The 1991 reforms not only separated the men from the boys in India Inc., it also showed how they failed to grab the right opportunities.

By Seetha & Dilip Maitra

Bharti enterprises' chairman and Managing Director Sunil Mittal still shudders at the memory. Eleven years back, Bharti Telecom got an order for exporting telecom equipment to the US, a first for India. ''It was a proud moment for the country,'' he says. Such honours meant little for the licence raj that still reigned then. Bharti Telecom couldn't get a manufacturing licence. For over six months, Mittal ran from pillar to post. In vain. The battle, he now admits, took the life out of him.

And then, in July 1991, with one stroke of newly sworn-in Prime Minister P. V. Narasimha Rao's pen, all industrial licensing was abolished. Mittal now had to merely file a memorandum of information with the name of the company, the product to be manufactured, and the capacity of the plant. ''We couldn't believe this could happen in this country,'' he exclaims. Bharti lost no time in getting to work. Three months later, the then communications minister Rajesh Pilot and commerce minister P. Chidambaram released the first export consignment. ''Look at the kind of energies this released,'' exults Mittal.

Indeed, 1991 ushered a new dawn for India Inc. One which brought in its wake freedom from the stifling controls of the previous 40 years, when the government dictated the size of a company, the sector it could invest in, the location of the plant, the production capacity, the price of both the raw material and the final product. Narasimha Rao and his band of reformers changed all that. Points out Subodh Bhargava, consultant, Eicher group: ''Entrepreneurship was finally allowed its space. Corporate India was charged with the responsibility of taking its own decisions.''

That should have let loose the full potential of the Indian industry, paving the way for higher growth. It should also have helped industry gear up for competition. After all, they did get some breathing space. But that didn't quite happen.

Growth did come, initially (See Running Out of Steam). But the tempo petered out after the mid-nineties. Clearly, the unleashed energies Mittal talks about got dissipated somewhere along the line.

What went wrong? A lot, actually. Remember, the nineties has seen two periods of recession. Also, the freedom to take decisions means little when companies can't shut sick companies or whittle down a bloated workforce easily. Or when they're struggling with abysmal power supply, high freight costs, and red tape. So Federation of Indian Chambers of Commerce and Industry (FICCI) Secretary General Amit Mitra certainly has a point when he says Indian industry cannot compete without globally competitive inputs.

But that's only one part of the story. The other part is really about India Inc. not being aggressive enough to grab the opportunities that came its way. Says Narayan Seshadri, Country Head, business consulting, Arthur Andersen: ''The killer instinct is pretty much absent.''

It's a charge industrialists accept. Admits Dhruv Sawhney, Chairman and Managing Director Triveni Engineering Industries: ''There was so much euphoria, we were unable to concentrate on strategy in the global context.''

Strategy took a backseat to mindless investment with money raised from the stockmarkets. Free to decide on the issue price of shares following the abolition of the Controller of Capital Issues (CCI) in 1992, several companies-from Sterlite Industries to Godrej Soaps-raised huge amounts of capital.

The money was either channelled into non-core businesses (Videocon International and Lupin Laboratories invested in real estate!), diverted to other group companies (Spic transferred the money into a petrochemical venture which never took off) or used to enhance families' stake in listed companies (in the mid-nineties, RPG group companies like Ceat, Asian Cables, Philips Carbon Black and CESC invested huge sums of money in group investment companies which, in turn, were holding shares in listed group companies). Swayed by visions of a 200 million-strong middle class market, companies which ought to have known better, expanded operations, resulting in overcapacity in industries ranging from steel to consumer electronics. The outcome: poor financial results, loss of credibility, low valuations.

No wonder, at Kearney director Patu Keswani says: ''Indian companies have a cultural inability to think global.'' Thinking global is not about acquiring companies or setting up operations overseas. Says Seshadri: ''It is the zeal, the drive to beat anybody and everybody, whether at home or abroad.'' Few Indian companies can measure up to this.

Certainly not the old, mammoth business groups which flourished during the licence raj. Nowhere is this more evident than in the automobile sector where the two doyens of the Indian car industry-Premier Automobiles and Hindustan Motors-continued to coast along in first gear, instead of utilising the lead time they had to race ahead, by improving their existing models and introducing new ones. Today, there's no way they can catch up with the foreign firms. The Indian corporate saga abounds with such examples of complacency and lack of vision.

Invariably, it is these set of companies which blame anything from government policy to poor infrastructure, Chinese imports and global recession for their plight.

In sharp contrast, there are a determined few who have decided that they will survive and grow despite all these constraints. They're a mixed lot, including the new breed of can-do entrepreneurs like Mittal, Naresh Goyal of Jet Airways and Subhash Chandra of Zee who have forayed into new areas; Davids like Cavin Kare, Paras Pharmaceuticals, and Himalayan Drugs who have successfully challenged Goliaths like Hindustan Lever; and old economy dowagers like Tata Steel.

Look at how Tata Steel has changed its product mix, improved efficiencies and reduced its work force to beat all the odds plaguing the steel sector, from cheap imports to overcapacity.

In contrast, its competitors, whether public sector monoliths like Steel Authority of India or private players like Lloyds Steel are all awash in red. In the beleagured capital goods industry, hit by cheap imports and recession, Triveni Engineering had to do a lot of blood-letting, including selling steam turbines at 1994 prices. That helped the company retain its market share in the segment. Sawhney also had to take what he calls "a painful decision" to shut down the company's first plant at Allahabad (also known as Triveni) after which the company got its name. Triveni finally turned the corner last year. As Mittal says: ''If you keep focus, governing processes and costs right, there's enough reforms in this country to do something.''

That's why Tata Services advisor S.S. Bhandare isn't lamenting the incremental growth logged by industry. ''What's important is that this growth is qualitatively better; it has been achieved in the face of competition,'' he argues. While conceding that the macro picture is bleak, he insists that the balance sheets of several companies tell wonderful stories about their contribution to productivity.

It's more a management problem, then. Talk to any of the consulting firms operating in India and they'll all lament the high inertia levels among Indian managements. Instead of sensing opportunities and making use of them, they are more involved in the management of day-to-day affairs.

And few are ready to implement the reports that they pay consultants to prepare, looking, instead, for excuses to avoid taking tough decisions. Bhargava says this is because industrialists are still unused to taking their own decisions after 40 years of control. Unfortunately, that isn't an argument that's accepted widely.

Well, the 1991 reforms have certainly separated the men from the boys in India Inc.

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