Is private industries in India getting its second wind?

Kothari: "If all the new projects that are now on the drawing board were totted up, they would add up to a hefty Rs 10,000 crore in investment," said an executive from Kotharis in Madras last week. He was not referring to his group but to the entire private sector. In Bombay, Tatas are said to have projects worth something like Rs 1,000 crore on the drawing board and perhaps an equal amount in the pipeline.Is private industry in India getting its second wind? New projects are streaming out of boardrooms like confetti at Christmas lime and there is hardly a business house that doesn't have its hands full. Tatas make news because they have been rather quiet for the last 10 years or so, with only Tata Engineering (TELCO) surging forward with succeeding waves of expansion. But other companies in the group are also catching up, notably Tata Chemicals, which has a couple of fertiliser plants up its sleeve, and Tata Steel, which plans to follow up its modernization programme with another phased expansion.Risk-taking: In the north, Delhi Cloth Mills (DCM), a slumbering giant, has suddenly leapt out of the dark with new schemes that will raise its turnover to Rs 500 crore a year in three to four years' time. In the south, the Kothari group, one of the most dynamic and self-contained business groups operating in that part of the country, has ambitious expansion plans in electronic and petrochemicals which, according to Dayanand Chandulal Kothari, 63, the patriarch of the group, will double the group's turnover to around Rs 250 crore before the end of the current decade. Says Kothari, "I have no mental reservations about what we can achieve. Barring Japan, no country in the East has the technical skills we have. We have not done badly but could have done much better." Kotharis took some time to decide whether to branch off from their traditional lines of sugar, tea and textiles. But once they took the jump there has been no looking back. The group now has strong interests in chemicals (caustic soda), engineering (spindles) and electronics (carbon film resistors) and will soon diversify into computer peripherals and petrochemicals.Computer processing at TCS: Taking up a challengeWhat holds Indian industry back is neither capital nor technical know-how - both of which are available, at a price - but its own inertia and, of course, the Government. The strong climate of protection at home has dulled its appetite for growth and risk-taking. Those who have taken the risk and pushed ahead are finding that there is no better impetus for growth than growth itself.Groups which, for one reason or another, have not been able to make the grade tend to blame the Government - or, vaguely, the economic climate - for their failures. Asked why the Tata group had not done as well as the Birlas in such new industries as synthetic fibres and fertilisers, J.R.D. Tata says, "We could have, perhaps, done better if we knew how to get round the Government. Some people are better at that sort of thing and they have done well, but we have no regrets." Kothari agrees, but only up to a point: "The octopus that has developed in Delhi is so strong that it is difficult to dismantle it. But you can play the system by its own rules. This takes time but there is no other way."Go-getting Spirit: If one is really keen to push ahead, even the octopus cannot be much of a bar. There are success stories within the Tata group itself. The group started a small computer and management consultancy service in 1968 - Tata Consultancy Services (TCS) - with a staff of about 20 people. In a little over a decade, TCS has grown into the largest computer-based consultancy organisation in India with a staff of nearly 500 professionals and a turnover of Rs 8 crore a year. More than a third of the income accrues from overseas assignments which range from such clients as the United States Coast Guard and British American Tobacco (UK) to Middle East Bank in Dubai and Barclays International in Sydney. The fact that TCS has close links with Burroughs, a well-known US computer company, has undoubtedly helped, but the management could well have felt content with its business in India and left overseas assignments to its foreign partner. "It is the easiest thing in India to rest on one's oars," says F.C. Kohli, director in charge of TCS. "It was a challenge to go overseas and lock our horns with foreign competitors. Indians are as good computer people as any and we are now accepted everywhere."Kohli: ConfidentHas the exit of IBM helped the computer industry in India? Kohli doesn't think so: "It is a pity they went. It is always good to have a first-rate competitor against whom you can measure yourself. You then have a bench mark and can judge how well - or badly - you are doing. We started nearly 10 years before IBM was forced to quit, so you can't really say that we have profited by their exit.I would go even further and say that it would be good to have a first-class foreign computer manufacturer here so that companies like Electronic Corporation of India Limited (ECIL) can prove their mettle." TCS has been involved in 75 assignments abroad and their plate is full.Essentials: What TCS has done is to seize a business opportunity and push it through. This is what business or economic growth is all about and companies which are unable to perceive, let alone seize, a business opportunity stay put or just go under. In the private sector, there are a number of companies that simply could not see the writing on the wall and went under, leaving behind wreckages or signposts to corporate oblivion. West Bengal is strewn with such debris - Braithwaites, Burn & Co, Jessops, Kumardhubi Engineering, Inchek Tyres, National Rubber. Why did they do so badly with all their history and goodwill at a time when new companies were coming up elsewhere? Why