Has India Inc Failed in Playing the Leadership Role?

Abstract

A large number of higher rung companies have not been able to contribute effectively to correct India's balance of trade. In fact, a large proportion (over 50%) is involved in aggravating it. The performance of lower rung corporates is comparatively more satisfactory. The contribution by the higher rung corporates to the globalization of Indian business is even more unsatisfactory. With a few honourable exceptions, they are globalizing more actively inwards than outwards. Most of the corporates are not contributing to increasing the global competitiveness of India through technological capability building. There is increasing technological dependence of these companies, perhaps strategic dependence, on foreign companies as manifested by accelerated pace of foreign collaboration by corporate leaders in every field. Corporates are not able to withstand global competition. The performance of over 50 per cent of pre-reform corporate leaders has gone down both in terms of their sales rank and profit position. The performance of the neo-leader companies (entering the fray after 1992) is even worse. This downturn has started affecting the national economy and society. The deteriorating performance of corporate leaders has blocked a huge amount of country's savings in unutilized/underutilized fixed assets and created sizeable non- performing assets. A majority of corporates are still not considering internationalization of their business leaving the task to small companies, especially the software ventures, which are vulnerable to host country protests as well as increasing share of the MNCs in business process outsourcing. Considering all these factors, it is time the corporates realized that they also have a role to play in ensuring sound health of their industry and Indian economy without which their own survival may be at stake in the long run. The magnitude of fall in their performance suggests that the issue has to be taken up as a strategic challenge and new models and approaches for arresting the fall need to be developed. This study analyses the policy implications of this phenomenon and comes up with the following suggestions: The policy-makers need to critically evaluate the export-import and other policies and examine what policy support is needed to make more Indian corporates assume responsibility for increasing the net exports and for internationalization of Indian business. The creation of a large amount of non-performing assets due to failed expansion and diversification moves would entail major ongoing restructuring of the underutilized assets in the form of acquisitions, mergers, and divestitures. There is a need for proactive policies for facilitating such strategies with concern for protecting the interests of larger section of the society. The policy-makers also have to think and consciously decide as to what level of “exit” is to be tolerated as a price to be paid for better quality and increased supply of goods and services. Corporate leaders are not paying enough attention to develop and/or scale up native products that are embedded in the natural endowment and socio-cultural context of the country which could be leveraged as a strategic tool for meeting global competition on local strengths. New/additional policy measures seem to be neces- sary for the purpose. There is a need for large-scale, coordinated research by mobilizing and unifying the national efforts with active industry involvement at various stages of research.