Discussion on Liberalisation
From 1950 till date, the era of liberalisation has seen Indian business come of age. A measure of change that has taken place in the structure and dynamics of the Indian industrial sector over the last two decades is the fact that some of what the economists wrote about the private sector in the 1970s is no longer relevant. Economic liberalisation begun in 1991, under adverse conditions, changed the business scenario completely. One striking fact is that industrialists who dominate the headlines today were unheard of less than a decade or two ago. Economic liberalisation and dismantling of the 'Licence Raj', coupled with India's outward orientation and willingness to let market forces come into play, pushed corporate India into the Darwinian world where only the fittest can survive. Licences, protection, subsidies, ceiling on asset- size and family fiefdoms are OUT. Competition, strategic planning, core competence, entrepreneurship and professional management are IN.
There is no doubt that the wide-ranging reforms of the first four years (1991-1995) have had beneficial results for the economy. This was most obvious in the case of exports, the attracting of foreign investors to India, the build-up of reserves and general strengthening of the external payment position. It was also the beginning of industry adjusting to the winds of change, and repositioning itself to meet the challenges, both on the domestic and global front. The corporate sector share in capital formation has more than doubled in the same period from 4.3 per cent to 6.8 per cent of GDP between 1990-91 and 1993-94.
An oft-repeated query is about the impact of economic liberalisation on the Indian corporate sector and the latter's reaction to it. The answer is a medley. It would be wrong to imagine that there has been a uniform impact; or positive or negative one; or a uniform response. Some industries and some corporate have done better than others. Some have benefitted significantly from the trade and investment liberalisation; others have suffered enormously. Most have coped with the new challenges and have found a place in the sun. Corporate like Reliance, Godrej and Tata have braced themselves pretty well, after the initial hiccups, even if some of them remain wary of speed; while others like Modi, Thapar and Singhania had delayed facing competition head on and have fallen behind. The big success stories and the bigger failures have all been written about, but a striking aspect of liberalisation is that some small, hitherto unknown players have not only managed to grow, but are also in the headlines repeatedly - such as Narayanamurthy of Infosys and Azim Premji of Wipro. In the 1990s, information technology and the services sector have emerged as new thrust areas, even as traditional industries like textiles and automobiles restructured and modernised to face the emerging challenges of the 21st century.
Simultaneously, liberalisation has brought in its wake a fair share of challenges and burnouts. Takeovers, mergers, brand wars, dumping and the like are now in. Nothing symbolised this better than Coca-Cola's takeover of Parle Drinks and Thums Up. Big brands arrived and gobbled up small brands. Liberal investment policies and more competition have finally made the consumer the king, but consumerism has replaced human values. The Indian corporate sector has been jolted from its slumber, and rather than surrender meekly to the MNCs, they began a fierce battle by jumping onto the bandwagon to ensure that Indian brands survived. Quality became the buzzword.
But despite all this, the Indian corporate sector still has to invest heavily in human capital and on Research and Development (R&D), while simultaneously inculcating the style of professional management. Finally, Indian business has changed for the better, thanks to economic liberalisation.