The Rejuvenation Of Indian Industrial Sector In Globalization Era

THE REJUVENATION OF INDIAN INDUSTRIAL SECTOR IN GLOBALIZATION ERA

S.Senthil Srinivasan*

INTRODUCTION

Business organizations in India have come across dramatic changes in technology, business knowledge, human skill, resources, quality outputs, innovativeness, foreign alliances and enhanced productivity etc. This is indeed essential and inevitable in the present globalization era. The changes in organizational structures, capital composition, management structure and corporatisation of family owned business have paved the way for formidable growth and development of the Indian industrial sector. But still, Indian business organizations should be converted into global conglomerates to meet the challenges posed by Multi-National Companies and foreign companies. The Indian Government and business professionals have to change their mindset and policies to built-up economic stability and to incline with self-confidence.  The import and export trade of India, the presence of Indian business houses in foreign countries, demand for Indian products in international market are still at nascent and infant stage. The evolution of new corporate strategies in line with that of global standards is essential quality for Indian enterprises to compete with MNCs and Large global business units. Success takes more than intellectual excellence or technical prowess that needs a sort of skill to survive and certainly to thrive with the internal qualities such as resilience, initiative, optimism and adaptability. Organizational success depends upon not doing different things but doing things differently.

PHILOSOPHICAL ADVICE

Sumantra Ghoshal, an Indian economist, called as “euro guru” said in 2003 that “Management theories have been highly influential but in ways that have exacerbated the problem rather than remedy it” and argued Business should be a force for good in society, but this potential is being squandered”. He reiterated, “Start afresh by developing alternative theories that acknowledge the reality of the organizational economy”.

Christoper A. Barlett, on managing across border have said, “the major industry shakeout of the past 20 years has left only a handful of viable competitors, all roughly equivalent in their potential to capture scale economies and develop responsive strategies”

A company’s worldwide organizational learning capability is fast becoming an essential strategic asset. People rejuvenation with four characteristics, discipline, support, trust and stretch are said to be solution to make failing companies to make reengineering successful. The new management agenda is aimed at building social capital and unleashing organizational energy. 

India is the fourth largest industrial base country in the world. Indian economy is growing at an average of 6.5% per annum (at present 7-8%). There are about 150 companies in India with a sales turnover of Rs.1000 crore and more. Approximately 30 and odd companies have $1 billion as annual sales, 25% of companies export 20% of sales, 30 companies exports more than Rs.500 crore worth of goods each, eighty companies have exports about Rs.200 crore and 150 companies have exports more than Rs.100 crore. The strength of Indian industrial growth is substantially high and future tends to show bright prospects.

The industrial growth rates to GDP over the years from 1998 to 2005 are given in the following table.

The above table shows about the contribution of each sector to GDP growth for past eight years starting from 1998 to 2005. It is evident that the industrial sectors had a marginal fall in the year 1999 and 2002, but has showed an increase over the other years and has reached the highest in 2005. This depicts that the industrial sector has attained a stronger position in Indian economic development. The manufacturing sector has shown an increasing trend over the years except in 2002. It also indicates that the contribution of this sector is higher compared to industrial sector. The construction sector has inconsistent contribution the decline and upsurge is intermittently noticed. The role of services sector is ditto of the construction, but transport, trade and hotel sectors have a steady rise over the years except in 2002. The overall contribution of these sectors (excludes agriculture, mining, electricity, gas and water) is positive in all the years isolating the year 2002. This shows the humungous and robust growth of this sectors and its role in economic and social development.

INDIA’S FOREIGN TRADE – AN OVERVIEW

Globally, the presence of India is also promising. Foreign trade constitutes 20% of India’s GDP and 30% to 35% of the Indian equity is held by foreign investors and this figure is ever rising. India global presence (as a share of major commodities in total exports) according to CMIE source states that agricultural and allied products has shown an decrease of 12.3% in 2003 compared to 16.9% in 1993, this is nearly a 30% fall in a span of 10 years.

jems and jewellery and engineering goods have recorded an upsurge in growth of exports from 16.6% to 16.9% and 13.3% to 16% respectively during the same period. While in textile sector (yarn, fabrics and readymade garments) the export volume has decreased marginally.

In the history of export import trade of India from 1950-51 to 2004-05 the imports experienced a higher percentage (about and above 50%) during the years 1951-52(45%), 1973-74(56%), 1974-75(51%) and 1980-81(40%). But in exports, the growth was above 25% during the years 1950-51(25%), 1973-74(26%) and 1974-75(29%). This eventually means that the exports have shown a higher percentage during or in the following period of higher imports.

