Madhukar Shukla

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 & Coetc

The Parsis•Wadias (shipbuilding, textile, paper, etc.)

•Tatas (textile, steel)•Godrej (locks, soap)etc

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

etc

The MNCs•Lever Brothers•Philipsetc

Madhukar Shukla

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...

• POPULATIONLow Income LevelsLow DemandsLow Scales of Economy

• CHEAP LABOURDeterrent to Technology

• LOCAL MARKETSLow Demand

• FLOW OF FDIsinto Sectors Useful to Advanced nations, Notto Local Economy

Madhukar Shukla

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

• Delhi Cloth & General Mills

• Tata Power Co• India United Mills• Madura Mills• British India Corpn• Jivajirao Mills• Andhra Valley Power

Corpn• Century Cotton Mills

Madhukar Shukla

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)

5.1 16.955.8

110.8

264.3

0

50

100

150

200

250

300

50-51 60-61 70-71 80-81 90-91

Madhukar Shukla

Road Length (SH & NH) '000Km

22 24

81

126

161

0

50

100

150

200

50-51 60-61 70-71 80-81 90-91

Madhukar Shukla

Crude Petroleum (mt)

0.3 0.56.8

10.5

33

05

101520253035

50-51 60-61 70-71 80-81 90-91

Madhukar Shukla

Bank Branches ('000)

8.26

31.42

51.3859.76 62.35

010203040506070

50-51 60-61 70-71 80-81 90-91

Madhukar Shukla

Telephones ('000)

168 483 12932785

6705

0

20004000

6000

8000

50-51 60-61 70-71 80-81 90-91

Madhukar Shukla

Pre-90s:Growth of Indian Economy

Essential Items

Madhukar Shukla

Paper & Paper Board (mt)

350755

1149

2432

0

1000

2000

3000

60-61 70-71 80-81 90-91

Madhukar Shukla

Chemical Fertilizers (mt)

150 10593006

9146

02000400060008000

10000

60-61 70-71 80-81 90-91

Madhukar Shukla

Diesel Engines ('000)

44.7 65 173.9

1863.2

0

500

1000

1500

2000

60-61 70-71 80-81 90-91

Madhukar Shukla

Machine Tools (Rs mn)

58.6 372.31859.5

6990

0

2000

4000

6000

8000

60-61 70-71 80-81 90-91

Madhukar Shukla

Pre-90s:Growth of Indian Economy

“Luxury” Items

Madhukar Shukla

Cars ('000)

5182

113

364

0

50

100

150

200

250

300

350

400

60-61 70-71 80-81 90-91

Madhukar Shukla

Two-Wheelers ('000)

19.4 97317.1

1863.2

0

500

1000

1500

2000

60-61 70-71 80-81 90-91

Madhukar Shukla

Refrigerators ('000)

11 87290

1184

0200400600800

100012001400

60-61 70-71 80-81 90-91

Madhukar Shukla

Bicycles ('000)

10712042

4489

6764

01000200030004000

5000600070008000

60-61 70-71 80-81 90-91

Madhukar Shukla

Pre-90s:Growth of Indian Economy

Economy

Madhukar Shukla

GNP ('000crores)

15.239.4

122.7

461.3

050

100150200250300350400450500

60-61 70-71 80-81 90-91

Madhukar Shukla

per Capita Income (Rs)

328 675

1630

5471

0

1000

2000

3000

4000

5000

6000

60-61 70-71 80-81 90-91

Madhukar Shukla

Exports (Rs crores)

642 1535

6711

32553

0

5000

10000

15000

20000

25000

30000

35000

60-61 70-71 80-81 90-91

Madhukar Shukla

Growth of GDP across Decades

Average GDP Growth Rate among Developing Countries during 1950-80

Madhukar Shukla

1947 - Mid60sExperiments & 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 Hyper-

Diverse 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

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

Madhukar Shukla

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?

