Are Indian brand names, technologies and designs going to be crushed by economic liberalisation? Will Indian companies become appendages of global giants?
So far, we have striven to develop our own technologies and brand names. For decades we ‘sneeped at Malaysia, Indonesia and Thailand for being mere assemblers of foreign components for multinationals. But after four decades, their low-tech strategy has paid much higher dividends than; our high-tech strategy. India’s per capita GNP is still arouild $ 300, but Indonesia’s is approaching $ 700, Thailand’s $ 1,700 and Malaysia’s $ 2,700.
Indonesia and Malaysia have low-fech manpower which cannot remotely compete with India’s considerable technical skills. Yet they are infinitely richer than India; Inspired by the Soviet model, we originally believed that if you master high technology, you automatically master low techltology too. Yet experience has shown, both in India and the “‘Soviet Union, that a nation capable of launching space rockets may be incapable of making competitive toys or shoes.
The South-East Asian example shows that India can become ten times richer without high technology or strong brand names. Undoubtedly indigenous technology and brand names are a help, since they add value to commodity production, as South Korea will testify. But of the original four Asian tigers – Korea, Taiwan, Singapore and Hong Kong – only Korea emphasised its own brands, whereas the other three have very few global brand names or technologies to boast of. Yet the per capita income in 1991 was much higher in Singapore ($ 14,210) Hong Kong ($ 13,430) and Taiwan ($ 11,000) than in Korea ($ 6,330), proving that even in East Asia the Korean model has been the least successful.
In short, there is an excellent case for India to attract multinationals and become a competitive producer of global brand names (like Bosch washing machines or Sony Walkmans). This does not mean India should abandon all R and D or local brand names. It does mean that too many tears should not be shed if some Indian brands die out and some technically strong companies decided to collaborate with global giants.
This is already happening. Parle is reported to have sold its brand names to Coca-Cola, becoming simply a bottler for Coke. When India kept out both imports and investment from multinationals, their only way of getting a slice of the Indian action was to licence their know-how to Indian companies, and this enabled companies like Bharat Heavy Electricals to become major, competitive companies. Today the same multinationals want to set up shop in India’ themselves rather than licence know-how to BHEL. In consequence there have been suggestions that BHEL should be broken up, and different parts of it should form joint ventures with different multinationals.
Telco has long prided itself on its indigenous design capacity, and its light truck defeated four rivals made with Japanese collaboration (Swaraj-Mazda, Eicher-Mitsubishi, DCM-Toyota and Allwyn-Nissan). Its Tata mobile broke new ground in the pick-up segment. Yet. Telco has now decided to join hands with the international giant Cummins for new truck engines, believing that this is the fastest way to produce engines conforming to stiff emission standards in North America and Europe.
The Left and BJP may differ on many issues but they are united in denouncing this trend as dangerous. And even centrist economists want to follow the Korean model emphasising indigenous technology and brand names. It seems to me that this smacks of elitism’ at the expense of the poor. It gives our intellectuals great satisfaction to boast about space rockets and brand names.
But if we wish to solve our basic problem of poverty, we need to harness millions of workers in productive, internationally competitive industries. After 40 years, the high-tech, indigenous track has failed dismally to make India competitive or abolish poverty. China today exports $20 billion of plastic toys and manufactures, more than India’s entire exports. If we marry the best in world technology and marketing skillsto our cheap labour, we can sweep the world, just as China has done in the last decade. If that means emphasising foreign know-how and investment in low tech industry, so be it.
This does not mean abandoning indigenous brands or technology. We can become a producer of global brand names even while developing our own. One positive effect of four decades of protection is that Indian brands have now come of age. Nirma beat Surf, and Hidustan Lever had to fight back with Wheel, a low-tech, indigenous product, not a global brand name. In non-aerated drinks Rasna has defeated global names like Tang and Ju-C. The Malhotras, India’s big blade manufacturerers, have beaten Wilkinson and Gilette. So even after globalisation many Indian brands will remain. Telco will not stop developing better truck engines. And Ranbaxy is typing up with Eli Lily for what promises to be the highest-tech venture in drugs. We are stronger than some people think.