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Business Commentary / Dilip Thakore

A learning time in the year of hard knocks

1998 was a testing year for the Indian industry -- indeed for the Indian economy as a whole. The overall economic growth (gross domestic product) of 7 percent forecast in the Union Budget for the fiscal year ending March 31,1999 is out of question.

With the latest Currency & Finance Report, 1997-98 of the Reserve Bank of India highlighting that industrial growth in April-October 1998 was a mere 3.6 per cent against 6.2 per cent in the corresponding period of 1997, and agriculture growth in the current fiscal unlikely to exceed 6 per cent, it is unrealistic to expect higher GDP growth than the 4.5 per cent forecast by the Centre for Monitoring Indian Economy.

Nevertheless, 1998 has been a good year for the Indian economy as an educational experience. Managers in several sectors of Indian industry have experienced genuine competition and are learning to cope and live with it.

For example, almost all companies manufacturing and marketing consumer durables have had a taste of never-before competition in a recessionary year. And though in terms of impact on their bottom lines the year that was wasn't memorable, as a learning experience, 1998 has perhaps been a watershed year for the industry.

While a business enterprise's assets base, sound financial health, and market-share are undoubtedly important, in the emerging knowledge-driven global society, its learning ability, responsiveness to emerging situations, and knowledge base have also emerged as important intangible assets.

It is difficult to recall any other year in post-Independence India's history in which so many companies have been put through the wringer and have had to aggressively woo consumers to survive.

In the electronics industry, managers have perforce had to learn to create a national second-hand goods market by accepting trade-ins of old television sets for new. By pioneering this concept in the hitherto ideas-bankrupt Indian marketplace, the Bombay-based Baron International has wholly shaken up consumer electronics and expanded the market while simultaneously opening up a huge latent market for second-hand electronic goods. This bodes well for the downstream electronics servicing industry and the economy as a whole in terms of jobs creation and skills development.

The spate of new car models being launched in a marketplace characterised by low purchasing power has led to a lot of head-shaking among economists and pundits of the old school. The fierce competition in India's parvenu automobile industry is likely to force managers in this industry to develop sharp marketing skills and -- perhaps most important -- to appreciate the business value of prompt and qualitative after-sales service which has always been the blind spot of Indian industry.

In this context, the highly-publicised and courageous launch of the almost wholly indigenous Tata Indica into an already crowded, foreign models dominated small-car marketplace is an event of momentous significance. It signifies the coming of age of Indian industry and of a new can-do confidence among engineers and managers in this nation's hitherto moribund manufacturing sector.

The learning process in the unrelenting school of hard knocks which Indian industry experienced this year was replicated in the agriculture sector. The sharp increase in prices of horticultural produce -- onions, potatoes, pulses etc -- revealed that in spite of the so-called green revolution, Indian farm productivity averages one-third of international levels. And demand is rising faster than supply.

More significant is the dawning awareness within the political class and society as a whole that Indian agriculture is pathetically under-industrialised. This is reflected in the estimate that almost 40 per cent of the annual horticultural produce of the nation spoils before it can get to hungry markets. This new awareness has reduced hostility towards large companies such as Hindustan Lever, PepsiCo, Britannia, Dabur and Marico expanding their food-processing operations in a big way.

Likewise, 1998 was a year in which the importance of infrastructure development impacted itself upon industry, agriculture, government and the public as never before. The ambitious decision to build four-lane east-west and north-south expressways, even if they do not materialise in the foreseeable future, has highlighted the vital connection between economic development and giant roadway projects.

The nation has been disabused of socialist propaganda that dismissed high-quality road networks as race-tracks for the idle rich. In this connection the tabling of the Insurance Regulatory Authority bill is of momentous significance. If the standing or select committee of Parliament approves sizeable foreign investment, a massive volume of long-term finance is likely to become available for investment in infrastructure development.

Indeed, the most valuable lesson that the nation has been forced to learn in 1998 is that as for individuals so for nations the era of free lunches is over. The Pokhran II nuclear explosions have clearly exhausted the patience of traditional aid-giving nations with India's development inefficiencies. This happened at a time when the global media revolution has clearly demonstrated that this nation has the capability to pull itself up by its bootstraps. All it lacks is will and determination.

Yet, given the accumulated impact of the dreadful mess in virtually every sector of the economy, politicians and the intelligentsia can hardly be blamed for being confused about national priorities. But a moment's reflection should indicate that the starting points of a new economic development initiative should be the nation's woefully neglected agriculture and education sectors.

Unfortunately, post-Independence India's economists and businessmen have lacked the earthy economic wisdom of automobile industry pioneer Henry Ford who firmly believed that mass consumption is the prerequisite of mass production and economic prosperity. This is why 700 million rural citizens have been virtually bypassed by the nation's nine elaborate plans.

So, the first priority should be to inject meaningful purchasing power into the rural economy. In this connection, the eminently sensible suggestions made recently by the prime minister's advisory council on food and agro-industries headed by Nusli Wadia deserve serious and urgent consideration.

Simultaneously, citizens need to exert maximum pressure to ensure that the long-standing proposal to make elementary education universal and compulsory is realised. By the turn of the century -- now only 350-odd days away -- there is a distinct possibility of 50 per cent of the world's illiterates being Indian citizens.

It's time to acknowledge the gravity of Dr Amartya Sen's remark that India's failure to make primary education universal is a failure of political and societal -- rather than economic -- bankruptcy.

Dilip Thakore

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