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India - Politics India - Politics and Business and Business
Rafiq DossaniRafiq Dossani
[email protected]@stanford.edu
India’s puzzles till 1989India’s puzzles till 1989
Governance: democracy’s near failure, Governance: democracy’s near failure, civil society’s failurecivil society’s failure
Business: high-growth big businesses, Business: high-growth big businesses, low-growth small businesseslow-growth small businesses
Poverty: 700 million left behindPoverty: 700 million left behind
Workforce: talent produced, unusedWorkforce: talent produced, unused
Governance: Governance: fundamental changefundamental change
In 1989, single party rule (by Congress) In 1989, single party rule (by Congress) yielded to national-regional coalitions.yielded to national-regional coalitions.
The BJP and Congress now each get The BJP and Congress now each get 25%, the rest with 20 regional parties. 25%, the rest with 20 regional parties.
Regional parties interested in Regional parties interested in regionalregional development.development.
Up to 1989, the ruling class Up to 1989, the ruling class was a person – the Prime was a person – the Prime
MinisterMinister
MP: dormant species, reports to SCM
Cabinet ministers: fixers, coterie member.
Bureaucrat: intellectual arm of coterie
State Chief Minister: manages MPsReports to PM
Why governance was Why governance was ineffective and unstableineffective and unstable
Ineffective:Ineffective: Frequent changes in pols and bureaucrats in order to Frequent changes in pols and bureaucrats in order to
control their power also destroyed their incentive to control their power also destroyed their incentive to performperform
Public sector (SOE) dominance led to Public sector (SOE) dominance led to underperformanceunderperformance Big private business occupied niches unoccupied by SOEs, Big private business occupied niches unoccupied by SOEs,
eg., automotive; combined with SOEs to thwart SME growth.eg., automotive; combined with SOEs to thwart SME growth.
Unstable:Unstable: Rural and urban elite were left out of politics. Rural and urban elite were left out of politics. Rural and urban middle-class turned anti-incumbent due to Rural and urban middle-class turned anti-incumbent due to
rising poverty rising poverty
Post-1989 CoalitionPost-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 Why governance is effective and stableand stable
Effective:Effective: State chief ministers are centers of regional powerState chief ministers are centers of regional power Bureaucrats are independent of ministersBureaucrats are independent of ministers Small and regional businesses have gained access Small and regional businesses have gained access
to decision makers via state chief ministersto decision makers via state chief ministers Stable:Stable:
Regions have influenceRegions have influence Anti-incumbency is focused on the national party not Anti-incumbency is focused on the national party not
regional partiesregional parties Trade unions’ power reduced due to rising share of Trade unions’ power reduced due to rising share of
regional and small businesses regional and small businesses Big business is involved in big opportunitiesBig business is involved in big opportunities
Impact of regionalization of Impact of regionalization of politicspolitics
New Delhi’s bureaucracy revitalizedNew Delhi’s bureaucracy revitalized Bureaucrat’s future is no longer dependent on Bureaucrat’s future is no longer dependent on
the taskmaster, but on the taskthe taskmaster, but on the task Improvement in regulation and transparencyImprovement in regulation and transparency
Regional enterprise takes-off Regional enterprise takes-off Business policies favor small and regional Business policies favor small and regional
businessesbusinesses Regional social welfare spending shifts to Regional social welfare spending shifts to
poor citizenspoor citizens Social spending favors primary and secondary Social spending favors primary and secondary
education, and rural developmenteducation, and rural development
Doing Business in India
Impact of good regulation: Impact of good regulation: 3 new cellphone users/s3 new cellphone users/s
Yes, that is Yes, that is per secondper second China: 2.3 per secondChina: 2.3 per second
Yet, Indian per capita income Yet, Indian per capita income is one-third of Chinais one-third of China There is more than one There is more than one
cellphone per Mumbai cellphone per Mumbai resident resident
Every family in the slum Every family in the slum shown likely owns a cellphoneshown likely owns a cellphone
The catch-up factors vs China:The catch-up factors vs China: Bureaucrat-driven regulationBureaucrat-driven regulation Private service provisionPrivate service provision
Shared infrastructureShared infrastructure 6-8 providers per region6-8 providers per region Foreign service providers can Foreign service providers can
own up to 74%own up to 74%
The media – lively, The media – lively, newsworthy, but reflects newsworthy, but reflects
weak civil societyweak civil society
2008 Ambassador
1962 Fiat 1100D
1943 Willys MB
2008 Mahindra Jeep
1956 Morris Oxford
2004 Premier Padmini2008 Tata Nano
Business wasn’t always easy
Big business is thrivingBig business is thriving
TCSTCS InfosyInfosyss
WiprWiproo
CognizanCognizantt
SatyaSatyamm
AccentureAccenture**
Q.Rev Q.Rev $m $m (4Q2007)(4Q2007)
15001500 11001100 920920 600600 560560 20002000
YoyYoy 3737 3232 2626 4848 5454 4848
QoqQoq 66 66 1010 77 1111 NANA
EmployeEmployeee
108000108000 8800088000 8000080000 5500055000 4900049000 7100071000
Rev/Emp Rev/Emp p.a.p.a.
5600056000 4900049000 4600046000 4400044000 4600046000 112000112000
OPMOPM 2626 2929 2121 1818 1919 1313
The IT industry will add 360,000 jobs in 2008, or 3 jobs for every minute of a working day.
So is small businessSo is small business
Servers of a NY bank maintained Servers of a NY bank maintained from Indore, Indiafrom Indore, India
The source of daytime powerThe source of daytime power
India’s Skills: English
Dawa Doma SheupaDebbie White
50 million speak good English
Another 250 million speak some EnglishLiteracy 60%
Even as 1 new college Even as 1 new college opens daily, 700 m are opens daily, 700 m are
left behindleft 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 The slums of Dharavi in Mumbai have an average of one toilet per have an average of one toilet per
1440 persons.1440 persons.
Long-term business viewLong-term business view
Positives: Positives: Balanced growth - across regions, sectors and Balanced growth - across regions, sectors and
sizessizes Solid relations and trade with US and China Solid relations and trade with US and China Mature capital marketsMature capital markets
Negatives:Negatives: Rural India still a problemRural India still a problem Industry faces infrastructure and people Industry faces infrastructure and people
challengeschallenges Regional challenges (5% of international trade Regional challenges (5% of international trade
is within the region vs 26% for ASEAN).is within the region vs 26% for ASEAN).
Entry StrategiesEntry Strategies
Domestic markets v exportsDomestic markets v exports Small business v big businessSmall business v big business Media managementMedia management J.V. J.V. Government (state v national v none Government (state v national v none
at all)at all) Professional servicesProfessional services
India V ChinaIndia V China Differences: Differences:
Democracy Democracy Literacy and health careLiteracy and health care InfrastructureInfrastructure RegulationRegulation Power of big businessPower of big business
SimilaritiesSimilarities Devolution of power Devolution of power
DestiniesDestinies UrbanizationUrbanization Services v manufacturingServices v manufacturing
Questions?Questions?