View from New Delhi: Indian firms eye foreign companies

Two years ago, Indian markets were swamped with goods from China. There were Chinese cell batteries and ceiling fans, Chinese clocks and electric bulbs, even Chinese CDs and computers.

Indian companies, taken by surprise, started wondering whether China was preparing to take over Indian markets for consumer goods, as it had done in several other countries.

But that was yesterday. Now you don't see many Chinese goods in India. Instead it is Indian manufacturing companies that are making news. IT may have helped India achieve global recognition, but engineering companies are not far behind.

Lots of foreign companies are seeking outsourcing opportunities in India for their engineering goods. Toyota of Japan is establishing India as a source for auto transmission parts. Ford Motor Co is sourcing engines from Hindustan Motors, a 50-year-old Birla group company, which makes Ambassador cars.

Yamaha and Mitsubishi have announced plans to use India as a sourcing hub for 125 cc motorcycles. Volvo and Mack Trucks are developing Indian vendors for some of their requirements. And the list goes on.

When the economy opened up ten years ago there were fears that imports would swamp local industry and drive thousands of firms out of business. At the beginning that is exactly what happened. Companies that could not stand competition went under, especially smaller firms without access to cheap finance or technology, but the bigger ones survived.

There was a time, not so long ago, when Tata Steel, the largest corporate in India until Reliance Industries of Ambanis came along, was about to fold up. Its steel was the costliest in this part of the world and of poor quality.

After six years of hard slog, the company is back on its feet and is in fact thinking of doubling its output from 4 to 8 million tonnes with the addition of a brand new greenfield plant.

The same is the case with Mahindra and Mahindra, a 50-year-old company which had fingers in all sorts of pies, from tractors and jeeps to chemicals. The company is now run by Anand Mahindra, grandson of one of the founders, who has turned it around by getting rid of all or almost all lines except tractors and utility vehicles.

There are two reasons for the turnaround. One, the licence raj has gone and the companies have to be on their toes. Second, the companies may be owned by families but are now run by the new breed of managers put out by business schools in India and abroad. Many of them have gone through elite technical institutes like IITs (Indian Institute of Technology), the same institutes that turn out IT whiz-kids every year.

Indian companies are now very different from what they used to be ten years ago, that is, before liberalisation, though they bear the same names. Tata Steel used to make not only steel but also cement and tinplate. Now it makes only steel.

Larsen & Toubro started off as an engineering firm but turned into a big conglomerate with interests in everything from cement to switchgear. It is now sticking to engineering and has sold off most other businesses including cement plants.

If multinationals are showing interest in Indian corporates, Indian firms are keen to acquire foreign companies in their line of business. A dozen firms have already done so. Who knows, ten years from now, there will be as many Indian companies operating outside India as foreign companies inside India!

The writer is an India-based senior economic advisor