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Love’s Labour’s Lost

Part 1 – Much Ado About Nothing

Fortunately, not all talented Indians leave the country or are content with working in a cushy job at a prestigious firm. Some of them are crazy enough to start their own companies.

The India story has been driven by entrepreneurs from the start. At a time when it is impossible to talk about economic development without using the words “inclusive” and “aam aadmi” or common man, it is instructive to recall a few examples of effective Indian entrepreneurship from typical “common men.”

Reliance group founder Dhirubhai Ambani started his career working at a petrol pump in Yemen. Returning to India in 1958, Ambani found that there were government licenses, controls and rations for establishing and expanding business.

Mr. Ambani went about working the system in a way that is now the stuff of Indian corporate legend. Obsessively quality-conscious and unabashed in his desire to grow, he did not think profit was a dirty word like India’s first prime minister. Through ingenious and sometimes controversial financial engineering, Reliance paid zero corporate income tax till 1996. The Minimum Alternate Tax, increased to 15% in this year’s budget, was introduced in that year to get companies like Reliance to pony up tax.

From scratch, Dhirubhai built the first Indian private company to enter the Fortune 500. Against all odds, he created vast wealth for millions of Indians – since its public offering in 1977, Reliance shares have risen at a compounded annual rate of over 25%, beating even Warren Buffett’s Berkshire Hathaway record. Reliance has shaken up every sector it has entered besides its core petrochemicals business, be it telecoms, retail or entertainment, bringing down prices for consumers and growing the market for everyone. In a few decades, Reliance has become bigger than Indian business houses that have existed for centuries.

Dhirubhai was an aam aadmi, and Dhirubhai was an entrepreneur. The growth of Reliance has included Indians from all sections of society.

In the last decade, sectors such as telecommunications which have seen market-friendly policies being implemented have seen exponential growth. The vital role of prudent policy-making has been under-appreciated in the telecom growth story – for instance, in the 2000 government budget, import duty on mobile phones was slashed from 25% to 5%. The National Democratic Alliance government did not take the view that mobile telephony was a luxury good that should be taxed heavily. Instead, it allowed vibrant competition that has today ensured that every aam aadmi can afford a cellphone.

The positive network effect of cheap and ubiquitous telecommunications on the Indian economy is staggering and incalculable. Sunil Mittal, founder of Bharti Airtel Ltd. who started his career selling bicycle components, is recognized worldwide for the innovation fostered by his company.

Foreign investors from Japan, Singapore and the Middle East to Russia, Norway and the United Kingdom are scrambling to get a piece of India’s telecom pie, desperate to have every Indian farmer use their cellphone service. That India would have almost 500 million cellphone users was unthinkable in 1999. That it actually does, is not an accidental tryst with destiny but the product of prudent policy coupled with effective entrepreneurship.

More recently, civil aviation has also seen a revolution of sorts. Reforms in the sector and the mushrooming of airlines have brought down ticket prices for consumers and dramatically enhanced air connectivity, knitting India closer together. Like mobile telephony, air travel was once the purview of the rich. Today, as an advertisement for a low-cost airline poignantly portrays, almost every am aadmi can afford to fly.

The lesson is that promoting industry and high-technology through economic reforms should be high on the government’s agenda, rather than initiating venture capital funds for poultry and innumerable other welfare programs. The government should have a mindset of empowerment and skill enhancement, instead of making people dependent on handouts and freebies. Free markets alone can liberate India’s masses from perpetual poverty. India must not take economic growth for granted.

India has many entrepreneurs with the skills and aptitude of Mr. Ambani and Mr. Mittal, some of whom are probably working for Google or DuPont. Without appropriate policy, the danger is that potential entrepreneurs might just spend their careers as content professionals. That would make for an epic Greek tragedy for India’s aam aadmi or mango people, to borrow a phrase from a recent Bollywood blockbuster.

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