Corporate India's scorecard from last three decades

This post shines light on corporate India's disturbing failure to deliver world-class products and services even after three decades of liberalisation and global market integration. 

In a recent article FT's Gillian Tett argued that far from reversing, globalisation may only have taken a different course, this time without America at the centre. In the article she points to this,

But Squid Game is a made-in-Korea product, backed by Netflix, which has become the most viewed show in 90 countries around the world this year. Indeed, polls suggest that one in four Americans has watched it, while Spanish, Brazilian and French offerings produced for a global audience now litter the Netflix site. The globalisation of media, in other words, is no longer about Hollywood; digitisation has made it a multipolar affair. 

The absence of any Indian soaps and movies in the landscape of chart toppers in Netflix is especially interesting given the enormous volume of movies and serials that are produced in India. This reminds me one of the most intriguing economic trend - the absence of Indian companies and brands in the global economic landscape. What explains the remarkable lack of any meaningful Indian global brands or globally leading Indian companies?  

I have blogged here about narratives which endure despite limited evidence or even evidence to the contrary. One of these is the narrative that pins the blame for India's economic failings on the government, by glossing over the equally disappointing performance of its private sector. This post will seek to surface the latter by sharing an illustrative factual scorecard of India's private sector of the last three decades.

Here goes an illustrative list:

1. All major private banks are foreign majority owned; 
2. apart from the founders capital, almost all the remaining capital in the major startups are foreign owned (if not addressed, it's only matter of time before they all become majority foreign owned too, if not already - flipping); 
3. the sectors which were deregulated and private enterprise allowed to play out are in a mess - telecoms, airlines etc; 
4. not one noteworthy enterprise or consumer focused software solution/product by the Big Four Indian tech companies in 40 years of existence (TCS, Infosys, Wipro, CTS) and hardly any presence in any of the cutting-edge areas like cloud computing, AI, IoT, Blockchains etc; 
5. not one world-class e-governance solution nor globally competitive government software prime contracting proficiency despite numerous opportunities that the big three (TCS, Infy, Wipro) have had from central and state government contracts for two decades; 
6. not one original and cutting-edge technology provider among the nearly 150 unicorns (mostly copy cat providers of solutions/ideas which are already being used in developed markets), no globally used product/solution (either B2B or B2C or C2C) by any of them; 
7. apart from a couple like Voltas, Godrej etc, the overwhelming majority of consumer durable brands are foreign; 
8. not one Indian mobile phone brand in the largest and fastest growing consumer durable segment (with a global market); 
9. apart from ITC, Marico, Dabur etc, the vast majority of FMCG brands in globally relevant market segments are foreign; 
10. the entire four-wheeler and above markets has negligible Indian brand presence (it's a moot point  whether Maruti is Indian or Japanese, given that Suzuki still provides its engines); 
11. India is the second or third largest solar generation market, but with an almost completely import dependent value chain and no major local polysilicon or wafer or cell manufacturer of note;
12. no world-class large domestic contract manufacturer in textiles, footwear etc; 
13. despite nearly 50 years of experience, no Pharma company in the higher end areas of non-generic drugs or formulations, biosimilars etc;
14. no Indian global brand of note in any major global mass market segment...

One could go on. Alright, we can quibble on some of the details. But on the broader thrust of the point being made?

This is no one-off observation. I have blogged here, here, here, and here highlighting corporate India's persistent failures to produce world class entprereneurship, create global brands, and innovate and expand technology frontiers. I have blogged here, here, here, here, and here about the failure of the country's startup eco-system to generate innovators and innovations which have had a significant impact on the country's development or push the frontiers of innovation. I have also blogged here and here about India's deficit of high quality entrepreneurship which leads to scale, this and this about its persistent corporate governance problems, this about how while market participants game the regulations bureaucracy responds with more regulations. I also blogged here that even Indian capitalists appear to avoid making risk capital investments in India.

Reinforcing the point, a recent article in the Business Standard wrote on the dismal fortunes of Indian mobile phone manufacturers.

According to industry estimates based on excise and Custom duty trends, the value share of Indian brands (across smartphones and feature phones, operator phone sales — which is mostly Jio phones — and the value of phones smuggled into the country) has dropped to a mere 1.2 per cent in January-October 2021 compared to 25.4 per cent in the calendar year 2015... a similar trend can be seen in the latest volume sales figures in smart phones. Techarc, which tracks the market share of Indian vs Chinese brands (other foreign brands like Samsung have been kept out of the analysis), says that the share of Indian brands has now fallen from 68 per cent in 2015 to a mere 1 per cent in 2021.

In the context of this discussion, a Business Standard analysis of the R&D spending among 2893 listed Indian companies provides a partial answer. Consider these - R&D spending as a share of net sales was just 0.38% in 2020-21 and has remained stuck in that range; around 82.3% of companies did not report any R&D spending; automobile and Pharma companies apart, R&D spending is minimal; the top 10 companies accounted for 54.99% of the total spending etc. Further, private businesses accounted for just 37% of national R&D spending compared to 68% for other large economies.

To be clear, the point I am making is that corporate India's failure to produce anything of note which is world class and in globally relevant sectors in the last 30 years - despite economic liberalisation; the country's fairly diverse and strong industrial base (compared to its today's EM peers); global tailwinds from trade liberalisation, globalisation and commercial innovations in the ICT; large population and market; and a well-educated entrepreneurial elite class - is remarkable and should be a matter of deepest concern and trigger introspection. 

The real issue is what (other than the government-regulations-are-responsible line) explains this shockingly poor performance for a continental economy? What ails the higher tiers of India's corporate and entrepreneurial ecosystem? This is also a surprisingly barren area of academic research.