Indian businessmen are a moody lot these days. At industry get-togethers, seminars and in interactions with the media, they seem to be sighing and shaking their heads all the time.
When they are not railing against competition from imports or multinational corporations (MNCs), they are lamenting political instability. Most surprising, many ascribe the lacklustre business conditions to a slowdown in government spending and are asking the government to invest more. Reforms, one would think, meant less government, but Indian businessmen are thinking again.
However, the worrying trend is surprising as corporate results for the first half of 1997-98 point to rising sales and profits. Profit margins also appear to have improved relative to 1996-97, although they are still below margins recorded in 1995-96.
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The falling margins tally with the estimates of Gross Domestic Product (GDP) growth and industrial growth. GDP growth is being revised downward from 6-7 per cent to 5.5-6 per cent. But, even the revised estimates are nothing to sniff at.
In some respects, conditions couldnt be better. Liquidity is high and interest rates are down to their lowest levels in years. The recent depreciation of the rupee means that protection levels for Indian industries will go up.
Companies can import machinery at low tariff rates, industries have been decontrolled and opened to private investment, the international markets are more accessible.
Then, what are businessmen complaining about? It is not as if they are threatened with extinction. It is just that the Indian environment is changing in ways that businessmen are finding uncomfortable to come to grips with.
You cant be sure the inflation rate will stay high: For years, Indian businessmen have been used to reaping windfall profits thanks to high rates of inflation.
While the inflation rate may inch up from the present levels, it does appear that there has been a decisive shift in the general rate of inflation. This means there wont be easy pickings any more.
On a long view, a low rate of inflation should be good news because a high inflation rate will retard demand growth. But, taking the long view means Indian businessmen must first shed their myopia, and thats asking for a lot.
Competition is fact of life: Indian businesses may not have had to close shutters because of competition, but its there all the same. Consumers have a wider choice than ever before and are more demanding. Quality, delivery time, after-sales service, packaging have begun to matter. Businesses are adjusting, but it isnt easy.
Corporate governance matters: You cant cook up accounts without being shunned. Messing with foreign exchange and other laws might get you into real trouble as the ITC top brass found out. Running a public company as a private fiefdom is not so easy anymore.
India businessmen also had to face the truth that if you fool around with investors funds, you can find yourself in the can as happened to C R Bhansali of the CRB group.
Brand image is fine, but its the bottomline that counts: There was a time when a groups name tag could attract investors funds and keep stock prices high. No longer. Many Aditya Birla group companies suffered a sharp erosion in prices as foreign investors zeroed in on what they perceive as downside risks - commodity businesses, unrelated diversification and Kumaramangalam Birlas unproven leadership.
The domestic market as well as the international market for Indian equities has been depressed for a long time. Yet, fundamentally sound and well managed companies like Mahanagar Telephone Nigam Limited (MTNL) and ICICI Bank managed to raise funds.
Several joint ventures have run into trouble Maruti-Suzuki, Godrej and P&G, Premier Auto and Peugeot, ITC and Peregrine.
Indian businessmen, who have been rushing into joint ventures in order to tap the premium market, acquire technology or access the overseas markets need to be clear about whether they are willing to accept a junior role in such ventures.
How to retain control in the new environment? With a formal takeover code in place, family-managed businesses face the risk of losing their companies to raiders, although it may be a while before the bigger companies come under attack.
Squabbles within a family or among promoters could put the future of the business in jeopardy as seen in the Asian Paints saga. The public wrangling undoubtedly soiled the image of Asian Paints, and it raised questions about how family-owned businesses propose to deal with the liberalised environment.
None of this was altogether new to 1997. Many have figured ever since the reform process started. But, now that the country has gone down the road some distance, the issues are assuming prominence.
Groups like Reliance have shown that they can flourish in the changed environment. Others arent doing badly, as the aggregate numbers show. But change is the only constant in the new environment, and adapting to change is never easy. So, the whining and grumbling is inevitable, but Indian businesses will learn to survive and even flourish.