is it that some of these companies were doing so well during the British regime when there was continuing economic stagnation but could not cope during a period of rapid economic development? They simply failed in turning development into growth, and growth into cash - for without cash no growth is possible.There is considerable misconception in India about development and growth, for the two terms are anything but synonymous. India has the potential to be a highly developed country, possessing the largest scientific and technical manpower in the world; but it is, at the same time, among the slowest growing economies. Development is concerned with the processes of change and acquisition of economic muscle, and there can be little doubt that India has undergone a radical change over the last three decades. But this process of change has to be harnessed to growth: to turn resources into gross national product through a continuing stream of new products and services. Braithwaites and Jessops failed to adapt to change and went 'sick'. Kothari and Tata, who started with some of the traditional agro-based industries like textiles, sugar and tea. were more in tune with the process of change and went on to new industries and rapid growth.Countries can be divided into roughly three categories: (1) those which have developed and also grown: (2) those which have developed without adequate growth: and (3) those which have grown without development.Growth with development: Japan is a good example of a country which has both developed and grown, fast. With virtually no natural resources of its own. it has developed its own economic muscle to achieve a high rate of growth.Development without growth: India, and lo a certain extent, the Soviet Union. It is not generally realised that the latter, with 60 years of revolutionary economic activity behind it, is one of the poorest countries in Europe with a per capita income that is, according lo the World Bank, less than that of even Ireland and Spain, and less than half that of Japan. Yet the Soviet Union is a superpower on par with the United States.Growth without development: The newly-rich oil countries. Their growth has been rapid in terms of per capita income and other indicators, but one has a feeling that it is a forced growth totally unrelated to their intrinsic strength. When the oil bonanza is over, the countries are perhaps fated to go back to the desert from which they sprang. Short-sighted Government: What is true of countries is also true of companies. In India the public sector has been the main instrument of development but it has been a failure as an instrument of growth. But the planners continue to treat it as a growth machine, sinking hundreds of crores of rupees into it while it continues to languish. We thus have the strange spectacle of companies like Tata Steel being kept on ice for 25 years while the public sector steel units grow fat but are unable to deliver the goods. "We could have raised our capacity to 4 or 5 million tonnes of steel," says Tata, "but for the Government's unhelpful attitude and the convertibility clause." The net result is that tiny countries like South Korea have pushed ahead of India in steel - although we had a 50-year lead - and will soon push ahead in other industries also."If MRTP (the Monopolies and Restrictive Trade Practices Act) were not there," says Kothari, "we would have had two or three times the number of units we have been able to instal." MRTP may be a big stumbling block but it is not the only one. The biggest hurdle is the confusion in the Government's mind, not only about the role of the public sector vis-a-vis the rest of industry, but also about technology, TCS has been waiting for three years for its new computer which it is setting up in New Delhi. In the United States, companies are not prepared to wait even for three months, as there are rapid changes in computer technology and yesterday's machine may be out of date by tomorrow. Yet the Electronics Department in Delhi operates as though the world was prepared to wait for India till doomsday, while files move slowly from one table to another in the Vigyan Bhavan Annexe.Utilising Talent: "Young scientists and engineers are not prepared to wait for the Electronics Department or anybody else," says a TCS official. "They will quit and go elsewhere if we are not able to keep them." While the public sector tends to be managed by older people - most of whom have forgotten their technology - the managers in private industry, particularly in the new industries, tend to be quite young-the average age in TCS is less than 30. And this is probably one reason that the private sector is getting its second wind: this is the second generation of managers since Independence and, qualitatively, is entirely different from the first. Kothari may head his group; but it is his son and son-in-law. both of whom are in their 20s, and other young managers who are more involved in the business than he is or has time to be. The same is the case with other business groups.New Delhi simply cannot assume that 1981 is 1951 and nothing has changed in between. It has to decide, and decide quickly, whether to give these people their head - and to turn development into growth. Otherwise the second wind might turn out to be one of those whirlwinds that visit our shores periodically leaving behind uprooted trees, smashed houses, dashed hopes and long faces in New Delhi.Published By: AtMigration Published On: Oct 22, 2013 14:43 IST--- ENDS ---

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Is private industries in India getting its second wind?

Is private industry in India getting its second wind? New projects are streaming out of boardrooms like confetti at Christmas lime and there is hardly a business house that doesn't have its hands full.

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