India Inc. Spreads its Wings

India Inc. Spreads its Wings

The doughty Ambassador has been chosen, much as it may surprise, as the world’s best taxi by Top Gear. It might be a joke of course, because Top Gear likes its own very straight-faced drollery, but last year, only 720 of the vehicles were sold from the Uttarpara Plant in West Bengal .

 The tough, relatively easy to repair car, despite its Isuzu engine nowadays, has been in production from 1948. And till the Maruti came along in the early eighties, it certainly ruled the Indian roads. Now tough or not, very few people including those in the Government want it, being quite spoilt for choice. Top Gear may have found its longevity as a car in production over so many decades impressive in itself.

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 in the UK since London hosted the Olympics. 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 now. 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 worsened further in 2013.

The draw is on 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 firms are increasingly taking the plunge. There is more Indian FDI going out of the country than there is foreign FDI coming into India now, if only by a couple of billion dollars statistically. 

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

It may be impossible to stem the decline and fall of India unless Government makes it its mission to promote growth. Till now, and particularly under the sway of the National Advisory Council, it is the ideas of Nobel laureate and Welfare economist Mr Amartya Sen and others that broadly agree with him that have control. Laudable as the objective of lifting up the poorest of the poor is, it should not be allowed to callously bankrupt the country in the absence of any real support given to the engines of growth.

692 words

July 21^st,   2013

Gautam Mukherjee