India's business culture in the brave new world

The Indian economy is at a crossroad. Its internal markets have sustained the economy through the global recession of 2008/9, but as it looks beyond the pandemic, that would clearly not be enough. Its own version of 'Great Leap Forward', hastily imposed neo-liberal reforms of the economic life, has stunted the domestic demand and ravaged the banking sector - and it must find new sources of growth. The government's hopes lie in the exports - the aspiration that India could be the new China, workshop of the world. Labelled somewhat misleadingly as Atmanirbhar Bharat (self-reliant India), a new set of initiatives has been rolled out in search of this illusive export success.

In this quest, India's key strength - perhaps its only one - is its people: A large working-age population ready to work for relatively cheap wage! How we view India's demographic opportunity has undergone a subtle shift - its young population was earlier seen as an exciting market and only now, as the domestic demand starts to disappoint, their productive capacity is being highlighted. But as the focus changes, the challenges - the health and the skills of the population - are being duly recognised. India's New Education Policy squarely recognises that India's education system needs a twentyfirst century update, if the country has to become competitive in the global market and win in the export game.

I want to make a different point, however. While there is a lot of discussion about the Indian workers not having the right skills for global jobs, the other challenge - that of India's business culture - is insufficiently recognised. It seems that we believe that better trained Indian workers is all that we need to win in the global market, and India has sufficient leadership talent and experience already. In fact, I have seen scholarly articles which compared India's and China's talent pool and argued that India had an hour-glass problem (lots of leadership talent and technical workers, but weak middle management layer) as opposed to China's pyramid (narrow pool of leadership talent). This view is already dated and China's entrepreneurs have proved themselves equal to the task of taking on the world. However, in my view, the shortcomings of India's business leadership have affected the country's competitiveness adversely.

Indeed, it's easy to miss the point in the overabundance of Indian CEOs of global companies and the success of India's IT services and some of the other export-facing sectors. But the Indian diaspora has little impact on India's business culture and they are usually kept at arms length. And, outside the export driven sectors (where diaspora participation is usually high), the business culture needs a significant upgrade. Some of these shortcomings are cultural - high power distance (the boss as the big man), off the cuff actions, relativist approach to timekeeping - and others are products of India's license raj culture, such as lack of integrity, opportunistic operations and Jugaad. 

For many industries, particularly manufacturing and services that deal with domestic clients (including, crucially, education and healthcare), this leadership crisis is acute. Worse, no one wants to talk about it. While analysts obsess over India's global competitiveness, there is little discussion about internal competitiveness in India. Speaking about crony capitalism, which is rampant and at all level, is considered bad form. For all the attention, starting up, unless one is from one of the 'business families' (which usually means families with the right connections), has gotten harder, despite efforts to simplify things. And, besides, most of the entrepreneurial activities are concentrated in the technology sector, which does little for India's global competitiveness.

In a way, India's model is opposite to China's. China has a fiercely competitive internal market. Chinese companies have to win there first, but once they have emerged from that competition, China's state puts its enormous resources and influences behind them in the global market. India's is just the opposite; Internal markets are not only protected, but also reserved for the entitled. And, Indian government does precisely little for entrepreneurs (other than the select few) when they approach the global market. 

It is right that India needs to fix its infrastructure (roads, ports, internet bandwidth and more), healthcare and education to compete in the global markets, but fixing business culture should equally be a priority. The license raj may be gone, but that mindset is everywhere. No amount of grand gestures will make India competitive if its businessmen continue to fail the country.