The ground realities of Indian business

Written by Pradip Baijal | Updated: Mar 31 2013, 09:28am hrs
Sumit Majumdars book tells the detailed story of the evolution of modern Indian enterprise after Indias industrial resurgence over the last two decades of industrial de-licensing

In my view, the book is a tour-de-force that does a fascinating job of reviewing the entire industrial development process of the last many centuries in India, the entire developing world, particularly the Asian economies and the West. True to the authors other writings, it does so with amazing precision of expression and deep factual analysis.

This book tells the story of the evolution of modern Indian enterprise after Indias industrial resurgence over the last two decades of industrial de-licensing. By exploring the contours of Indias late, late industrial revolution and its drivers, it narrates anecdotes so that the reader can get a detailed sense of the ground realities of Indian business, yesterday and today. The book does not examine the distortions that have regrettably crept into the growth model in the last three years. The examination of success drivers in the book offers readers policy recipes for correcting present distortions, and a model for taking the present late, late industrial revolution into the future.

The author accurately identifies that the fundamental transformation in India in being an altered role of the state. Whether by design or accident, and more due to the latter, its role as the dictator-in-chief to Indias entrepreneurs has been simply washed away by the giant tsunami waves of autonomous entrepreneurship that have engulfed the nation.

The book differentiates between the enterprise facilitation roles of bureaucracy in India with late industrialisation programmes of Japan, Taiwan, South Korea and China, where the government played major guiding roles. In contemporary India, entrepreneurs have taken over. Entrepreneurship opportunity equality defines modern India. Entrepreneurship democratisation and the ability of the Indian entrepreneur to go forward without much government help in creating necessary infrastructure is the real revolution.

Majumdar clearly recognises the importance of state facilitation in setting up heavy industries like automobiles, defence, ship building and aviation to kick-start higher growth. Particularly, the role of defence spillovers is highlighted, and the roles played by ordnance factories, DRDO laboratories and the many defense PSUs receive approbation. The role of government in deeply supporting defense industries in the US has had a major impact on general industrial development, and such a feature has to be managed competently for Indias overall industrial development.

He, however, does not examine the debilitating nature of recent subjective and shifting environment clearances and resource allocation processes in India, particularly after 2010, almost destroying the Indian model identified in the book. Hopefully, the distortions will soon correct themselves.

The book is an extraordinary inter-disciplinary narrative. As seen in 2010, India has embarked on her industrial revolution. She is behind Japan, South Korea and China, other Asian success stories, in this process. But relative backwardness is an asset as India can leapfrog into a new growth age. Such growth has to be driven by manufacturing because the use of technology in manufacturing has led to all known instances of rapid growth in human history, whether in the West or of the more recent Asian economies.

While examining the Indian model, a number of poverty reduction issues are dealt with, giving a corpus of ideas for planning a different and an inclusive growth model for India. The author devotes effort to highlight the role of small and medium enterprises, and unorganised sector enterprises as key contributors to Indian growth. How SMEs and unorganised sector enterprises can mutually co-exist with large-scale enterprises is spelt out in detail.

Majumdar identifies Indias growth model as being dependent on the rise of manufacturing and its competitiveness. The manufacturing phenomenon has to be inclusive. Otherwise, the model is unsustainable and can collapse due to the lack of resources, jobless growth and consequent inflation. The German relative success story, as much of Europe collapses lies in ruins, highlights the benefits of symbiosis of small and large manufacturing enterprises in a model of modern industrialisation.

Because of late timing, manufacturing catch-up could be problematic. India has key information technology competencies to be leveraged via a process of information technology industrialisation, and the use of her human capital skills in developing embedded software. Such embedded software usage can revolutionise Indias mass manufacturing and enable her to catch up and regain her lost position in the world.

According to the author, wealth creation and poverty reduction are two sides of the same coin. Wealth creation implies a positive attitude based on an additive motivation. Poverty reduction implies dealing with a negative condition based on an amelioration dispensation. Industrialisation is a value-additive process preceding amelioration since it generates resources to improve the lot of people.

Indias industrialisation can lead to wealth creation and the amelioration of Indias poverty. Bold risk-taking by her manufacturing entrepreneurs will foster Indias development. If this does not happen, poverty reduction programmes will collapse due to a lack of resources and uncontrolled inflation.

Indias firms have to focus on large-scale manufacturing, turning out high-quality, standardised products by the millions as American, Japanese, South Korean and Chinese companies have done to advance her industrial revolution. The sectors for mass production and value upgradation have to be close to agriculture and rural areas, using information technology skills. Attention has to be given to the unorganised sector technical upgradation, and labour laws preventing such upgradation need quick review. This process will generate the fiscal resources required for poverty amelioration. It will make cheap goods widely available and control inflation. It will influence income distribution, employment generation and the subsequent contours of Indias development.

Pradip Baijal is a former disinvestment secretary and former Trai chief