Dossani

India - Politics and Business Rafiq Dossani [email_address]

India’s puzzles till 1989
Governance: democracy’s near failure, civil society’s failure
Business: high-growth big businesses, low-growth small businesses
Poverty: 700 million left behind
Workforce: talent produced, unused

Governance: fundamental change
In 1989, single party rule (by Congress) yielded to national-regional coalitions.
The BJP and Congress now each get 25%, the rest with 20 regional parties.
Regional parties interested in regional development.

Up to 1989, the ruling class was a person – the Prime Minister MP: dormant species, reports to SCM Cabinet ministers: fixers, coterie member. Bureaucrat: intellectual arm of coterie State Chief Minister: manages MPs Reports to PM

Why governance was ineffective and unstable
Ineffective:
Frequent changes in pols and bureaucrats in order to control their power also destroyed their incentive to perform
Public sector (SOE) dominance led to underperformance
Big private business occupied niches unoccupied by SOEs, eg., automotive; combined with SOEs to thwart SME growth.
Unstable:
Rural and urban elite were left out of politics.
Rural and urban middle-class turned anti-incumbent due to rising poverty

Post-1989 Coalition MP: still dormant species State Chief Minister: regional party leader National party executive committee: fixers, coterie members Bureaucracy: depoliticized

Why governance is effective and stable
Effective:
State chief ministers are centers of regional power
Bureaucrats are independent of ministers
Small and regional businesses have gained access to decision makers via state chief ministers
Stable:
Regions have influence
Anti-incumbency is focused on the national party not regional parties
Trade unions’ power reduced due to rising share of regional and small businesses
Big business is involved in big opportunities

Impact of regionalization of politics
New Delhi’s bureaucracy revitalized
Bureaucrat’s future is no longer dependent on the taskmaster, but on the task
Improvement in regulation and transparency
Regional enterprise takes-off
Business policies favor small and regional businesses
Regional social welfare spending shifts to poor citizens
Social spending favors primary and secondary education, and rural development

Doing Business in India

Impact of good regulation: 3 new cellphone users/s
Yes, that is per second
China: 2.3 per second
Yet, Indian per capita income is one-third of China
There is more than one cellphone per Mumbai resident
Every family in the slum shown likely owns a cellphone
The catch-up factors vs China:
Bureaucrat-driven regulation
Private service provision
Shared infrastructure
6-8 providers per region
Foreign service providers can own up to 74%

The media – lively, newsworthy, but reflects weak civil society

2008 Ambassador 1962 Fiat 1100D 1943 Willys MB 2008 Mahindra Jeep 1956 Morris Oxford 2004 Premier Padmini 2008 Tata Nano Business wasn’t always easy

Big business is thriving The IT industry will add 360,000 jobs in 2008, or 3 jobs for every minute of a working day. 13 19 18 21 29 26 OPM 112000 46000 44000 46000 49000 56000 Rev/Emp p.a. 71000 49000 55000 80000 88000 108000 Employee NA 11 7 10 6 6 Qoq 48 54 48 26 32 37 Yoy 2000 560 600 920 1100 1500 Q.Rev $m (4Q2007) Accenture* Satyam Cognizant Wipro Infosys TCS

So is small business

Servers of a NY bank maintained from Indore, India

The source of daytime power

India’s Skills: English Dawa Doma Sheupa Debbie White 50 million speak good English

Another 250 million speak some English Literacy 60%

Even as 1 new college opens daily, 700 m are left behind

A.K.Ramanujan’s definition of Indian Village Time: indefinite, continuous, anywhere between a few decades ago and the medieval centuries. 30% of rural population consumes less than1600 calories/day % or underweight rural children below 5 years: 50%(40%) % of rural adult females with severe anemia: 80% (50%)

Space at $700/square foot $6,000 for 20’x15’ City of hope

The slums of Dharavi in Mumbai have an average of one toilet per 1440 persons.

Long-term business view
Positives:
Balanced growth - across regions, sectors and sizes
Solid relations and trade with US and China
Mature capital markets
Negatives:
Rural India still a problem
Industry faces infrastructure and people challenges
Regional challenges (5% of international trade is within the region vs 26% for ASEAN).

Entry Strategies
Domestic markets v exports
Small business v big business
Media management
J.V.
Government (state v national v none at all)
Professional services

India V China
Differences:
Democracy
Literacy and health care
Infrastructure
Regulation
Power of big business
Similarities
Devolution of power
Destinies
Urbanization
Services v manufacturing

Questions?

Dossani

by South Asian Studies Association on Oct 21, 2008

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Dossani — Presentation Transcript