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: The Parsis

•Andrew, Yule & Co •Wadias (shipbuilding,
•Duncan Brothers textile, paper, etc.)
•Shaw Wallace & Co •Tatas (textile, steel)
etc •Godrej (locks, soap)
etc

The Marwaris The MNCs

•Birlas (textile, jute) •Lever Brothers
•Goenkas (trading) •Philips
•Jhunjhunwalas (broker, etc
cotton)
etc
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...

• POPULATION • CHEAP LABOUR

Low Income Levels Deterrent to Technology
Low Demands
Low Scales of Economy

• LOCAL MARKETS • FLOW OF FDIs

Low Demand into Sectors Useful to
Advanced nations, Not
to 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 • Delhi Cloth & General

• Burmah Shell Mills
• Calcutta Electricity • Tata Power Co
Supply Co • India United Mills
• Associated Cement Co • Madura Mills
• Scindia Steamship • British India Corpn
Navigation Co • Jivajirao Mills
• Indian Iron & Steel Co • Andhra Valley Power
• Bombay Dyeing Corpn
• Steel Corpn of Bengal • 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)
300 264.3
250

200

150
110.8
100
55.8
50 16.9
5.1
0
50-51 60-61 70-71 80-81 90-91
Madhukar Shukla
 Road Length (SH & NH) '000Km

200
161
150 126

100 81

50 22 24

0
50-51 60-61 70-71 80-81 90-91
Madhukar Shukla
 Crude Petroleum (mt)

33
35
30
25
20
15 10.5
10 6.8
5 0.3 0.5
0
50-51 60-61 70-71 80-81 90-91
Madhukar Shukla
 Bank Branches ('000)

70 59.76 62.35
60 51.38
50
40 31.42
30
20 8.26
10
0
50-51 60-61 70-71 80-81 90-91

Madhukar Shukla
 Telephones ('000)

8000 6705
6000
4000 2785
2000 1293
168 483
0
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)

3000 2432

2000
1149
755
1000 350

0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Chemical Fertilizers (mt)
9146
10000
8000
6000
3006
4000
1059
2000 150
0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Diesel Engines ('000)

2000 1863.2

1500

1000

500
173.9
44.7 65
0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Machine Tools (Rs mn)

8000 6990

6000
4000
1859.5
2000 372.3
58.6
0
60-61 70-71 80-81 90-91
Madhukar Shukla
 Pre-90s:
Growth of Indian Economy

“Luxury” Items

Madhukar Shukla
 Cars ('000)

400 364
350

300

250

200

150 113
82
100
51
50

0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Two-Wheelers ('000)

2000 1863.2

1500

1000

500 317.1
19.4 97
0
60-61 70-71 80-81 90-91
Madhukar Shukla
 Refrigerators ('000)

1400 1184
1200
1000
800
600
400 290
200 87
11
0
60-61 70-71 80-81 90-91
Madhukar Shukla
 Bicycles ('000)

8000
6764
7000
6000
4489
5000
4000
3000 2042
2000 1071
1000
0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Pre-90s:
Growth of Indian Economy

Economy

Madhukar Shukla
 GNP ('000crores)

500 461.3
450
400
350
300
250
200
122.7
150
100 39.4
50 15.2
0
60-61 70-71 80-81 90-91

Madhukar Shukla
 per Capita Income (Rs)

6000 5471

5000

4000

3000
2000 1630

1000 675
328
0
60-61 70-71 80-81 90-91

Madhukar Shukla
 Exports (Rs crores)

35000 32553

30000
25000

20000

15000

10000 6711
5000
642 1535
0
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 - Mid60s
Experiments & 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 • Garhawali
• Chhatisgarhi • Pahari
• Magadhi • Bhili
• Manipuri (Maithei) • Oraon (Khurukh)
• Marwari
• Komaoni
• Santhali
• Lambadi (Lamani)
• Rajasthani
• Gondi • Tulu
• Dogri/ Kangri • 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

Madhukar Shukla
 “…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 • Delhi Cloth & General

• Burmah Shell Mills
• Calcutta Electricity • Tata Power Co
Supply Co • India United Mills
• Associated Cement Co • Madura Mills
• Scindia Steamship • British India Corpn
Navigation Co • Jivajirao Mills
• Indian Iron & Steel Co • Andhra Valley Power
• Bombay Dyeing Corpn
• Steel Corpn of Bengal • 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 - Early80s
Economic 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
70 63.9
60 Land under HYV seeds (mn hectares)

50
43.1
40

30

20 15.4
10
1.9
0
1960 1970 1980 1990

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 Entrepreneur
ÔSecretary, Company Law
ÔPlanning Commission
ÔOffice of Technology Development
ÔIndustry Ministry
ÔFinance Ministry
ÔForeign Investment Board
ÔMinistry of Commerce
ÔDevelopment Commissioner, Small Scale
Industries

