The Indian industry has to change the way it functions if it has to successfully take on the competition from abroad which has come in the wake of the opening up of the country's economy. While stating this, speakers at session of India Economic Summit yesterday also called for further reforms in order to aid the industry in tackling foreign competition.
At the session, moderated by Rahul Bajaj, Ranjit V Pandit, managing director, McKinsey & Company, India pointed out that since liberalisation fewer and fewer companies were recovering their cost of capital. In such a scenario the investors are having a second look before investing. He said, " What has been liberalised is the easier part. The other part which needs to be liberalised is vital for the survival of the Indian industry." This includes reforms in the labour laws, land reforms and financial sector reforms.
G C Burman, managing director, Dabur India Ltd pointed out that the on its part the industry will have incorporate the best practices and benchmark against the best. The Indian companies will have to become lean, competitive responsive and employ the best people."
The speakers were of the view that the government will have to play a proactive role and remove the shackles holding back the industry. Many sectors are reserved for the SSI which are in no position to compete with the multinationals which have economies of scale. Thus it was imperative that the industry these sectors be de-reserved or they will not be able to meet the challenge.
One important point raised by many speakers was that lot of capital had been invested into capital intensive industries which were not recovering their cost of capital. This was mainly because of the non competitive nature of the market. Institutions had rushed in to provide capital to the industries like cement which was now burdened with a large number of players. This situation, according to the participants, had arisen mainly because of the non competitive nature of the market. In a competitive market the capital would only go to those industries that will recover their costs. In such a case these industries could find the going difficult.
On the brighter side there were India had competitive advantages in many sector that it could exploit to become world class players for instance in the IT sector. R S Pawar of NIIT India, was optimistic that the Indian companies were capable of facing competition but for that the country will have to become net creator of technology which the country has not done so far.
Summing up the session Claude Smadja, managing director, World Economic Forum, said, " India needs to modernise its manufacturing sector and initiate some critical reforms if it is to take on the competition."
He also pointed out that India has the capability to be a technology creator in the new technology or knowledge economy where the traditional handicaps do not apply and the country can start with a clean slate.
