But six years after the liberalisation process stared, one hears rumblings about the take over of Indian companies by MNCs; about Indian Industry, both large and small, getting hurt by unfair competition; about Indian industry not receiving the required support from the government, etc.
In a matter like this, there are at least two sides of the picture. Those who support an open economy, maintain that this is in the interests of the consumer and also point out that in todays global world, under WTOs regulations, India has no other choice.
Those who disagree maintain that consumer interest can be adequately protected by ruthless internal competition. They also maintain that we should decide what is good for India, the Indian people and Indian industry, without confusing the issue by bringing in WTO and the pressures from the developed world. This side maintains that once we decide what is good for us, then, to the extent this is contrary to the views of WTO and the developed world, we should strongly and persuasively argue our case so that we protect our legitimate interests.
In my view, we need to have a balanced approach. Liberalisation, which started in mid-1991, should have started during the 70s. We need much more liberalisation and deregulation of the Indian economy. No sensible Indian businessman disagrees with this. We need partnerships and we need to network with the rest of the world in todays `knowledge society. Otherwise, we shall get left behind.
It is only in the area of competition from MNCs that there is some difference of opinion. Foreign capital and technology are welcome. For technology, in fact, I do not know any Indian businessman who objects to its import. In fact, I do not understand why even today industry needs governments approval to import technology which costs more than US$2 million.
In todays intelligent world, in this networking society, technology and people are very important. India has the people but we need technology. And, in my view, we can get technology without necessarily and so easily giving away our ownership and control. We want growth, we want employment, we want poverty reduction. I believe, these do not need to be sacrificed for retaining ownership and control of most of our large companies.
As for foreign capital, there are obvious areas where we need such investments. Especially for certain infrastructure sectors and other industries that require very large investments, which Indian entrepreneurs may not be able to raise, we have no alternative but to rely on foreign capital. Similarly, there are some technologies that are in the hands of just a few companies abroad. These companies will not part with their technology unless they are given majority or even 100 per cent control in the Indian company. In such cases again, we should welcome even majority foreign control if we need such technologies. However, today majority foreign equity is being permitted in almost every Indian industry. A few exceptions include civil aviation, telecommunications, and broadcasting.
Supporters of foreign capital argue that any industry in India is Indian irrespective of whether it is owned and controlled by Indians or foreigners. I am amongst those who believe that this is a simplistic view. This view is naturally supported by the developed world because it suits them. It is they who are coming and controlling our companies and not we who will go in equally large numbers to their countries to control their companies. There are large American, Japanese or European companies who have the wherewithal and the finances to take control of almost any Indian private sector company, if its share are available on the stock exchange. There is no Indian company which has the financial strength, to take over a large company in the developed world.
Every nation, to some extent, supports its domestic industries. While preaching Free Trade, even developed nations care for, if not protect, their domestic corporations. Daewoos aborted attempt to acquire a division of a French company is one recent example. The recent uproar in EC over Boeing-McDonnel Douglas merger proposal is another case in point to protect the interests of Airbus Industrie. The developed countries need to do it much less than us as their companies are already large and strong. There is every reason to believe that even the US will not welcome the take-over of a GM, IBM or Microsoft by companies from Asia and Africa.
If we were living in a world with only one country, ownership would not be an issue. However, there are about 200 countries in the world today and I believe we should not ignore our national interests, our national pride, and unduly favour foreign corporations, by waving the red-herring of customer interest.
I want at least a 100 Indian multinationals by the year 2020. This will need a great deal of effort. Also, we cannot achieve this objective without a partnership with our government. Hence, in addition to our efforts, we need policies which promote Indian MNCs.
We do not need old fashioned protection. We have had enough of that. However, we should keep both customer interest and national interest in mind. We must, therefore, decide what is in our interest. Will we be happy and proud if a large percentage of our big companies are subsidiaries of foreign corporations? If we believe that we do not want most of our large companies over the next 20 years or so to become foreign owned and controlled, and that we would like India to have its own MNCs, we have, in my opinion, no alternative but to make a list of industries in which we would henceforth not allow foreign equity in excess of a certain percentage, say, 26 per cent or 40 per cent. These industries (for example, steel, paper, cement, sugar, textiles, soft drinks etc) are such that we can get all the technology we need without giving majority ownership to foreign companies, once it is clear that this is the policy of the government. Till there is a hope that a foreign company can get majority equity, foreign companies will naturally insist on the same.
Once we are clear this is the right policy for us for, say, the next 10 years, we should implement the same and explain our stand politely but very clearly to our friends abroad including the WTO. We need the world perhaps more than the world needs us. But, one billion people should not be pushed around. China is not.
In business one should neither be too sentimental nor too logical. Though we are not as yet one world, we are, economically, though not politically, moving in that direction. Globalisation is inevitable. There is no better alternative. However, we should decide, not some one else, how and at what pace we should go about globalising the Indian economy. I have no objection to goods of well-known foreign makes, being manufactured and sold in India.
However, at least I, as an Indian, specially during the 50th year of our independence, will be much happier, will be much more proud, when I see excellent products with well-known Indian brand names being manufactured and sold in India and abroad. We need many more such products and many such domestic companies so that Indian can with pride hold its head high as one amongst the most industrialised nations of the world.
(Excerpts from the Administrative Staff College of India (ASCI) foundation lecture delivered on December 6 at Hyderabad)
Rahul Bajaj has been an avid votary of government protection for swadeshi companies. But his brand of protection has often been mis-quoted and misunderstood. Here, he carefully articulates his vision of seeing homegrown Indian multinationals take giant strides in global corporate sweepstakes
Every nation, to some extent, supports its domestic industries. There is every reason to believe that even the US will not welcome the takeover of a GM, IBM or Microsoft by companies from Asia and Africa.
