An Indian renaissance

India’s top CEOS discuss the rewards of restructuring,

both for the country and for companies

Mukesh Ambani

There is new found confidence in India. Indian information

technology prowess has already become a legend. Other areas of
technology, such as biotechnology and nanotechnology, are
taking roots in India. We are beginning to see a resurgence in
science. Research-led companies of global reach are turning to
our country to create science facilities here. India is emerging as
a global manufacturing hub.

India has already made a mark in business process outsourcing.

The width, depth and geographical reach of such services are
expanding. Indian businesses are aspiring to be world-class
players. Several industries, like steel, automobiles,
pharmaceuticals, textiles and media, are beginning to imprint
their footprints overseas.

An Indian renaissance is, therefore, no longer a dream. But in a

world of globalisation and intense competition, India has to go
beyond the feel-good factor and the sense of newfound
confidence to attain global leadership. This will call for concerted
efforts by Indian business leadership to scout for global
opportunities, seed nodes for innovation and build brand India.
Business leadership will have to be obsessed with a passion for
fostering global initiatives and attaining global leadership.

At the strategic level, Indian business will have to go beyond

business process outsourcing to attaining global leadership in
services; go beyond outsourced manufacturing to creating global
brands; and go beyond contract research to creating new vistas
of knowledge.

This cannot come about unless India invests heavily in science

and technology education. This is because technology is driving
economic growth and development in the New World and
research-led higher education in science and technology is the
crucible for ideation and innovation.

Indian institutions must also be geared to nurture innovation as it

leads to greater productivity, higher economic growth and better
standards of living. This can come about with sizeable public
funding for research, surpluses from traditional businesses of
large corporations channeled to research-led initiatives,
protection for intellectual capital, vibrant venture capital
participation, a competitive market place and a demanding
environment for academic researchers.
Global leadership for India also means that India must access
markets for goods, services and professional resources in other
parts of the world. The developed world is gripped by the
paranoia of protectionism. Non-trade barriers are emerging in the
form of quantitative restrictions and phytosanitary requirements.

Subsidy for farmers in US and Europe is already a volatile issue.

In this milieu, the Indian political and economic leadership must
skillfully promote the interests of Indian trade in global
conclaves. This would call for several bilateral and multilateral
trade agreements to be put in place. Side by side, there is an
urgent need to foster an efficient infrastructure within the
country to support global trade. Efforts made by the government
in roads need to be extended to ports, electricity, civil aviation
and telecommunications. India must also have many more free
trade zones.

India today has a once-in-a-lifetime opportunity to forge a new

destiny of global leadership and transform the lives of over a
billion of her people. With an eye on education, innovation,
competition and market access and a vision that goes beyond
business process outsourcing, contract manufacturing and
contract research to building brands, technology and owning the
global customer, India can make the grade.

The feel-good factor will stay

Kumar Mangalam Birla

India is back in currency. As the nation stands on the cusp of

explosive growth, I believe the feel good factor is here to stay.
The year 2003 has been remarkable on practically all fronts,
signalling a tremendous resurgence in the economy. We have
had a good monsoon. The faith and confidence of foreign
investors in our country’s economic prospects have been amply
demonstrated with their putting in a record $7 billion during this
year.

Today, foreign exchange reserves in excess of $100 billion are at

an all- time high and secures us against any adverse external
shock. In turn, this has prompted rating agencies to revise their
outlook on India. Quarterly profits of corporations are soaring,
helped by low interest rates, increasing demand for their
products and improved productivity.

Overseas jobs are moving to India as the outsourcing wave gains

momentum. Fifty per cent of Fortune 500 companies have taken
this route. Interestingly, 100 of the Fortune 500 companies have
set up R&D centres in India, and General Electric’s R&D centre
here is its second largest with over a 1000 PhDs.
As India outperformed the global economy in 2003 by a
considerable margin, the whole world became alive to our
country’s potential. Stock markets are booming and currently
represent wealth close to 55 per cent of our GDP.

The underlying trends in the economic fundamentals point to a

performance that will be sustained well into the future. India’s
cost advantage and availability of a pool of skilled labour are
proving to be sources of competitive strength. Our brain power
has reshaped corporate America and continues to march on.
One-third of NASA scientists are Indians and there are over
5,000 Indo-American professors in American colleges. At Harvard
itself, I believe, 10 per cent of the faculty comprises Indian
intellectuals.

In today’s world, globalisation is not an option but an imperative.

Indeed the only option is how to harness the forces of
globalisation to one’s advantage. Companies will locate where the
costs are the lowest, and will service those markets where the
returns are the highest. Therefore, it should come as no surprise
that global auto companies are increasingly sourcing their
components, and even designs from India. Many other sectors
are following this trajectory. And this will further fuel our growth.

Earlier, India’s traditional strength in services could not be

exported, as services were seen as a non-tradeable sector.
Today, the scenario is different. Our techno takeoff has been and
continues to be spectacular. Additionally, with growth in the
telecommunications infrastructure, the skills even of a
radiologist, a secretary, a financial analyst or a computer
programmer have all become exportable.

High quality customer services can now be delivered over a

telephone link, one end of which could be in Bangalore or
Hyderabad. And this is causing the great exodus of jobs from
high cost countries to India. The relative youth of India’s labour
force is another vantage point. The need to harness this
favourable demographics to its maximum potential is well
recognised today. It will also be the mainstay of India’s pension
reforms.

Finally, we can all bet on India’s prosperity. With an expected 7

per cent to 8 per cent GDP growth and inflation under control at
4 per cent to 5 per cent, the scene at the macro level is indeed
encouraging. Oil prices seem stable too and there is hardly any
likelihood of pressures from other quarters. One hopes that the
rain gods will continue to be benevolent and no untoward global
incidence occurs, in which case, we can all keep smiling.