The growth rate of imports where below zero percentage during the years 1950-51(-1%), 1952-53(-21%), 1953-54(-13%), 1958-59(-12%), 1961-62(-3%), 1967-68, 1968-69 and 1969-70(-9%, -5% and –17%) and thereafter the imports was marginally below 0% during the years 1972-73,1976-77, 1981-82, 1982-83, 1984-85 and 1986-87. During 1991-92, the imports were –19% and the imports have never fallen below zero percent till date.  In studying the exports below zero percent, it was during 1951-52(-19%), 1953-54(-8%), 1957-58(-7%), 1966-67(-4%), 1967-68(-3%), 1985-86(-10%), 1998-99(-5%) and 2001-02(-28%).

It is evident that there is no significant correlation between negative imports and negative exports. Imports of sensitive items make up about 5.5% of the total import bill. While crude oil imports still occupies a predominant chunk of India’s import basket.

INDIA AND ASEAN COUNTRIES – A COMPARISION

According to CMIE data, gems and jewelry, yarn, fabrics and garments and engineering goods have record level of improvement and performance from the financial year 1993-94 to 2003-04. Among the ASEAN (Association of South East Nations) countries (China, Hong Kong, Indonesia, South Korea, Malaysia, Singapore and Thailand) India is consecutively in the second position next to China from the year 2001 onwards till date except in 2003 where it has backed third position next to South Korea. Similarly comparing these countries in average export growth rates from 1993-2003 India occupies second rank following China.  Among the Asian countries, India’s average growth of exports is second to china and other Asian countries like Singapore, Malaysia, Thailand, South Korea and Hong Kong. India has an advantage over these above countries relating to positive growth rates in exports. The money spinners for India are the following sectors, cotton yarn, fabrics, products, drugs (Pharma), fine chemicals, electronic goods, gems and jewellery machinery and instruments, metals, marine products and off late information technology and bio-technology. India’s top export destination economies are USA, Asia and Western Europe.  In classifying India’s share of world exports by technological category, low technologies have higher scale followed by primary articles and then by resource-based items. The medium and high technology categories share is very meager. This is poor sign for India to achieve higher volumes of exports in future and a weakness to be immediately addressed. The projects exports from India in consultancy, civil construction and turnkey projects has been increasing on an average of more than 100 percent from the year 1999 till 2004. This competitive advantage over the other countries in Asia especially in project exports speaks about the India’s technological capabilities in the world scenario and it is highly promising and visibly green for bagging high value contracts in years to come.  Domestic industry faces some handicaps as compared to ASEAN (Association of South East Nations) countries. ASEAN is one of the fastest growing markets for Indian exports. India’s share in Asian’s global imports is less than even 1% of their total imports. India’s exports till February 2006 have recorded a moderate growth of 12.31% over February 2004. During the first eleven months of this fiscal year the overall merchandise trade growth is 24.34%. Imports were valued at $126.33 billion, representing 33% increase during April-February.

THE FUTURE OF INDIA’S FOREIGN TRADE

The trade deficit of India in post liberlisation era (after 1990) was very high in the year 1999-2000(a double digit mark of $13Bn). India’s exports and imports have picked up in 2002-03 onwards. This sign of improvement and growth in foreign trade have to be geared up rapidly to achieve splendid economic progress in economy’s capital formation and higher standard of living as well as to compete with developing countries.

Indian exports have been targeted at $ 100 billion. New markets in African countries and new developing countries should be explored to enlarge the export basket of India. The share of India in world exports are still hovering around 1%, which is much below compared to our existing resources like minerals, materials, manpower etc. The information technology sector have rightly stepped into the software export services, project exports and also renders Business process outsourcing services, which is at commendable heights. The same precedent should be made applicable to other sectors making it competitive and self-sustenance. This may need new plans, strategies and methods with innovativeness, involvement and with high degree of commitment. Emerging entrepreneurial skills of Indian people is appreciable at the same instant they should be bold and accentuate to meet the challenges domestically and internationally. Indian Government is supporting the medium and small enterprises long since the industrial policy was formulated during the second five-year plan. Small and medium enterprises have achieved substantial growth and have contributed a large chunk of revenue for the government by way of taxes and levies. It contributes nearly 40% of industrial growth of our country. This is never seen any were in the world among the developing countries. Small and medium enterprises are likely to meet severe pressures and unthinkable competition if the WTO principles, conditions and norms are adopted. It is the apt time to formalize concrete strategies and to strength the existing enterprises through mergers, amalgamations and takeovers, thus facilitating to compete in capital, technology, human potential etc. with that of the rival multinational enterprises. This is the way out for confronting issues for Indian enterprises in the dawn era of globalisation.

