BackIndian companies’ missing spark
2017 may be a challenging one for the corporate sector, to which corporate leaders will have to respond with fresh thinking and new ideas while junking the business-as-usual approach
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Svenska Cellulosa Aktiebolaget (SCA), the Stockholm-based Swedish consumer goods company, said in December that it was closing its operations in India after concluding that “profitability cannot be achieved within a reasonable time frame".
SCA had set up a plant to make incontinence products, diapers and tissue in Pune at an investment of about Rs110 crore just two years ago.
Tellingly, SCA said in a statement that the company prioritizes growth in select emerging markets such as China, South-East Asia, Latin America, Eastern Europe and Russia, where the company already holds strong market positions.
Emerging markets accounted for 32% of SCA’s net sales in 2015; but after over four years in India, two of which were under the benign watch of an apparently progressive new government, the company gave up on India.
Coupled with the Tata group’s internecine battle, with allegations and counter-allegations becoming an almost daily affair, this just about sums up the year for India’s corporate world, with the country’s biggest companies making little headway in breaking the consumption morass of the last few years.
While circumstances played a part, with demonetisation at the fag end of the year adding to their woes, Indian companies didn’t do enough either. We saw little by way of innovation, either in product design or customer service or even innovative use of technology.
No new business models emerged even as companies stuck to tried and trite formulae. Thus, the year saw the much-heralded launch of Reliance Jio Infocomm Ltd’s telecom services. Given its parent, the country’s most powerful business group Reliance Industries Ltd, and the sheer scale of investments, nearly $15 billion, it was expected to revolutionize the business. Instead, Jio flattered to deceive and what we have seen so far is a model no different from that of the thousands of angel-funded wannabe entrepreneurs: buy your customer by giving him the service free and then hope to monetize the numbers brought in by the lure of free service.
In a year when the country grappled with dangerous levels of pollution in its big cities, not a single car maker came up with an idea for a new green vehicle.
India’s booming auto industry has had 22 years since the advent of the first electric car in the country. It was way back in 1994 that The Reva Electric Car Co. (RECC) was founded by Chetan Maini to manufacture electric cars in a joint venture with Amerigon Electric Vehicle Technologies Inc. of the US. Maini’s entrepreneurial daring hasn’t found an echo since even though his original impetus for building an electric vehicle—“pollution was getting crazy" (https://bit.ly/2hFO8RA)—is even more relevant today. Yet, the world’s fastest growing auto market continued to be dominated by the launch of more crossovers and sport utility vehicle.
Sadly, even InterGlobe Enterprises Ltd-owned airline IndiGo, rated among the top 10 most innovative companies in the world in 2015 by Fast Company, disappeared from that list in 2016 as post-initial public offering (IPO) blues saw the company’s performance slip and its ability to surprise the market with new ideas slump.
In a year in which the world’s best companies were launching solar tiles or attacking tumours with electricity or working on genetically engineered mosquitoes that could reduce the spread of Zika while preparing for an era of artificial intelligence, in India, the idea of affordable healthcare continued to be more high-end hospitals catering to the richest Indians as well as the not-so rich patients from West Asia and Africa.
Towards the end of the year, we had Indian business’s emerging face revealing its ugly side as Flipkart chairman Sachin Bansal and Ola chief executive Bhavish Aggarwal claimed India should protect its start-ups against “foreign" rivals in a way similar to how China did with its own in the first decade of the millennium. It was a strange admission of failure besides, of course, being blatantly hypocritical, given that these are two of the three largest foreign venture capital-backed firms in India. It doesn’t augur well for the future either. That the brand new generation of Indian business is still looking at the government to fix the environment in its favour is a matter of great concern.
What is clearly emerging from the new political realities is that this government may well clear the road for business, but the driving will have to be done by businessmen themselves. After making little headway this year in moving up the Ease of Doing Business ranking by the World Bank, the government is working on a concrete eight-point strategy to make it to the top 50 of the list (see https://bit.ly/2h88aWK.
These relate to issues such as access to credit and the time taken to get construction clearance, which are critical elements of the business process. But that apart, relying on the government, in particular for a stimulus in the coming budget, as some industry denizens have been hoping, may turn out to be frustrating.
If the best monsoon in some years and a favourable regulatory environment couldn’t get India’s best businessmen to loosen their animal spirits, what hope is there in a year when the goods and services tax is expected to unleash more instability and a resurgent US economy, on the back of rising interest rates, will possibly dry up fund flows to emerging markets like India?
A depreciating rupee will also push up the cost of servicing external commercial borrowings.
Add to this the hangover of the demonetisation mess and 2017 is likely to be a challenging one for the Indian corporate sector. India’s corporate leaders will have to respond with fresh thinking and new ideas while junking the business-as-usual approach.
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