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MYRA Distinguished Lecture(5) by Dr.Sanjaya Baru | Nov. 18, 2016

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 The Trustees, the Governing Board, the Faculty and the Students of the MYRA School of Business cordially invite you to the

MYRA DISTINGUISHED LECTURE (5)

"Economic and Social Change and Growth of Indian Business" 

by

Dr. Sanjaya Baru

Distinguished Fellow

United Service Institute of India, New Delhi

Consulting Fellow for India

International Institute of Strategic Studies, London

Honorary Senior Fellow, Centre for Policy Research, New Delhi

 

Dr. Sanjaya Baru is an Indian political commentator and policy analyst, currently serving as Director for Geo-Economics and Strategy at the International Institute of Strategic Studies.

Dr. Baru was Media Advisor to Prime Minister of India, Dr Manmohan Singh during 2004-2008.

Dr. Baru has held academic positions at many prestigious institutions such as Lee Kuan Yew School of Public Policy and Institute of South Asian Studies, Singapore; Indian Council for Research in International Economic Relations; Jawaharlal Nehru University; University of Hyderabad; University of East Anglia, UK; and the East-West Centre, Hawaii. He is a Guest Faculty at National Defence College, India & Indian School of Business, Hyderabad. Member, International Academic Advisory Board, Kazakh New Economic University, Almaty.

Dr. Baru’s journalistic career spans more than 3 decades across some of the top notch publications — as Chief Editor Business Standard, India, The Financial Express, Editorial Page Editor, The Times of India, and Associate Editor, The Economic Times.

He holds M.Phil and Ph.D. (Centre for Development Studies) and M.A. (Centre for Economic Studies & Planning) from the Jawaharlal Nehru University.

 

Date & Time: November 18, 2016 | 04:30 pm

Venue: Athena Auditorium, MYRA

 You are cordially invited

 

Dr. Shalini Urs

Chairperson, MYRA School of Business

Dr. Sudhindra Seshadri

Senior Associate Dean, MYRA School of Business

 

 

Report

 MYRA | Distinguished Lecture (5) | November 18, 2016 | 4:30 PM

 Dr. Sanjaya Baru

  “Economic and Social Change and Growth of Indian Business”

 Report

The students of the MYRA School of Business experienced a refreshing change from, the classroom lectures and insights on the bread and butter issues of Marketing, Innovation, Technology, Financial and Analytical tools with Dr. Sanjaya Baru, Distinguished Fellow, United Service Institute of India, New Delhi, Consulting Fellow for India, International Institute of Strategic Studies, London, Honorary Senior Fellow, Centre for Policy Research, New Delhi giving them an exciting overview of the business world around them and on how the businesses in India has evolved over the centuries, during the 5th Distinguished Lecture on Economic & Social Change & Growth of Indian Business at MYRA School of Business, Mysore.

Dr. Baru shared his perspectives on the growth of Indian businesses across the centuries from three areas – historical, sociological and political – as he sees that India has presented itself as a fascinating nation of fundamental changes in all these spheres.

Looking back at the history of Indian business, he shared that despite what it seems today, India has been a great trading nation for centuries; India has been at the crossroads of Asia both in land-based and in maritime trades; India along with China had contributed to half the world economy by the 17th century; however, India lost its position due to the European expansion and their mastery of the seas, maritime, manufacturing and military technology; India had tremendous historical experience, memory and institutional legacy in the management of money and logistics; India’s strong roots and strengths in financial management dates back to the Katris of Multang who were the financiers of trade from the subcontinent all through Russia and who were well-equipped with high levels of trust, capabilities and information to manage the cycle of money through the trade.  Thus India has a trading history and a trading culture, a money-management history and a money-management culture,

However, history also shows that India was not a great manufacturing nation; with handicrafts, textiles and some manufacturing capacity there was virtually little to talk about by the beginning of this century, thanks to the European colonialism coming in, said Dr. Baru.   

The other key take away that we can understand from the history of Indian business, said Dr. Baru, was that India had a class of people who had the competence to move very quickly into new opportunities.  This saw the first wave of Indian businesses with the first Indian businessmen being the merchants and money lenders – the Marwaris and the Chettiars – who deftly used the opportunity provided by what the British called the policy of discriminating protection, to enter into manufacturing activity.  The interwar period, between the first and second world wars, saw  the British stepping in to encourage manufacturing – jute, textiles, sugar, and all the big names – Birlas,,Kanoria, Singhanias, Dalmia, Narang, the Parsi community in the west, Chettiars in the south, were born.

Dr. Baru advised the students of business to appreciate that India’s core competencies have been in the management of money and people and that our strengths lie in our knowledge and ability in making money.  He recalled his conversation on Core Competencies with Prof. Prahalad and Samir Jain, the former Chairman of the Times group, a conversation which brought forth the legacy of the experience of Indian business development - that we had a class of people who had acquired over generations of experience the competencies in the management of money and people.  This class deployed in different directions and in manufacturing different products, and served different markets

From a sociologist’s point of view, Dr. Baru  analyzed the changing social and regional composition of business groups; the new management practices set in by organizations like Infosys to manage money, markets, technologies and services – that gave them an edge over the old established business groups and to move ahead to the top in today’s business charts. 

Dr. Baru emphasized that India is a diverse subcontinent, deliberated that from the point of business development, the most important diversity is its regional diversity.  Almost all the pioneering business groups come from western and southern India.  While the Marwaris moved east after the British established Calcutta as the business capital, he pointed out the interesting fact that their origins were also either western or southern India.  He explained that this is not surprising looking back at the history of our trading over centuries, we realize that Gujarat was one of the earliest globalized economies of the subcontinent, the earliest businessmen to leave India to take their businesses from the Gujarat coast to finance trade along the Arabian Peninsula between India and the Arabian markets; between India and the African markets and between India and the South East Asian markets; the Tamil groups, – the Chettiars – took businesses all the way to Indonesia, Malaysia and Vietnam.   All these facts stand testimony to the west and the south being the main business sources of India, he elaborated.  He also pointed out another interesting fact that even among the Muslim community, the business-oriented were the Khojas and the Boras of Gujarat in spite of the fact that their numbers were small in this state. 