• -Shashi Tharoor

Madhukar Shukla

Hyper-Diversity

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

• - Arundhati Roy

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“…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 Hyper-

Diverse 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

• Delhi Cloth & General Mills

• Tata Power Co• India United Mills• Madura Mills• British India Corpn• Jivajirao Mills• Andhra Valley Power

Corpn• Century Cotton Mills

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• 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 import-substitution

• Prevention of foreign capital domination• Growth with equity/ Reformist welfare-

oriented 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 state-owned 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 - Early80sEconomic 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

1.9

15.4

43.1

63.9

0

10

20

30

40

50

60

70

1960 1970 1980 1990

Land under HYV seeds (mn hectares)

Madhukar Shukla

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 EntrepreneurSecretary, Company Law

Planning CommissionOffice of Technology Development

Industry MinistryFinance Ministry

Foreign Investment BoardMinistry of Commerce

Development Commissioner, Small Scale Industries

Madhukar Shukla

1970s: MRTP & After

Abolition of Managing AgenciesNationalisation

CoalCotton TextileCopperIISCOBanks InsuranceWholesale 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

5

8 5

1 8 5

2 1 5

0

50

1 00

1 50

200

250

1 9 5 1 1 9 6 6 1 9 8 0 1 9 8 4

• What Went Wrong– ‘Employment Generation’– Transient Top Mgt– Over Regulated– Low Profitability

• Contributions– Industrial Infrastructure– Industrial Culture– HR Breakthroughs

Madhukar Shukla

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

Bajaj Scooter: 10-15yrs

Telco Truck: 2yrs

LPG Connection: 5-10yrs

Scarcity of Stainless Steel

3mn smuggled Wrist Watches

1980-Year of Tourism: 9,000 hotel rooms

Madhukar Shukla

1970s: The Invisible Changes

• Rise of Professionals/ Technologists

Madhukar Shukla

Universities/ Colleges

2745

100

132

202

0

50

100

150

200

250

1950 1960 1970 1980 1990

Universties/ Colleges

Madhukar Shukla

Active Scientific/ Technical/ Medical Personnel (mn)

0.190.45

1.2

1.8

3.8

0

0.5

1

1.5

2

2.5

3

3.5

4

1950 1960 1970 1980 1990

Active Scientific/Technical/Medical Personnel(mn)

Madhukar Shukla

Stock of Engineering Degree/Diploma Holders (in ‘000)

7901,480

4,049

7,307

13,789

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1955 1961 1971 1981 1991

Madhukar Shukla

Stock of Registered Doctors (‘000)

18

76

172.4

297

394

0

50

100

150

200

250

300

350

400

450

1950 1960 1973 1984 1991

Doctors ('000)

Madhukar Shukla

Stock of Hospitals (‘000)

1.9

4

5.4

7.4

11.2

0

2

4

6

8

10

12

1950 1960 1973 1984 1991

Hospitals ('000)

Madhukar Shukla

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

0

10

20

30

40

50

60

70

80

1961 1971 1981

Post-Independence BornIndians (%)

Madhukar Shukla

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

50.6

17.5

31.9

33.8

27.8

38.3

0 10 20 30 40 50 60Agriculture

Manufacturing

Service

81-9151-61

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

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 ArjunSengupta 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 Revolutionetc.

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

733

20831855

3628

0

5001000

1500

2000

25003000

3500

4000

Rural Urban

1984 1989

• >50% Rural Share for:– Biscuits– Cycles– Motor Cycles– Watches– Transisters– Soaps, Detergents– Sewing Machines– Table Fans...

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

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

81

42

54

93

116

53

31

34

29

58

84

23

0 50 100 150

Packaged Tea

Popular Soap

Telcum Powder

Premium Soap

Edible Oil

Shampoo

19851990

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

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

SwarajSwaraj Paul Raids!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)

91.5 98.4 195.8858.3

6509.9

01000200030004000500060007000

1970 1975 1980 1985 1990

Madhukar Shukla

Registered Cos in India ('000)

26.2 30.343.4

65.6

124.4

224.5

0

50

100

150

200

250

1960 1970 1975 1980 1985 1990

Cos Listed on SEs

1 1 2 5 1 2 0 3

1 8 5 22 2 6 5

5 9 6 8

0

1 0 0 0

2 0 0 0

3 0 0 0

4 0 0 0

5 0 0 0

6 0 0 0

7 0 0 0

1 9 4 6 1 9 6 1 1 9 7 5 1 9 8 0 1 9 9 0

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• 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)

11.3

31.3

82.3

9.915.1

2321.2

46.4

105.3

0

20

40

60

80

100

120

1980 1984 1988

Domestic DebtForeign DebtTotal

••33--times annual govt. revenuetimes annual govt. revenue••2/32/3rdrd of GDPof GDP••RsRs. 1,500/ person. 1,500/ person

Madhukar Shukla

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

3273

194

785

151

453 472

691

0

100

200

300

400

500

600

700

800

900

1970 1980 1990 1993

Financial Technical

Madhukar Shukla

New Realities...