Focus on infrastructure
Anand Mahindra

Corporate India has built a culture of cost cutting which has

trimmed the flab and set our basics right. Many of us have also
achieved global milestones in terms of quality. But cost cutting is
only a first step - what will now take us forward is cost
leadership. Cost cutting is only a small part of this. Leveraging
cost leadership and delivering global quality are the factors that
will drive our future growth. I think Indian companies are well
aware of this, and we are already beginning to see the
emergence of Indian multinationals.

Over the next few years up to the year 2010, as a nation we

would have to focus on infrastructure, which has a multiplier
effect on the economy, on agriculture, where we need to set our
house in order, and focus on human development and improving
the quality of life. Within our own group, growth will come from a
combination of market leadership, innovative strategies, a quest
for globalisation and a ruthless focus on financial returns.

There are numerous areas where we need to pull up our socks.

Although there has been a marginal improvement on the fiscal
front, greater efforts are needed to discipline the burgeoning
fiscal deficit. The unprecedented deterioration in the rate of
public sector saving is a matter of concern. We need a faster
reform process, especially in the areas of agricultural and fiscal
reform.

We must also address the larger problems of civil society. We still

need to overcome problems relating to corruption, economic
scandals and good governance. Above all we must create an all-
encompassing vision of the India that we want. To do this, there
has to be a mechanism for dialogue between all stakeholders, so
that we all work in our respective fields towards the same vision
of a better, more affluent and more inclusive India.

The Confederation of Indian Industry has been maintaining that 8

per cent sustainable growth is eminently feasible. With a stable
external sector, a growth-oriented financial regime and a
rejuvenated corporate sector, the final growth rate of 7 per cent
for 2003-2004 appears well within our reach. In fact, we should
be ambitious for more.

Creating a brand image

A M Naik

After more than four years of recession, the Indian economy is

recovering and is poised on the growth path. No doubt the WTO
regulations have made inroads into the country’s trade policies,
but they have also been nudging India to integrate with global
economies. This has led to a mix of opportunities and challenges
for Indian corporations.

While the service sector is set to boom, manufacturing

organisations have to rethink their business models to survive
and grow. The controlled economy regime forced Indian
industries to invest in uneconomic volumes as well as expand
outside their core areas. This legacy has come to haunt industry
in the changed scenario. Therefore, restructuring to build upon
the economies of scale in core areas and a capable human
resource pool will be the key challenges for the survival and
growth of Indian manufacturing.

The development of a strong and vibrant capital goods sector is a

must for the growth of Indian industry. Since 1992, this sector
has been rightly thrown open to international competition
through a substantial reduction in duties as well as removal of
trade barriers. At the same time, the sector continues to wallow
in high costs. To sustain the manufacturing sector’s growth, the
government needs to expedite second generation reforms on
labour issues, remove infrastructure bottlenecks and leverage
India’s strengths to promote the export of manufactured goods.

While the business environment has opened Indian industry to

competition, the current situation has also made us realise the
need to become international players. To manage the demand
fluctuations in the domestic economy, L&T proactively embarked
on the path of becoming an Indian multinational as an EPC
(engineering, procurement & construction) organisation.

To cope with these challenges, L&T is restructuring itself by

hiving off unrelated businesses, reducing its interest burden by
proactive treasury management and adopting the latest HR
practices. L&T plans to generate 40 per cent of its revenues from
international sales by 2007-2008.

The development of a global management pool, management of

international business risk and creation of a sustainable India
brand image will be the key challenges for Indian corporations in
the years ahead.

Looking to the future

Harsh Goenka

Only a few years back, many started writing epitaphs for the
Indian manufacturing sector and most believed them. The old
economy companies were the prime targets. They heard the
wake up call. Most realised that with globalisation and
competition, they had to act and now. They began to attack costs
both in manufacturing and in supply chain management.

With a majority of the sectors surpassing their own standards,

the turnaround that companies were waiting for finally became a
reality. They consolidated their positions in the global arena too,
an indicator being the ever increasing export figures witnessed in
the pharmaceuticals, auto and IT industries. The second post-
reforms growth is clearly visible now. This is the first time in a
decade that the stock market has witnessed a broad-based rally
and stock markets now play an important role in India’s
economic growth.

The story at RPG has been fairly representative of this sequence

of events. A large diversifed group like RPG had its fair share of
challenges – a large workforce, the high cost of debt, very small
and very large businessess and many associated issues. The
situation could have been worse, if not for a major restructuring
exercise initiated in 1993.

The group was then reorganised along core lines of business,

processes were changed and fresh talent was infused into
management. Restructuring, at RPG and outside, however, is an
ongoing exercise . We may feel we are now somewhere close to
completion. But in a dynamic environment, it never is really
finished.

The last four years were indeed amongst the most challenging for
the group. The key constituents of the group like power,
transmission and tyres were facing a lot of challenges. We looked
at three or four major areas of cost – manpower, interest, supply
chain and process efficiencies. One of the biggest problems in
power, high transmission and distribution losses, were
dramatically reduced.

Looking to the future of Indian industry, the silver lining is clearly

visible and signs of growth are evident. The evidence will
ultimately rest on how the political framework lives up to the
demands of a growing economy.

The commitment to the reform process has to be aided by a

unified approach amongst all political parties when it comes to
specifics. Indian industry has gained immense confidence on a
global platform and as a nation we have earned a great deal of
respectability. If we make a breakthrough in the way we manage
and administer our nation I am sure we will see India shining for
many years.