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Indian industries must prepare to face globalisation

If you want to scare an Indian businessman, just whisper "globalisation" in his ear. He will run for his life, as if chased by some foreign demons.

There are two sides to this globalisation business. One side is investment, that is, foreign investment. The other side is markets, that is, domestic markets. What the Westerners are saying is that they are prepared to invest in your market, provided you remove unnecessary controls and open it up for foreign trade.

Indian businessmen are happy about the first side viz, investment. There is hardly a business house that has not taken advantage of the recent liberalisation in foreign investment. From Tatas to the local small company making screws, all have gone in for joint ventures, or technical collaboration, or have raised capital in foreign money markets. And they have done very well and prospered.

But imports? That is where they draw the line. This is true not only of businessmen but also of the government. When Western nations led by the United States insisted that quantitative curbs on imports should be removed in five years instead of seven, they were shocked.

The question came up at the recent meeting of World Trade Organisation which was discussing India's programme for meeting the WTO's special deadline for India. Under the rules, India has to fall in line and remove all such curbs by AD 2004, that is, in seven years time. Why seven years? Because India has some balance of payments problems which it hopes to clear by that time.

What balance of payments problems, ask western nations. India's foreign reserves have reached record levels and are about to touch if not cross $30 billion. They are more or less on a par with reserves of most East Asian countries. With such a high level of reserves, there is no need for special dates, so goes the argument.

Indian officials themselves have been going round saying that the foreign exchange situation never looked better. It is true that the bulk of the reserves constitute funds brought in by the so-called portfolio managers and can vanish overnight under pressure as it happened in Mexico in 1994. But dollars are dollars and 30 billion of them is a lot of dollars.

It looks as if India will not be given more time and may have to adhere to the earlier timetable. It may ask for and get a few more months, says, a year or so, but that is about all.

The question now is what effect will the removal of curbs on imports -- which means no import licensing -- will have on India's foreign trade account, as also on its economy. Most pundits think that the impact will be adverse and some industries may just go under.

My own view is rather different. I do not think Indian industries will go under, though they may be affected badly for some years. In the end, if Indian companies face the challenge in the way it should be faced, they will come out of the whole situation more competitive and therefore stronger.

But it will not be easy. With a vast domestic market at its feet, Indian industry has never really taken globalisation as seriously as it should. Indian companies do not export because they have never thought of exports as a possible alternative. But there are certain exceptions.

A company like Ranbaxy Laboratories of Delhi exports half its output. It has set up factories and other facilities outside India and is geared to play a global role. The company is probably the fastest growing company in its line and will soon take over as number one company in pharmaceuticals.

Why can't other companies do so? Of course, when you have such a big market at the doorstep, you don't think of exports. But they will very soon. I am quite sure that companies like TELCO, Reliance, Larsen & Toubro, etc. will soon position themselves for foreign sales, as Ranbaxy has done.

They have certain inherent advantages. Their labour costs are low, perhaps the lowest in this part of the world. If China can raise its exports to almost $60 billion in ten years, there is no reason why India cannot.

It is a question of attitude. We are so used to protection that we feel lost if we have to fend for ourselves. Unfortunately, the government has failed to prepare industry as well as the country for globalisation. It is high time it did so, for whether we like it or not, globalisation is not going to wait for anybody.

Jay Dubashi is a member of and economic advisor to the Bharatiya Janata Party, which, incidentally, has guarded views on liberalisation and globalisation. The views expressed here are the author's own.