Madhukar Shukla
 1970s: MRTP & After

ƒ Abolition of Managing Agencies

ƒ Nationalisation
¾ Coal
¾ Cotton Textile
¾ Copper
¾ IISCO
¾ Banks
¾ Insurance
¾ Wholesale Wheat Trade
ƒ SSI Reservation List (180 => 907)
ƒ 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

250 • What Went Wrong

215
– ‘Employment Generation’
200 185
– Transient Top Mgt
– Over Regulated
1 50
– Low Profitability
1 00 85 • Contributions
– Industrial Infrastructure
50
– Industrial Culture
5
0
– HR Breakthroughs
1951 1966 1980 1984

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

¾Bajaj Scooter: 10-15yrs

¾Telco Truck: 2yrs
¾LPG Connection: 5-10yrs
¾Scarcity of Stainless Steel
¾3mn smuggled Wrist Watches
¾1980-Year of Tourism: 9,000 hotel
rooms

Madhukar Shukla
 1970s: The Invisible Changes

• Rise of Professionals/ Technologists

Madhukar Shukla
 Universities/ Colleges
250
Universties/ Colleges 202
200

150 132
100
100

45
50 27

0
1950 1960 1970 1980 1990
Madhukar Shukla
 Active Scientific/ Technical/ Medical Personnel (mn)
4 3.8
Active Scientific/Technical/Medical Personnel
3.5 (mn)

3
2.5
2 1.8
1.5 1.2
1
0.45
0.5 0.19
0
1950 1960 1970 1980 1990
Madhukar Shukla
 Stock of Engineering Degree/Diploma Holders
(in ‘000)

16,000
13,789
14,000

12,000

10,000

8,000 7,307

6,000
4,049
4,000

2,000 1,480
790
0
1955 1961 1971 1981 1991

Madhukar Shukla
 Stock of Registered Doctors (‘000)

450
394
400

350 Doctors ('000)

297
300

250

200 172.4

150

100 76

50 18
0
1950 1960 1973 1984 1991

Madhukar Shukla
 Stock of Hospitals (‘000)
12 11.2

10 Hospitals ('000)

8 7.4

6 5.4
4
4
1.9
2

0
1950 1960 1973 1984 1991

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

80
70 Post-Independence Born
Indians (%)
60
50
40
30
20
10
0
1961 1971 1981

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
81-91
51-61
38.3
31.9
vice
r
Se

27.8
17.5
r ing
ct u
f a
anu
M
33.8
50.6
ltu re
u
gr ic
A
0 10 20 30 40 50 60

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 Arjun
Sengupta 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 Revolution
etc.

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

• >50% Rural Share

4000 3628 for:
3500
– Biscuits
3000
– Cycles
2500
2083 – Motor Cycles
2000 1855
– Watches
1500
733
– Transisters
1000
500
– Soaps, Detergents
0 – Sewing Machines
Rural Urban – Table Fans...
1984 1989

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

Shampoo 23
53

Edible Oil 84
116

Premium Soap 58
93

Telcum Powder 29
54

Popular Soap 34
42

Packaged Tea 31
81

1985
1990 0 50 100 150

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) • RHL => P&G
• Modi Xerox (1981) • Glindia =>Glaxo
• Maruti Suzuki (1982) • Food Specialities =>
• DCM Toyota (1982) Nestle
• Birla Yamaha (1983) • Pieco => Philips
• Sriram Honda (1985) • Hindustan Cocoa
• Hero Honda (1986) Products => Cadburys’
etc. • PEPSI
Swaraj 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)

6509.9
7000
6000
5000
4000
3000
2000 858.3
1000 91.5 98.4 195.8
0
1970 1975 1980 1985 1990
Madhukar Shukla
 Registered Cos in India ('000) Cos Listed on SEs

250 224.5 7000

5968
6000
200
5000

150 124.4
4000

100 3000
65.6 2265
43.4 1852
50 26.2 30.3 2000
1125 1203
1000
0
0
1960 1970 1975 1980 1985 1990
1946 1961 1975 1980 1990

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)
120 •3-times annual govt. revenue
Domestic Debt •2/3rd of GDP 105.3

100 Foreign Debt •Rs. 1,500/ person

Total 82.3
80

60
46.4

40 31.3
23
21.2
20 11.3
15.1
9.9

0
1980 1984 1988

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

900
785
800
691
700 Financial Technical

600

500 453 472

400

300
194
200 151

100 73
32
0
1970 1980 1990 1993
Madhukar Shukla
 New Realities...

• Collaborations & Partnering

• Consolidations

Madhukar Shukla
 Mergers & Acquisitions

M&As

500 450
450
400
350
300
250
200 156
150 114
100
18 25 33 30
50 15
0
1988 1989 1990 1991 1992 1993 1994 1995
Madhukar Shukla
 New Realities...

