Business in India & CapINDIAlism

GROUP 5

AAKASHDEEP - PGP/14/126, AMEYA - PGP/14/004, ARIFUDDIN - PGP/14/014, EMILIA - IE/14/05, GERHARD - IE/14/06, GOUTHAM - PGP KUMARESAN - PGP/14/150, MORTEN - IE/14/10, OBULESU - PGP/14/156, TOBIAS - IE/14/11, UMESH - PGP/14/310

History
1950-1991 Inward Looking Era (GDP growth 3 %)
Indias own attempt trying to grow without foreign investment

1991 - 2003

Mild Liberalization Era (GDP growth 5 %)

Relaxation of industrial regulations & quantitative restrictions; reduction of tariffs; enabled import of capital goods & increase of labour productivity

2003 - Today

Extensive Liberalization Era (GDP growth over 6 %)

India as IT service hub & backoffice of the world

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Current Headers & Forecast

The Economic Times Handelsblatt

New York Times

Current Headers
The Economist

The Economist

"Optimists believe that India's entrepreneurial spirit will make it a superpower over the next two decades"

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India & Capitalism

Definition Capitalism
Capitalism describes an economic system where the means of production are privately owned, operated for profit from investment, and in competitive markets.
Dictionary of Economics

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Structure of Indian Economy

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Indian Family Groups

Tata Group Reliance Industries
Sales: $58 bn. Generation: 2nd Industries:
Consumer products Services ICT Oil & Gas Textile Telecommunications Retail products Insurance Petroleum

Aditya Birla

Sales: $ 84 bn. Generation: 5th Industries:

Chemicals Steel Energy

Sales: $35 bn. Generation: 4th Industries:

Metals Cement Telco Wind power Agriculture Chemicals Mining Textiles Retail Insulators
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Indian Family Businesses - Characteristics

Complexity Intricate chains of holding companies & subsidiaries Reasons Outside capital can be brought in at multiple levels without weakening family control Response to family spats Like to do business with friends

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Indian Family Businesses - Characteristics

Conglomerate 1 or 2 core activities Long & growing tail of other activities

Reasons
History: British before 1947 & socialist era with restrictions Culture: Marwari & Bania communities famous for trading

Tax rather put money into new business than a bank account

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Role of Government & State in Indian economy

41 % of BSE 100 value is state-controlled; In finance, energy & natural resources state controls 2/3 of production Public-private partnerships are common on big infrastructure projects, but private part suffers from low margins Reserve Bank of India frowns upon bank loans for takeovers State is partner and enemy, unlike e.g. in Korea

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Capitalism vs. CapINDIAlism

India is neither following a Chinese way nor European way Going their own way successfully until now - CapINDIAlism Family conglomerates have been merely a phase of capitalism in other countries like e.g. in Europe, but have declined of their own accord

Should it also happen in India?

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CapINDIAlism
Family conglomerates are powerful and international recognized companies State & conglomerates are spotting new opportunities & compensate eachother India is still growing with this system - Stable economic conditions State-owned companies are not efficient & profitable by suffering from inertia Entreprenuerial spirit declined over last decade (only 2% of IIM-A started own businesses) Conglomerates are only middle weights in global context (e.g. compared to China) Poor educational system & corruption

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Recommendations
Secure foreign investment without selling out Indian companies
Retain innovators & entrepreneurs within India, e.g. Mittal Steel Profitability within all subdivisions of family conglomerates Build companies that are global heavyweights Spread capitalism in geographical terms Ensure inbound/outbound deals add value domestically rather than destroy it Simplify access to funding (domestic & foreign) Fight corruption & improve educational system (from primary school on) Invest in infrastructure
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