There is exodus of manufacturing companies from China. We need to act, and fast. We’re underestimating how powerful we can be in the world of entertainment & green industries
At the recent Loksatta Advantage Maharashtra—the conclave on the state’s agriculture, infrastructure and industry—held in Mumbai, Anand Mahindra, the chairman of the Mahindra Group, shares with Girish Kuber, the editor of Loksatta, the three things the government should do to help develop the business environment.
Girish Kuber: You are a global conglomerate. What place does Maharashtra has for the group?
Anand Mahindra: Any Indian company that has global aspirations has a choice. You don’t invest in Maharashtra versus Bihar versus Chhattisgarh; you are investing in Maharashtra versus the rest of the world. It’s a tough game. When we acquired two companies in Turkey—a tractor company and an implements company—we were shocked to know that per labour cost, or output per labour, was lower than in India. We wondered if our next export unit should be in India, forget Maharashtra or any other place. Interestingly, recently, because of inflation-linked wages, Turkey has outpriced itself. You can’t sleep on your laurels. Maharashtra and the Mahindra Group go back in history. My grandfather and granduncle started business in Calcutta; their migration to Mumbai mirrors the industry’s migration. They bought some English company and built offices, and built a base here. Today, we have 10 businesses, 24,000 employees, and over `35,000 crore worth of business in the state. We’ve called it home ever since. This is where we saw prosperity and growth. We are in Maharashtra because this is the state that understands reinvention and resilience. It manages to stay tall despite all the risks.
GK: What are the factors you look at when deciding on a place, be it Turkey, Maharashtra, Punjab or the US?
AM: Classically, the factors of production used to be three; there are four now—land, labour, capital and entrepreneurship. If you look at capital, Maharashtra accounts for 25% of FDI in India, 20% of the country’s industrial output, 27% of exports—compelling reasons why you look here for a cluster-based approach—largest network of industrial areas, highly banked state, infrastructure. But entrepreneurship, the fourth factor, is fuzzy. What do you mean by entrepreneurial talent? A lot has to do with education; literacy rates are 80%-plus in Maharashtra. But I go back to the fact that you come here because of cluster effect—the concept was created by Michael Porter, professor of strategy at Harvard, and he did a fascinating study on Benetton. He went to Italy where Benetton is located; it’s a village that has held a stranglehold on hosiery and knitwear. There’s no apparent reason for it. Somebody decided to set up an industry, and that became the ‘jamun’, as we Indians call it, and then an ecosystem sprung up. Today, people go there because you can just plug and play. You can start with nothing and yet build incredible globally competitive capability if you build a cluster.
GK: Is it just physical infrastructure that you look at?
AM: No, the ecosystem isn’t just about infrastructure; it’s people, quality and network. I think Maharashtra has a good, strong, robust cluster. But, at the end of the day, you look for a buzz. Is this a place I want to be in? Is this a place where there is energy? Some places have that. You land in NY and your blood starts moving at a faster pace; you land in Silicon Valley and you start thinking about start-ups. The French have a phrase ‘Je ne sais pas’, which means ‘I don’t know what it is’; sometimes, the hardest job is protecting ‘I don’t know what it is’.
GK: Once upon a time, Maharashtra was considered a manufacturing and engineering hub. Does it still enjoy that status?
AM: No, and that’s a leading question, almost rhetorical. You know the answer that it’s been slipping. Maharashtra has been growing in manufacturing at 8%, but is way behind Bihar or Chhattisgarh. Reasons are there were a lot of fiscal incentives given to backward areas. But under GST regime, and the philosophy of this government, they’re not going to give sops like that. There’s going to be a natural gravitation back to places that have inherent advantages and differentiation. It’s time for Maharashtra to reassert its leadership.
GK: In the 1990s, the biggest loss Maharashtra faced was the IT industry. What things should the state be careful in, not to commit same mistakes again?
AM: It’s intriguing, Tech Mahindra is the fifth-largest IT company in India. We started in a modest way in Pune; it was called Mahindra British Telecom (in 1985), so we pre-dated Infosys. We didn’t have the kind of creativity and aspiration they had. Pune is a worthy competitor to Bengaluru. But, perceptually, we’ve lost the lead. At the cost of being simplistic, it came down to cost of land and accommodation because young people, when they move, that’s their biggest expense. If Maharashtra wants to regain the lead, it needs to use government intervention to create areas that are large, and that allow low-cost accommodation.
GK: A reason was labour unions—the famous Datta Samant strike, the kind of leaders the state produced. What’s your experience dealing with powerful labour leaders, and politicians?
AM: I started in Khopoli, in Mahindra Ugine Steel, and the head of our union was some ‘gunda’ from Karjat. The main economy of Karjat was looting wagons. We were unfortunate enough to get some labour from there. Because I was in charge of labour, this fellow took a ‘supari’ on me! I had to put up grills on my building. We conquered that. Then I joined Mahindra and Mahindra in 1991. Within six months, because I demanded productivity, at an inopportune time, on Diwali, I was ‘gheraoed’, and was under siege for four hours at Khadavli office. But today we’ve one of the best records of union-management relations; there’s tremendous sense of empowerment. The union that almost killed me is today the highest productivity union. It has become a tradition at Mahindra; nothing gets pushed to the top. You’ve got the top pushing responsibility down, where it belongs, and from bottom up, people becoming more participative.
GK: What are the three things the government should do, and three it shouldn’t do, as far as business environment is concerned?
AM: Let me stick to the three it should do. One, there is a historic opportunity, i.e. the exodus of manufacturing companies from China. The problem is we’ve got competition: Vietnam and Myanmar. In garments, we’ve lost to Bangladesh. We need to act, and fast. The NITI Aayog came out with a proposal for two coastal economic zones, thousands of acres, like Guangdong and Shenzhen. One on the East, probably in Andhra, and one in the West. That is where Gujarat has taken the lead—framed a legislation where those zones are exempt from certain onerous labour laws. Maharashtra has to catch up. China did this in the 1980s. India needs to do it. Two, we are underestimating how powerful India could be in the world of entertainment. This a new-age industry. Today, Bollywood’s output is just 10% of Hollywood’s. It’s a high-value job-creator. Three, the opportunity lies in making Maharashtra a centre of organic, sustainable businesses. People are getting very attracted to anything that’s green, and there’s funding and capital for green industries. If Maharashtra positions itself as a state that leads in rainwater harvesting, in organic and biodynamic farming, then you can make this a hub for all those interested in investing in such areas.
GK: You’re running a $20-billion industrial house, and yet you find time for Twitter…
AM: I’ve often been asked this … do you have the time, do you have a team, and why do you do it? In 2009, a young American graduate who joined us rushed into my room and asked me, “Are you on Twitter? You should be on Twitter.” I asked him what is that, and he explained there is a huge audience there. I’ve often said this is one of the most underestimated business tools. Think about it, I sit there. Provided you have large enough following, the kind of scope it gives you to oversee your business is unimaginable. Today, the power is actually between a mobile camera and Twitter—every person with a mobile phone camera, anywhere, becomes my agent for telling me what’s going wrong and what we are doing wrong … Twitter is just an invaluable tool, and that’s why I am on it today.