• Collaborations & Partnering

• Consolidations
• The New Worker

Madhukar Shukla
 1990s: Declining TU Militancy

No of Strikes & Lockouts Strikes Lockouts

18 16.12
2000 1810
1714 16 14
14.68 14.33
1800
14 15.31
1600 1393
10.57
1400 1201 12
1110 12.42
1200 10
1000 8
800
6
600 6.65
4 5.61 5.72
400
2
200
0 0
91 92 93 94 95 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 • By 1994, Indian

Overseas Investments Companies had
330
– 524 overseas JVs
350
300
– 300+ wholly-owned
250
subsidiaries abroad
198
200 • Mid-late 90s:
150 107 Overseas Takeovers
100
• Global Indian
50
0
CEOs (StanChart, US
1992 1993 1994
Air, McKinsey,
Infospace...)

Madhukar Shukla
 Impact of Liberalised Environment

ƒ The structure of business environment

has changed

Madhukar Shukla
 Sales Market Capitalisation
1992 1999 1992 1999
1 Telco Reliance ITC HLL
2 ITC HLL HLL ITC
3 Tisco ITC Tisco Reliance
4 Reliance L&T Reliance Wipro
5 HLL Tisco L&T Bajaj
6 L&T Telco Telco Infosys
7 Grasim M&M Hindalco Telco
8 ACC Grasim Century Nestle
9 Bajaj Bajaj Grasim NIIT
10 M&M ACC Colgate L&T
Madhukar Shukla
 Impact of Liberalised Environment

ƒ The structure of business environment

has changed
ƒ …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.

Madhukar Shukla
 Impact of Liberalised Environment

ƒ The structure of business environment

has changed
ƒ …some have emerged as Winners
ƒ but large number of companies have
lost out to competition

Madhukar Shukla
 Indian Scenario 1990-2001
120 120

Top 100 100 Top 100

100
100 Indian 100 Indian
Companies Companies
80 (by sales) 80 (by market cap)

60 60
47
40
40 33

20
20

0
0
1990 2001
1990 2001

Madhukar Shukla
 Impact of Liberalised Environment

ƒ The structure of business environment

has changed
ƒ …some have emerged as Winners
ƒ but large number of companies have
lost out to competition
ƒ … India is emerging as a global
sourcing hub

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

Madhukar Shukla
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

Madhukar Shukla
 Indian Auto-Component Exports (in$mn)
1600 1500

1400

1200

1000

800

600

375
400

200

0
2002 2003

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
• 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 brand
Etc.

Madhukar Shukla
 Impact of Liberalised Environment

ƒ The structure of business environment

has changed
ƒ …some have emerged as Winners
ƒ but large number of companies have
lost out to competition
ƒ … India is emerging as a global
sourcing hub
ƒ But being a part of global network has
its own challenges

Madhukar Shukla
 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

Madhukar Shukla
 Before we close….

A Summary

Madhukar Shukla
 India: from the beginnings…
What we had in 1947- manufacturing
What we had in 1947 - agriculture
• 3%
What (8.8we
mn)had
employed
in in manufacturing
1947...
• 83% rural population; 70% dependent on
• Somewhat developed Core Sector Industries
• agriculture
30cr Population – Sugar, Cement, Matches, Iron & Steel, Paper, Cotton,
• • 70% cultivated
15% Literacy (9% Jute,womenlandliteracy)
Woolen owned by landlords &
• Averagemoneylenders
• 55%
Longevity ofof total(15%
32yrs valueinfant
added from Jute and
mortality)
• Rs 1800cr Cotton
rural (30%
debt of total industrial employment)
• 8.5 mn • Low value added:
• Refugees
28% landless agricultural labour
– 9% contribution of organized mfg. to economy
• 40% of Landmass
• Low investment belonging to 562 princely
in modernization
– 70% export of raw material; 65% import of finished
states
– 0.9mn irongoods ploughs vs. 31.3mn wooden ploughs
• Ethnically, Culturally,– 90%Religiously
– 27% irrigated land
machine toolsHyper-
imported
Diverse Country (1549 “mother tongues”
– 7 Engineering colleges;–2217
1961students
Census) – 9 agricultural colleges; 3000 students
• Madhukar Shukla
57% Population below Poverty Line
Madhukar Shukla

Madhukar
Madhukar Shukla
Shukla
 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

Madhukar Shukla
 India: there is a long way to go….

Some points to
ponder….

Madhukar Shukla
 India: there is a long way to go
• Per capita income = Rs 38084/annum
– …but 836mn live on a daily income of
>Rs.20/day
• Part of BRIC nations
– … but 134th rank on 2009 Human
Development Index (out of 182
countries)
– …but 65th rank on 2009 Global
Hunger Index (out of 84 countries

Madhukar Shukla
 India: there is a long way to go
• Top 10% of the society
own 48% of assets

• While the bottom 10% own

>1% assets

Madhukar Shukla
 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.

Madhukar Shukla
 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!

Madhukar Shukla