Economics Indian Style is our pervasive impact on the world

 

Economics Indian Style is our pervasive impact on the world

Prominent Nobel laureate for economics Mr.Amartya Sen, erstwhile of Cambridge University in England and Harvard in the US, is much listened to in India at the highest echelons of power and in the National Advisory Council.

Mr. Sen’s views on ‘Welfare Economics’ and the urgent need to uplift the poorest of the poor are part of the ruling UPA’s blueprint. That his ideas may turn out to be responsible for the bankrupting of India, is, of course, another story.

 At less exalted but salt of the earth levels, you have the East African/ British Indians thrown out in the sixties and seventies, who took over the corner shop trade all over the UK and transformed it into the hard-working businesses that seemed, like the 24 hour super markets in the US, to never close. There was rarely any outside help employed in these shops, the various members of the family ran them in a demonstration of typical Indian thrift and effective economics.

The generations next, assimilated and confident as British Asians of Indian origin, have branched out very successfully into many more substantial businesses; the theatre, fashion, the media, films, television, authorship, medicine.

Mr. VS Naipaul, part of the diaspora, can also be claimed in this regard, along with his long anticipated Nobel Prize and his books, mostly to do with India.

Scientists have been making their mark in both the UK and the US from decades ago too, some going back to the 1930s. Their success, their struggles have distinguished the economic style of Indians who have come from adverse conditions to make their very significant contributions without abandoning their thrifty, economically sound, ways.

Indian origin millionaires and billionaires such as the internationally trading Hindujas, Steel king Laxmi Mittal and family, who specialised in taking over sick steel mills all over the world, pickle baron Patak,  diversified Lord Swaraj Paul and the Ruia brothers, others who have their bases both in London and India, have been prominent in the British  establishment for decades.

Across the Atlantic, you have an equally impressive showing of Indians risen to prominence in business, consulting, politics, even the space programme. A largish number of Indians run some of the best known US companies and multi-nationals, such as Indira Nooyi of Pepsi.

Tata is today one of  Britain’s leading manufacturers, and between its automotive and other interests in steel, hotels , beverages, IT as in TCS,  etc. is also the biggest private sector employer in British manufacturing, with some 45,000 employees.

Tata’s expensive acquisition of Jaguar/Land Rover/Range Rover, three iconic British brands, contrary to the expectations of many, has proved successful and profitable. Apart from a growing presence in India, with its overseas sales out of the UK, particularly to China, making all the difference.

It has been able to retain all 3 of its UK based plants and all its employees and is building a 4th as it gears up to make its own engines, instead of buying them from the previous owners of the marques, namely Ford. This despite the high wages and costs prevalent in the UK compared to India, where the rest of Tata Motors is located.

India Inc. may not be doing well domestically because of falling demand, inflation, high input costs, tight liquidity and political drift, but it continues to be appreciated in some quarters abroad struggling with tough economic conditions of its own.

Consider that Indian FDI projects for 2012-13 in the UK are likely to generate 24 million pounds in value to London’s economy over the next three years according to a report released by the Mayor of London’s Office. It puts India at the Number 2 spot in terms of investment and job generation after the US and ahead of China in Britain. And most of the business is coming from our IT Industry and Telecommunications.

In some ways the trans-national character of Indian business in a variety of fields is helping it survive a particularly difficult time domestically. In 2012, Indian firms invested 12 billion dollars in acquisitions abroad, up 27 per cent over 2011. This despite the fall in the rupee’s value, that has only worsened further in 2013.

At the same time, it must be admitted, that the venturing forth of Indian business and industry to the corners of the globe wherever it perceived an opportunity, was made possible by economic reforms in India. Our growing foreign exchange reserves were partially made available to India Inc. to go forth and multiply in a departure from our Socialist inspired protectionism.

The draw abroad can be attributed to multiple counts; access to monies at low borrowing cost, market share expansion, inorganic growth, diversifying away from India so as to not put all one’s eggs in the same basket, technology acquisitions and so on.

And also because the economy of India has been declining ever since 2008 due to unhelpful Government policies, at least in part

There are also bargain assets to be had all over the Western world today and not just in real estate terms. And Indian firms from the large, medium and ambitious smaller ones are increasingly taking the plunge. There is more Indian FDI going out of the country than there is foreign FDI coming into India presently, if only by a couple of billion dollars.

But the fact is, the world has stopped believing in the India story at home, and so have many of the Indian firms frustrated with the muddled business environment.

We have never managed to attract large capital because of policy paralysis, enormous red tape and rampant corruption. This is often difficult to prove but is nevertheless very much the case if the whispers are to be believed. Generally however, we blame it on the pulls and tugs of our functioning democracy and the rule of law, which is seriously over- burdened and therefore tardy.

The excuses however have worn thin, and many global players are taking their expansion plans elsewhere. Those who are already in the country through joint ventures and subsidiaries are still expanding their investment footprint, and actually account for 80 per cent of the FDI that does come in. But the green-field projects such as POSCO and Arcelor Mittal’s steel venture in Odisha, have sadly floundered.

But abroad, Indian management skills are in demand. Indians are appreciated for their ability to turn around troubled and sick industries and businesses. Used to a chaotic business environment locally, Indian managers are versatile and very good at multi-tasking. Many from the IITs and IIMs have impressed their peers and employers abroad with their calibre and highly developed quantitative and analytical skills.

Increasingly, international recruiting firms are actively placing Indians with the right skills in jobs abroad, even as expatriates are trickling into India to manage their India opportunity. The time may have come to start reckoning on the global Indian.

1,151 words

July 23rd,   2013

Gautam Mukherjee