Of all the false notions deeply embedded in current debates, none is more entrenched than the idea that Indian companies are incapable of standing up to competition from multinationals. Parle has sold out to Coca-Cola, Kwality ice-cream has been bought by Hindustan Liver, the Doshis have given up control to Fiat. And so both the extreme left and extreme right have joined to clamour for protecting Indian businessmen from extinction.
Their unspoken assumption is that Indians are inferior to foreigners and cannot compete. This is rubbish. I find it amusing to hear this sort of stuff from the most jingoistic swadeshi patriots. The very people who enthusiastically declare Mere Bharat Mahan and Sare Jahan se Achha, Hindustan Hamara are the ones who really think Indian businessmen are neither mahan nor achha.
Such people need to open their eyes and take a look at the developments globally. They will see that Indian businessmen can and have begun conquering the world.
Mr Lakshmi Mittal, a businessman of Indian origin with head-quarters in Britain, hit the headlines earlier this year when a top business magazine listed him as being richer than the Queen of England. Mr Mittal is virtually the world’s largest steelmaker. He runs steel plants in Kazakhstan, Indonesia, Trinidad, Mexico, Germany, Ireland and Canada.
A century ago, Andrew Carnegie’s US Steel was the biggest steelmaker in the world. That company has been reduced to an irrelevant pygmy while Mr Mittal’s Ispat group now straddles the world.
Mr M Sinivasan, a businessmen of Tamil origin born in Indonesia, has just acquired the fibres division of the German giant Hoechst, which was once the biggest polyester producer in the world.
Mr Sinivasan runs the Texmaco group in Indonesia. His flagship company, Polysindo, has taken over two once-famous, but now ailing companies in India, Best & Cromp-ton and the textile division of JCT.
So do not think all foreign takeovers are managed by white men. Talk to Mr Sinivasan and you will find him utterly contemptuous of European and American producers of polyester. “They simply cannot compete with me,” he declares. Is the swadeshi (and Marxist) brigade listening?
Reliance is already among the top five producers in the world of polyester and chemicals like PTA. It is setting up a giant 22 million tonne refinery, which will be among the world’s biggest. Foreign merchant bankers say it is going to be the lowest-cost refinery in the whole world.
When Sri Lanka called for global tenders to privatise its tea plantations, every single winning tender was from an Indian company. For internal political reasons, the Sri Lankan government did not want to hand over its tea gardens to Indians, and insisted on majority control remaining in the hands of its own citizens.
However, the incident drives home the lesson that, as national barriers drop and globalisation spreads, Indian plantation companies can dominate the global tea industry. And they will not be far behind in coffee or rubber either (Indian rubber yields are among the highest in the world).
The late Aditya Vikram Biria was once asked whether he was afraid of multinationals. “No” he replied, “they should be afraid of me”.
The Oberoi and Taj hotel groups have long run hotels in all parts of the world.
How does such Indian achievements in global business square with the surrender of Indian brands like Thums Up, Kwality and Hamam to multinationals? Of with the constant refrain of many Indian businessmen that they cannot compete with the money power of MNCs?
Look a little deeper, and you will find that the complaints relate almost entirely to the limited field of branded consumer goods. Now, branded goods are certainly the speciality of MNCs.
But they constitute only a small, though prominent part of our total production. The bulk of our industrial output is of unbranded or low-branded items ranging form steel and cement to polyester and capital goods.
And here MNC competition is no problem at all. Just as Siemens—it suffered a shopping loss last year. Very few MNCs are entering these fields anyway, since Indian companies are so competitive.
AV Biria was a manufacturer of unbranded commodities like rayon, aluminum and cement. That is why he said MNCs should be afraid of him. And he is not untypical. Just take a look at the top Indian business houses, and you will find that their interest in branded goods is very limited.
The Tatas are overwhelmingly in commodities (steel, cement, caustic soda, tea) or low-branded goods like trucks (the exceptions being Titan watches and the Taj hotel chain). The Birlas, Singhanias, Thapars, Ambanis, Ruias, Jindals, all focus on unbranded goods.
Some of these groups have sick not MNC competition. Indeed some (like the Thapars) have welcomed foreign takeovers (like Polysindo’s) to get a good price for their unwanted assets.
Why are Indians not competitive in branded goods? Because they are not willing to lose enormous sums building brand images and foreigners are.
All critics who fear foreign MNCs should read the October 22 edition of Business World. This details how MNCs have lost a whopping Rs 1,500 crore since coming to India.
Whirlpool (fridges, washing machines) has lost Rs 122 crore, Peugeot Rs 120 crore and GE-Godrej Rs 60 crore. Reebok and Nike are in the red. The balance sheets of Coke and Pepsi are not available, but business folk know these US giants have lost fortunes.
Ray Ban dark glasses have lost a fortune for Bausch & Lomb. Kellogs cannot make any money out corn flakes or other breakfast cereals. Even foreign car companies expects to lose millions for years.
Yet branding is so important in the long run that MNCs are willing to lose money for a long time in the hope of making good later. Should this be a matter of great concern?
I cannot see why. Let foreigners lose thousands of crores in branded goods, which are not vital anyway to India. MNCs provide Indians with lots of income in the process. And let Indians (like Ramesh Chauhan) sell out at a huge profit and put their money in more profitable ventures.
Indian businessmen make the point that they do not have access to cheap global finance like MNCs do. This is largely true, though the emergence of the GDR market means all good Indian companies have global access too.
More relevant is the complaint that the license-permit raj and high taxes kept Indian companies artificially small and over manned, and that with timely help they too can become globally competitive. The right answer to this problem is not to shut out MNCs, but to give active assistance to worthwhile Indian projects, to help create Indian giants that can become MNCs in their own right.
That will generally mean outright grants or tax relief’s for indigenous technological development. This is a topic that requires a full-length article, and I will deal with it in a future column. Suffice for the time being to say that Indians are not inferior businessmen, and can compete with the best in the world. They have proved this in many countries. Let us create conditions where it can be proved in India too.