of 1995.
Banking standards were abysmal in the 1980s, and bank balance sheets were fairy tales. But after economic reforms, Indian banks adopted Basel-1 norms, and are now moving towards Basel-2 norms. During nineties, consumer surveys showed that three-quarters of all food products sold loose were adulterated. Today, India has become a significant exporter of processed foods, and companies have to maintain global standards. The auto industry, two-wheelers, four-wheelers, and components have flourished and become world-class. Why? Auto companies need constant new models and improvements to compete, and Indian engineers can do this faster and more cheaply than US engineers. Yet, a company like Bharat Forge now employs no blue-collar workers at all. Only engineers, and this skilled force has made it the second largest forging company in the world. Gone are the old days when it took more than 5 years to get a car.
A significant section of the Indian growth was unplanned.
Far from having a strategy for promoting computer software, government policy suppressed it for decades. Narayana Murthy of Infosys says, it took him almost two years to get a telephone connection and a licence to import a computer. Because of trade union pressure, the government discouraged computerization of Indian services. The infamous bank-trade union agreement of 1993, provided for branch computerization at the rate of just 0.5-1% per year. India was saved by Silicon Valley, which hired Indians to work on US projects, and created skills though learning-by-doing. These skills then came back to India, and helped launch the software revolution. This was a by-product of US outsourcing strategy, rather than Indian strategy. The boom in brain-intensive manufacturing was also unplanned. There was much talk in 1991 of India following the path of labour-intensive exports that East and South-East Asia had pioneered. Alas, India failed dismally in labour-intensive industries, thanks to political constraints on labour laws. Instead, India is now flourishing in brain-intensive industries such as pharmaceuticals and automobiles. All top US companies are setting up Indian subsidiaries in search of cheap skills: if they don't have a low-cost Indian operation, they will lose out to others who do.
Indians are gleeful about the terrible bashing China's image has taken after a spate of scandals about the quality of its exports to the US. China converted this scandal in a huge blessing in disguise. They have improved standards sharply across industries in a short span. It’s a lesson for us. Unforgettable lessons that can take us to new height of international business if we improve production standards but also ruin millions of Indian investors if we don’t learn from it.
What should we do in the future?
We need to focus on connectivity and deregulation, rather than specific industrial policies. We should try to develop a global village, a open & globalized India where policy framework will develop long term competitiveness.
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