Doing business in India can be overwhelming for somebody accustomed to working in a more hospitable business environment. The World Bank’s Doing Business study ranks India 134th worldwide for ease of doing business, behind lesser-talked- about nations such as Tanzania and Ghana.
Besides the well-documented inadequacy of physical infrastructure, archaic corporate and taxation laws are yet to catch up with modern ways of structuring and operating new ventures. Yet India is able to register high rates of economic growth year after year.
U.S. President Barack Obama’s contention that India has already arrived is magnanimous — India is a startup with high potential but hasn’t made it yet into the pantheon of world powers. Like a startup, India is chaotic and unpredictable.
Democracy adds another twist in the tale. As the last three months have shown, Indian politics can turn on a dime and the perception of political stability can give way very quickly. India’s business model is contrary to how other Asian economies have developed: India continues to be services-driven and domestically-oriented instead of being heavy on export-led manufacturing.
This approach shielded the economy during the financial crisis. With growth driven by high-quality entrepreneurs who have been able to deliver despite a suspicious and often obstructionist state, it’s no wonder that investors continue to be bullish on India and tend to overlook major political and geopolitical risks.
But high growth brings with it many quandaries. Though a happy problem to have, a growing enterprise faces its own management challenges. At the very least, the capacity of India’s executives and government to manage growth has been somewhat disappointing. India chose (some would argue that it stumbled upon) a bottom-up development model based upon entrepreneurship.
We are now reaching a stage in the economic cycle where we need to push the envelop further, not negate the strategy that has served us very well over the last two decades. India saw two bursts of significant reform, from 1991 to 1996 under Prime Minister P.V. Narasimha Rao and again from 1998 to 2004 under Prime Minister A.B. Vajpayee. Since 2004, there has been virtually no reform initiated by the Congress-led United Progressive Alliance government in areas such as labor law, where the current regime is constraining growth in manufacturing. This is impairing the quality of India’s economic growth and limiting job creation.
Recently, Steve Jobs said that his company, Apple, is the world’s largest startup. It’s an interesting view given that Apple’s market capitalization, which is close to $300 billion, makes it one of the most valuable companies in the world. Apple also has zero debt and tens of billions of dollars in cash. From the brink of bankruptcy and irrelevance in 1998, Apple’s financial and competitive strength is now the envy of the technology industry.
When Mr. Jobs returned as Apple’s CEO, he had a straightforward mantra: To rebuild Apple as a pioneering innovator and rescue it from the morass of creating “me-too” products, as he put it. He felt that the company he founded had forgotten what it stood for. This was audacious for a company struggling to stay on its feet.
Indian administrators and policy-makers should also remember how high rates of economic growth have been achieved in the first place. Like a startup which has achieved a fit between product and market fit and is ready to scale up, India needs to continue providing its entrepreneurs with the space and environment to operate.
Apple lost its mojo because it abandoned the strategy that made it what it was. Curiously, that strategy itself was not rigid and inflexible but one of continuous innovation, where Apple would make its products irrelevant before its competitors could. A return to this thinking has ensured the company’s rise through the 2000s. India, too, needs to return to policies that have transformed its economy from anemic to blistering growth.
In Hindu philosophy, The Upanishads talk of the concept of “Atmanam Viddhi,” which roughly translates as “knowing oneself.” It turns out that self-knowledge is also a sound business strategy — to reach where you want to go, it’s first important to know how you got to where you are.
The government must realize what it is that has delivered high rates of economic growth. Negating the ideas and policies that are driving India’s economic development by delaying the next round of economic reforms could prove to be immensely damaging to India’s economic prospects. India needs a visionary leader to step up and push through some of the changes that most agree need to be implemented — but few have the political courage to execute — or else an opportunity may be lost again.
Originally Published: http://navam.in/1m5k6AE