The two Indiasthe haves and the have-nots

Written by Garima Pant | Updated: Nov 9 2009, 01:49am hrs
The late Nobel Laureate Milton Freidman had once made his famous statement: The business of business is business, that is, the primary purpose of business is to make profits for the shareholder and to serve its customers. Times have changed since then, and specifically in the context of contemporary India, there is a dire necessity to reconsider this definition of the purpose of business.

As India progresses through the 21st century, it is impossible to consider businesses as stand-alone economic entities, disconnected from the socio-political context of the larger society. A couple of years back, in an interview at Wharton University, KV Kamath, the then CEO of ICICI Bank, had commented on the greatest threat to Indian businesses: ...in the Indian context, I would say something that is unforeseen, like social strife, (would be the greatest threat) because we are living in a world of haves and have-nots. And there is a divideto me, this is the single most important thing, which could impact business.

Kamaths observation is amply justified if we consider that while India is one of the fastest-growing economy, and part of the BRIC nations, we also ranked 134 out of 182 countries on the Human Development Index release earlier this month. The last few years have also witnessed increasing resistance to business expansion and industrialisation from various segments of the society. As India progresses through the 21st century, this divide of two Indias would become an increasing challenge for businesses. Meeting this challenge proactively would require three action agendas from the Indian businesses.

Unlike the developed industrialised nations, Indian businesses still occupy an extremely exclusive and narrow segment in the larger society. Barely 7% of the economically active Indian workforce is in the organised sector (compared to 58% in the USA, or 30% in China). In contrast, a huge manpower works in the informal sector, which is inadequately skilled, lacks access to resources and therefore, is not adequately productive (even though it accounts for 60% of Indias GDP, 68% of income, 30% of agricultural exports, and 40% of manufacturing exports). The first action agenda for the Indian businesses would be to develop more inclusive business models, which can bring the productive power of the unorganised workforce into mainstream business.

Secondly, over the last few decades, Indian business has played a key role in wealth creation, and the Indian economic growth story is an outcome of this magnificent achievement. However, Indias growth has remained divided and inequitable, and the wealth has remained confined to only a small segment of the society. The challenge for businesses in the coming years would be to identify business opportunities, which also distribute wealth by creating new markets.

Lastly, and following from the above, there would also be a need to redefine the very nature of wealth, which the businesses create. Instead of focusing only on their financial bottom line, the businesses would also need to consider the positive impact they make on society and the environment. Following Triple Bottom-Line accounting standards, adhering to Equator Principles, following the Ethical Trading Initiative guidelines etc would increasingly become not only desirable, but a necessary pre-condition for sustainable business.