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.