Talking of concentration of the Indian businesses in certain states, he further explained that the factors that accentuated the regional divide were the British agrarian and the British trade policies.  While the agrarian policy ensured the destruction of the peasants across Northern India from Delhi to Kolkata, it helped flourish the peninsula farmers in the Godavari and Kaveri delta regions.  Another agrarian factor - the green revolution, did not impact states like Bengal, Bihar, Orissa, Eastern UP, while it prospered states like Punjab, Haryana, Andhra, Tamil Nadu, Karnataka, and Maharashtra – reinforcing this regional pattern. 

The trade policy adopted by British in India was more to suck goods out of India and sell to their home country or to the rest of the world, therefore the port cities – Bombay, Madras and Calcutta became the centers of business activities and Bombay became the financial capital of India.  Thus a strong regional differentiation got set in over a 100 years, he said. Dr. Baru pointed out that despite all efforts at planned development over the last 60 years, India has not been able to make a big dent into this regional pattern and divide, Peninsular India – western and southern India – continue to be ahead of the Gangetic plain to leave very little business development between Delhi and Calcutta regions. 

So from a holistic point of view, we see that there is a fascinating regional pattern of business development which went on reinforcing itself over centuries and has contributed to this unfortunate regional divide – unfortunate, Dr. Baru explained, is because of the fact that when we compare and contrast the business developments in China versus India, China’s business development synchronizes with the density of population across the coastal region, while India’s business development was more in low density states.  The largely populated states between Delhi and Kolkata which contribute to about 40% of the country’s total population are not business-oriented states, he opined. 

Moving on to the political factors that have played a role in the development of Indian businesses, Dr. Baru deliberated on the role of government that has made a strong positive impact on the business development. This is well reflected in the way in which the public sectors created a new class of businessmen because of the way in which it encouraged enterprises.  He supported this school of thought with some well-known examples – Dr. Anji Reddy who started as a scientist in a public sector company, and then went on to set up his own private sector companies – Dr. Reddy’s Laboratories; Narayan Murthy and others who were initially working in public sectors got opportunities to move into private business – these and others like these teach us not to discount the positive role of the state, he emphasized.  The public policy and state intervention thus opened opportunities for new classes in the 60’s and 70’s unlike the traditional business castes and classes.  

The role of the government is also well reflected during 1991 – the year of a revolutionary change in the development of business in India.  The abolition of the Licence Permit Raj  – an elaborate system of licenses, regulations and accompanying red tape that were required to set up and run businesses in India between 1947 and 1990; which only gave more and more power to the existing powerful and influential business houses; which was very restrictive and a big roadblock to new entrants – this phase post-1991, was indeed a significant turning point in the development of Indian business, he said.  He quoted the example of K V K Raju who left the American Company, Union Carbide to get a license to set up the Nagarjuna Fertilizers in the 1980’s; who tried in vain to knock any door in Delhi as he was a nobody – until he could manipulate the system to set up a technology collaboration with an Italian company, whose agent was in Delhi. This was how K V K Raju was able to beat K K Birla who was then the kingpin of fertilizer industries, he shared.

Both the setting up of public sector companies and the abolition of the License Raj saw the second wave of businessmen entering the business world.  A complete revolution set in with new entrants in all fields setting a dramatic change in the social composition of the businesses across the country; this is evident from the data of businessmen across the country over the decades – the post-independence era (1947-1990) and the post 1991-era, he validated. 

One of the criticisms of the growth of Indian business development is that the license permit raj became a source of enormous corruption.  However, the last decade saw a reversal of processes that were started in 1991.  Many infrastructure areas like telecom, port construction, petroleum, road constructions etc. all became sectors where we crawled back into the license permit raj with influential and powerful business people being able to get licenses.  He also shared his views on the benefits of the 2 G scam saying that it was a shake-up and a wake-up call that created awareness and set up a national campaign against corruption; and generated the recent demonetization issues.  A new wave of middle class consciousness has now set in which is preventing the politicians from taking advantage of their power in favoring one business group over the other, he said. 

We are now at the cusp of the third wave of generation of businessmen that is more globalized in its thinking, much more individualistic and business oriented, the problem is that we have to watch and see if the global market and the global economy will be as supportive as it was in the past and if we are venturing in as the rest of the world is closing, however it is important to recognize that this is yet another significant turning point in the emergence of new businesses in India. 

Finally sharing a few thoughts on the politics of Indian business, he said that there have been interesting relationships between political parties and business groups during the license permit quota raj of the pre-1991 era; the highly influential businessmen like Birlas, Tatas, Goenkas, Singhanias etc have funded political parties and have supported politicians – as a result, the Congress benefited enormously as they had a historical link with these established business groups.  But because the license permit raj had so much concentrated power – both business and political, the decentralization of economic growth and the rise of new businessmen who preferred their own political parties to back them up saw new political parties emerging across the country.

The current situation shows that in spite of a single party gaining power in 2014, and it indicating the end of the era of coalitions, regional parties across the country are doing well since the last 2 years and  it will be interesting to see what kind of relationships emerge between political parties and businessmen as we go ahead. 

Dr. Sanjaya Baru opened the forum for an interaction with the audience which saw an array of questions facing the country today in view of the recent demonetization issues and wanted to hear more on his views on the future of the Indian economy and Indian business.

Photos

 

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