The changing face of Indian enterprise
‘‘MNCs will eat up our companies’’ — that was the cry just a few years ago. In fact, since just November 2003, our companies have acquired 44 companies abroad. On a rough calculation, FICCI estimates that our companies have spent over two billion dollars in investments and acquisitions abroad!
Nor is a company like the TATAs going ‘‘global’’ only in the sense that exports are an important limb of its operations. Nor is it going global only in the sense that it is setting up branches abroad. Nor even in the sense that it is acquiring companies abroad. It is today striving to be ‘‘global’’ in the sense that it shall recruit personnel who are, that it shall adopt practices that are, that it will source services and skills that are the best from across the world.
‘‘Japanese, Chinese, Southeast Asian goods will swamp our markets’’ — that was the fear just two/ three years ago. In fact, Indian industry has become competitive.
A good index is the fact that our exports — to sell which, after all, we have to out-compete rivals in fully competitive markets — are growing at 19 per cent a year. We have a trade surplus with China.
N. Srinivasan, the Director General-designate of CII, draws attention to an equally telling indicator: the pace at which our companies are being conferred the prestigious Deming Award for quality. It was in 1998 that the first Indian company got this Award. No Indian company got it in 1999. None got it in 2000. In 2001 one got it. In 2002, two. In 2003 five Indian companies have been honoured with the Award.
And as I type, I receive from Srinivasan a second list: of Indian companies that have been conferred the prestigious TPM Excellence Award — the Award for Total Productive Maintenance. In 1995: one (I am counting only the highest category awards in the series). In 1996, 1997: none. In 1998: one. In 1999: one. In 2000: three. In 2001: seven. In 2002: eight. In 2003: fourteen…
The ‘‘export pessimism’’ that had us in its grip for 30-40 years has gone. The fear that goods of China etc. will swamp us has gone. Indeed, many of our industry leaders have begun to look at China as an opportunity.
Nor is the change confined to the sectors we hear about often — services and manufacturing. The notion that everything must change has caught on, for instance, even in the sector that most of us think is what it used to be — banking. The other day, at the function to mark the 10th Anniversary of Business Line, K V Kamath narrated how banks now work on the premise that they too must re-invent themselves every three years — else they will become obsolete.
That figure — ‘‘three years’’ — used to be the figure we used to hear in regard to industries swept by rapid technological change — like electronics — and, even in these sectors, we used to hear such figures only in relation to companies located in advanced countries. Indian companies seldom talked in such terms. But now our banks are working to such schedules. Most of us still think of our banks as saddled with bad debts. That remains a problem, no doubt. But even in regard to this there has been a major change.
Kamath pointed to the overhaul that has been brought about without fanfare: about fifty thousand to sixty thousand crores of corporate debt has been restructured to lower interest rate debt, he reported. Thereby, he said, on the one hand Indian industry’s requirements of working capital have been cut to half of what they used to be — a huge step towards competitiveness; and, on the other, our banking sector has averted the bind in which banks in Southeast Asia and China find themselves. In China, he said, bad debts of the banking sector amount to 45 per cent of the country’s GDP. Not of the total loans of Chinese banks, he repeated, 45 per cent of the country’s GDP. And he put that figure in perspective: the corresponding figure for India is about 3 per cent! Down from 5 per cent.
What was declared intractable — the problem of ‘‘Non-performing Assets’’ of our banking system — has thus been contained, he said. The pipeline of projects with banks and financial institutions speaks to the outlook and strength of Indian industry, he said. The pipeline of projects that these institutions have been requested to help fund is now over one lakh crores. Yes, we can indeed use that term, he declared, Indian industry is indeed shining.
Nor was Kamath speaking out of thin air. He was speaking with the authority of one who has himself brought about an exemplary transformation. In March 2000, 94 per cent of ICICI’s transactions were carried out through branches. By December 2003, branches accounted for just 30 per cent. ATMs, which accounted for 3 per cent in March 2000, now account for over 46 per cent of transactions. Internet and mobile facilities account for 13 per cent, and Call Centres for another 11 per cent. A testimony to both — the power of transformative leadership as well as the alacrity with which ordinary customers in India take to new technology.
The entire outlook of the staff, the entire culture of the institution have been overhauled: each employee has gone through 90 hours of training — and 60 per cent of this has been on-line; the organization now follows a ‘‘90-day rule’’ — all projects, including projects involving the introduction of new technology, are to be implemented within 90 days. The results? Within four years ICICI’s customer base has increased from 1 million to 10 million. In 1996 it offered these customers three financial products. Today it offers 40. Its portfolio was around Rs 2,900 crores in March 2001. By December 2003, it had risen almost ten-fold — to 28,300 crores. Even more significant, now retail loans — for cars, houses, commercial vehicles, personal needs — account for almost half of the portfolio. And all these services are being provided at transaction costs that would bewilder banks abroad.