THE NEED FOR BALANCED REGIONAL GROWTH

In a country like India with varied cultural and social diversity some of the states have higher concentration of industrial activity and while others are at medium and bottom league. The States in top league are, Maharastra, Gujarat, Tamil Nadu, Andhra Pradesh, and Karnataka. The moderate industrial activity was recorded in the following States, Punjab, Harayana, Madhya Pradesh, West Bengal, Kerala and Rajastan. The runner-up states of industrial activity are Assam, Bihar, Himachal Pradesh, Orissa, Jammu Kashmir and Northern Eastern States.  The parameters of the status of industrialization are based on the number of factories and the net value added. According to a survey by a leading newspaper reveals that ten states have almost 80% of the country’s industrial units. The above disparity in lack of even industrial concentration and backwardness of the states should be eliminated to make the industrial sector stronger to enter into foreign trade and also to step into a foreign land as a separate entity without a tie-up or collaboration with MNCs.

TODDLES TOWARDS GLOBALISATION 

Indian software companies such as Satyam are beginning to make in roads into corporate Australia, having 400 employees. Infosys has set-up a global development center in Melbourne that is integrated with other development centers round the World. TCS acquired the Sydney- based Financial Network Services (FNS) in October,2005. Indian companies are finding their indoctrination in the new territory. Birla’s have invested in a copper mine in western Australia; the Oswal group in fertilizer plant, Saurastra chemicals is looking at coal, as is Sterlite. Indian hotel has bought a boutique hotel near Sydney for A$26 million. The biggest ever foreign corporate takeover by Indian company was Dr.Reddy’s Laboratories takeover of German drugs manufacturer Betapharm for $570 million and very recent acquisition of Hansen of Belgium, the world’s second wind turbine gear boxes manufacturer by Suzlon Energy limited for $565 million.

INTELLIGENCE VALUE CHAIN- A TOOL FOR GLOBAL SUCCESS

Organizations must infuse strategic and tactical decisions with the knowledge to maximize revenue, minimize risk and achieve competitive advantage. The vital knowledge of raw data should be transformed into actionable intelligence. Business intelligence is a prominent factor in the intelligence value chain (IVP). The first step in IVP is development of an action plan. The assessment of this helps in securing derivable returns on investments through well-defined objectives and leverages in information technology. The second step is Extraction, Transformation and Loading (ETL). It is a process of extraction and transformation of quality data from the specific business objectives. The result of ETL is that the data is cleansed, integrated, consolidated and transformed into a useful and reliable source. The third step is Intelligent Storage (IS). The intelligence is created from massive quantities of data in flexible storage options, which is concurrent to the existing database. The IS accommodates technology platform for new databases and as well as for evolving changing business requirements. The fourth step is dissemination of all the information within and outside the organization through delegating decision-making powers. The fifth step is Analytical Intelligence (AI). It involves use of predictive modeling, forecasting and descriptive modeling techniques. These techniques proactively empower to manage customer retention, to identify opportunities, to frame optimal pricing policies, minimizing purchasing cost, demand forecasting, fraud detection, failure analysis, risk management and so on.   

CONCLUSION

In a pursuit of buoyancy in industrial growth and foreign trade, the Indian enterprises have to harness with fray to remove the impasse in global achievement. Indian companies and businessmen should sprucely cultivate the benign situation of qualitative global markets. A holistic objectives and goals are imperative for enhancing business acumen. An adroit transgression to globalize Indian firms should be carefully examined. Some of the Indian firms both from public sector and private sector have lured swiftly making them globally exposed. Some have grabbed a formidable position in fortune list. More and more corporate bodies should be recognized with strong fundamentals. 

About the Author

 Name:  S.Senthil Srinivasan, MCS, MPHIL, PGDPM,  paper presentation and participation at national and international level.   Acted as resource person, examiner and observer for universities.  published articles in national and international journals and periodicals.  authored lessons for distance education programme materials and  books.    mobile: 9942053673    email: sensri68@rediff.com and senthe68@yahoo.com