MTI Business in India

8/2/2019 MTI Business in India

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Business in India

& CapINDIAlism

GROUP 5

AAKASHDEEP - PGP/14/126, AMEYA - PGP/14/004, ARIFUDDIN - PGP/14/014, EMILIA - IE/14/05, GERHARD - IE/14/06, GOUTHAM - P

KUMARESAN - PGP/14/150, MORTEN - IE/14/10, OBULESU - PGP/14/156, TOBIAS - IE/14/11, UMESH - PGP/14/310


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HistoryInward Looking Era (GDP growth 3 %)1950-1991

1991 - 2003

2003 - Today

Indias own attempt trying to grow without foreign investment

Mild Liberalization Era (GDP growth 5 %)

Relaxation of industrial regulations & quantitative restrictions;

reduction of tariffs; enabled import of capital goods & increase oflabour productivity

Extensive Liberalization Era (GDP growth over 6 %) India as IT service hub & backoffice of the world

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Current Headers & Forecast

Current Headers

The Economic Times

New York Times

The Economist

Handelsblatt

"Optimists believe that India's entrepreneurialspirit will make it a superpower over the nexttwo decades"

The Economist

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India & Capitalism

Definition Capitalism

Capitalism describes an economic system where the means ofproduction are privately owned, operated for profit from investment, and incompetitive markets.

Dictionary of Economics

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Structure of Indian Economy

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Indian Family GroupsTata Group Reliance

IndustriesAditya Birla

Sales: $ 84 bn. Sales: $58 bn. Sales: $35 bn.

Generation: 5th Generation: 2nd Generation: 4th

Industries:

Chemicals

Steel

Consumerproducts

ServicesEnergyICT

Industries:

Oil & Gas Textile

Telecommunicationsproducts

Petroleum

RetailInsurance

Industries:

Metals Cement

Wind power

Textiles

ChemicalsMining

InsulatorsRetail

Telco

Agriculture

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Indian Family Businesses - CharacteristicsComplexity

Reasons

Intricate chains of holding companies & subsidiaries

Outside capital can be brought in at multiple levelswithout weakening family control

Response to family spats

Like to do business with friends

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Indian Family Businesses - CharacteristicsConglomerate

Reasons

1 or 2 core activities Long & growing tail of other activities

History: British before 1947 & socialist era with restrictions

Culture: Marwari & Bania communities famous for trading

Tax

rather put money into new business than a bank account

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Role of Government & State in Indian economy 41 % of BSE 100 value is state-controlled;

Reserve Bank of India frowns upon bank loans for takeovers

In finance, energy & natural resources state controls 2/3 of production

Public-private partnerships are common on big infrastructure projects, but

private part suffers from low margins

State is partner and enemy, unlike e.g. in Korea

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Capitalism vs. CapINDIAlism India is neither following a Chinese way nor European way Going their

own way successfullyuntil now - CapINDIAlism

Family conglomerates have been merely a phase of capitalism in other

countries like e.g. in Europe, but have declined of their own accord

Should it also happen in India?

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CapINDIAlism

Family conglomerates arepowerful and internationalrecognized companies

State & conglomerates arespotting new opportunities &compensate eachother

India is still growing with this

system - Stable economicconditions

State-owned companies are notefficient & profitable by sufferingfrom inertia

Entreprenuerial spirit declined overlast decade (only 2% of IIM-Astarted own businesses)

Conglomerates are only middleweights in global context (e.g.compared to China)

Poor educational system &corruption

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Recommendations

Secure foreign investment without selling out Indian companies

Retain innovators & entrepreneurs within India, e.g. Mittal Steel

Profitability within all subdivisions of family conglomerates

Build companies that are global heavyweights Spread capitalism in geographical terms

Ensure inbound/outbound deals add value domestically rather than destroy it

Simplify access to funding (domestic & foreign)

Fight corruption & improve educational system (from primary school on) Invest in infrastructure

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MTI Business in India

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