• Collaborations & Partnering

• Consolidations

Madhukar Shukla

Mergers & Acquisitions

M&As

15 18 25 33 30

114156

450

050

100150200250300350400450500

1988 1989 1990 1991 1992 1993 1994 1995

Madhukar Shukla

New Realities...

• Collaborations & Partnering

• Consolidations

• The New Worker

Madhukar Shukla

1990s: Declining TU Militancy

12.42

15.31

5.616.65

5.72

14

16.1214.68 14.33

10.57

0

2

4

6

810

12

14

16

18

91 92 93 94 95

Strikes LockoutsNo of Strikes & Lockouts

18101714

13931201

1110

0200400600800

100012001400160018002000

91 92 93 94 95

Madhukar Shukla

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

107

198

330

050

100150200250300350

1992 1993 1994

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

subsidiaries abroad

• Mid-late 90s: Overseas Takeovers

• Global Indian CEOs (StanChart, US Air, McKinsey, Infospace...)

Madhukar Shukla

Impact of Liberalised Environment

The structure of business environment has changed

Madhukar Shukla

Sales Market Capitalisation1992 1999 1992 1999

1 Telco Reliance ITC HLL2 ITC HLL HLL ITC3 Tisco ITC Tisco Reliance4 Reliance L&T Reliance Wipro5 HLL Tisco L&T Bajaj6 L&T Telco Telco Infosys7 Grasim M&M Hindalco Telco8 ACC Grasim Century Nestle9 Bajaj Bajaj Grasim NIIT

10 M&M ACC Colgate L&T

Madhukar Shukla

Impact of Liberalised Environment

The structure of business environment has changed…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.

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Impact of Liberalised Environment

The structure of business environment has changed…some have emerged as Winnersbut large number of companies have lost out to competition

Madhukar Shukla

Indian Scenario 1990-2001

0

20

40

60

80

100

120

1990 2001

100

47

Top 100Indian

Companies(by sales)

0

20

40

60

80

100

120

1990 2001

Top 100Indian

Companies(by market cap)

100

33

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Impact of Liberalised Environment

The structure of business environment has changed…some have emerged as Winnersbut large number of companies have lost out to competition… India is emerging as a global sourcing hub

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

facilities to India

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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

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Indian Auto-Component Exports (in$mn)

375

1500

0

200

400

600

800

1000

1200

1400

1600

2002 2003

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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 brandEtc.

Madhukar Shukla

Impact of Liberalised Environment

The structure of business environment has changed…some have emerged as Winnersbut large number of companies have lost out to competition… India is emerging as a global sourcing hubBut being a part of global network has its own challenges

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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

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Before we close….

A Summary

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India: from the beginnings…

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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 Hyper-

Diverse Country (1549 “mother tongues” – 1961 Census)

• 57% Population below Poverty LineMadhukar 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

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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

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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

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India: there is a long way to go….

Some points to Some points to ponderponder……..

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India: there is a long way to go

•• Per capita income = Per capita income = RsRs 38084/annum38084/annum–– ……but 836mn live on a daily income of but 836mn live on a daily income of

>Rs.20/day>Rs.20/day

•• Part of BRIC nationsPart of BRIC nations–– …… but 134but 134thth rank on 2009 Human rank on 2009 Human

Development Index (out of 182 Development Index (out of 182 countries)countries)

–– ……but 65but 65thth rank on 2009 Global rank on 2009 Global Hunger Index (out of 84 countriesHunger Index (out of 84 countries

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India: there is a long way to go

•• Top 10% of the society Top 10% of the society own 48% of assetsown 48% of assets

•• While the bottom 10% own While the bottom 10% own >1% assets>1% assets

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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.

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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!