Index upon index
Index upon index shows how things have changed — even as so many of us go on with wails of ten years ago. The range of products that we manufacture, the services we provide have no resemblance to what was being done a decade ago. A student has just to contrast the advertisements that our newspapers and TV channels used to carry a decade ago with what we see today, and she will have a good book on hand. Indeed, the sea-change in the quality and inventiveness of the advertising will itself make for an interesting chapter.
Similarly, scan the list of ‘‘the ten largest industrial houses’’ of twenty, of even ten years ago, and contrast it with the corresponding names today. Apart from one or two — the TATAs, for instance — you would scarcely find a name common in the three lists. Houses that were nowhere on the scene are the ones that lead the charge today. And while a name or two may be common to the lists, what it signifies today is completely different.
Fifteen years ago, Reliance was a company predominantly in synthetic fibres: these accounted for 70 per cent of the total turnover of the group. Today, fibres account for just 15 per cent of its turnover. Its current operations, and even more so its plans for the future are dominated by energy, by information and communications technology, by stem cell research and other knowledge industries. Similarly, we think of TATAs as a steel and truck maker — that of course, it is: and after the modernization it has put through, TISCO is the most cost-efficient producer of steel in the world. But TISCO represents only 17 per cent of the turnover of the group now. TATA Motors another 17 per cent. Services — IT, telecommunications, financial services, hotels — which accounted for just five per cent of turnover twenty years ago, today account for 31 per cent. The star, TCS, had just about begun then — it accounted for just 0.8 per cent of the group’s turnover 10 years ago. Today it accounts for 10 per cent. TATAs are not just steel and trucks today: the group encompasses 80 companies in diverse sectors — automotive engineering products, metals, composites, energy, telecommunications, information technology, control systems, chemicals, hotels and property development, financial services, consumer products, and several others. The list — just the list — of just their international collaborations and tie-ups runs into three-and-a-half pages.
Nor is even that single company — say, TCS to take an example from information technology — what it used to be. Many a company in IT started as an organization placing youngsters in companies abroad. Today they are shooting from one level of complex software solutions to the next.
Yes, the name ‘‘Dabur’’ was known a decade ago. But the company is a completely different one today — one of the best examples of growth around its original field, of products that keep us healthy. You just have to look at the new products it continues to introduce, even at the way the products are packaged, and you know that the very nature of the company has been entirely transformed.
True, Haldiram sells snacks today as it did years ago. But in every respect — its work culture, its management practices, its production and marketing techniques — the company bears little resemblance to what it was a decade ago.
ITC is another example — of the opposite kind. It has transformed itself out of recognition by moving into areas far, far removed from its original field — tobacco and cigarettes. Into hotels, into paperboards, into packaging and printing, into ‘‘lifestyle retailing’’, into information technology, into ready-to-eat cuisine… In 1990 it set up an International Business Division to export agricultural commodities. Today it is the second largest exporter of agricultural produce — ranging from soyabeans, to wheat, to sesame, to pepper, to shrimp, to coffee: within just twelve years, this limb has crossed a turnover of Rs 1,000 crores. ITC has gone into rural extension and marketing — and today runs 3,000 e-chaupals across 18,000 villages in five of our largest states. Through these, apart from selling its products, ITC provides information to farmers and rural communities about agricultural inputs, about best practices for raising particular crops, about prices and weather. Such is the reach and effectiveness of what it has set up that already 60 companies use its portal to sell their products — paying ITC a commission…
Do you know of a school that has branches in Dharan and Birgunj, Nepal, in Indonesia, in Dubai, in Kuwait, in Sharjah, in Doha, Qatar, in Bahrain, in Singapore, in Colombo, in Dammam, Saudi Arabia, in Ethiopia, in Los Angeles, in New York, in Washington DC? I didn’t. It is the Delhi Public School. Do you know how many branches it has established within India? I didn’t. Ninety.
That is a difference in itself: the scale at which our entrepreneurs and companies are operating. Just a few years go, turnover of ten or twenty crores was something to reckon. Today, turnover of a few hundred crores is routine. TATAs have a turnover of Rs 50,000 crores. Reliance of Rs 70,000 crores or more.
To be concluded
The author is Union minister for Communication, Information Technology and Disinvestment. The article is based on his address at the 10th anniversary of Business Line in Chennai on March 23
PART II- From socialist rags to competitive riches
PART III- Required: a new form of governance for a new economy