List of Contents
Source: The post is based on the article “Our labour market’s playing field is in the process of being levelled” published in Live Mint on 16th February 2023.
Syllabus: GS 3 – Indian Economy
Relevance: evolution of the Indian multinational companies
News: The article discusses how the Indian companies evolved with the time and the way they have provided job opportunities to the Indian labour market.
How did the companies evolve in India?
Under the license raj: MNCs in those times relied on their regulatory connectivity and their capital, technology and product investments bred higher productivity and wages.
Companies at that time focused more on performance, potential and hard work than a surname.
After the reforms of 1991: These reforms ended licencse raj and brought changes in the business climate for Indian entrepreneurs. The changes were reflected in staffing, financing and governing of businesses.
Companies like Tata, Reliance and Mahindra attracted global and local investors. These Indian entrepreneurs distinguished between their shareholder, board member and executive role in companies.
They also executed mindful strategies that offered employees vision, purpose, meritocracy and growth.
Later, these changes were also seen in a wide range of companies like IT (Infosys, TCS, HCL, etc), finance (HDFC, ICICI, Axis) and consumer goods (Marico, Dabur, Britannia, etc).
The combination of growth and governance led to a massive expansion in the price-to-earnings multiples of their stocks.
It also lead to five changes – a) multinationals shifted from the European model (country head as CEO) to the American model (country head as ambassador with global vertical reporting), b) institutionally funded startups (Flipkart, Ola, Ather, Nyka, etc.) attracted experienced managers with attractive equity, c) rising prosperity made self-expression a priority, and a career became an individual, not a family decision, d) society, economy and citizens realized that it is not necessary to be Western to be modern and people became more confident and secure about their future and identity and e) new business and startup ideas started coming up.
What does the future hold for the Indian companies?
There have been rapid changes in the Indian companies and with the time it would be difficult to categorize what is an Indian company because today everything has been globalized and interdependent.
For example, an Indian car has imported products, HDFC is an Indian bank despite being majority-owned by foreigners, etc.
Furthermore, the diminishing labour market advantage for the Indian companies will become irrelevant with the coming time because it is the best talent that will be employed.