The insular world of Indian business

About two decades ago, three corporate gurus wrote a book called World Class in India. Two of the authors were Indian: The late Sumantra Ghoshal, who was then founding dean of the upcoming Indian School of Business (he died in 2004 at the absurdly young age of 56), and Gita Piramal, a respected historian of Indian business. The third writer was Christopher Bartlett from Harvard Business School who co-authored other books with Ghoshal on the nature of global corporations. 

The book made waves not least because of the chain-smoking Ghoshal’s electric presence at seminars in the run-up to the launch of McKinsey-promoted ISB. Those were also heady days of hope for India Inc. Indian business had, contrary to the dire predictions of the early nineties, survived the tides of global competition. The powerful industry lobby CII under the quietly charismatic Tarun Das was being heard at the highest levels of policy-making. Chandrababu Naidu, then chief minister of undivided Andhra Pradesh, had created the novel image of the investment- and tech-oriented politician with a “corporate” approach to development, long before Narendra Modi made it a national phenomenon. From airports and roads to flashy new TVs and mobile phones, India Inc seemed poised to become China’s rival soon. 

World Class in India underwrote that mood of general optimism. It presented case studies of a range of companies in India that appeared to have the qualities to qualify for the tag. The list included Reliance, Ranbaxy, Wipro, Bajaj Auto, Hero Honda, HCL, Infosys and Hindustan Lever (those are the names I can recall — my copy of the book is in the possession of a truant borrower). These companies, the authors said, combined a focused management strategy with an emphasis on people and processes, all the hallmarks of future greatness.

From the distance of two decades, at least some of those names would raise a wry smile. Ranbaxy was embroiled in multiple scandals that had a deleterious impact on the Indian pharma industry for at least a decade and has had two owners in six years as a result. Its original promoters hog the headlines with controversies that are breathtaking, and sometimes comical. Hero and Honda ended a quarter-century relationship and went their separate ways though both retain their top two positions in terms of market share. The IT giants have been in the headlines as much for management changes — Infosys (controversially) and Wipro in particular — as for their efforts to move up the value chain of global IT services. And Hindustan Lever has lost its reputation as the giant of India’s fast moving consumer goods market. 

Ghoshal et al’s list demonstrates the risks of predicting corporate greatness in a world of constant flux. Seen from that distant vantage point, it would have been difficult to foresee the rise of corporations such as Titan, IndiGo, Airtel, Paytm, Flipkart, Oyo, Bharat Forge, Royal Enfield, Sun Pharma, GMR, GVK and a raft of strong private sector banks. 

Equally, though, yesterday’s optimism seems naive when you survey the corporate Indian scene today: In 2000, Jet Airways was a feted competitor to Air India (then Indian Airlines) and IL&FS the infrastructure financing juggernaut of the future. Companies and institutions once hailed as exemplars of Indian business’ animal spirits are either bankrupt, have defaulted or embroiled in some sort of fraud or the other today. 

Admittedly, this crisis is principally the result of decades of poor policy-making, cronyism, the misguided activism of some public institutions and the sheer inefficiency of others. But in the welter of headlines that appear almost daily, it is possible to overlook one other endemic weakness in corporate India: Nearly three decades after the shackles on competition were loosened, few Indian companies can be considered truly world class. Just as in the seventies and eighties, the most powerful corporate giants in India are but minnows on the global scene (with honourable exceptions, of course). 

Prima facie, there is something illogical about this trend. The sub-standard ease of doing business milieu (which is far worse than the World Bank metrics suggest) should have driven India’s largest companies to invest their capital in less challenging geographies, you would think. Servicing the vast, expanding Indian market from overseas was always an option as tariff barriers came down. This is what a host of foreign appliance makers — of TVs, mobile phones, household electronics and so on — have done, powering out Indian incumbents in no time at all (who remembers Onida, Videocon or even Micromax). 

So what explains the instinctive insular worldview of Indian business? The answer appears to coalesce around the depressing truth that cronyism at every level offers a handy short-cut through the labyrinths of red-tape. For those who master this game, cronyism spares the entrepreneur the hard business of strategic thinking to compete on equal terms. The un-level playing field has its illusory attractions, but recent business history has shown that it serves Indian entrepreneurs and consumers poorly in the long run.