There is a need to look at the missing link which caused the failure of several large American corporations in democratic India while communist China could succeed in getting the best out of these.
American auto giants General Motors and Ford Motor Company folding up their operations in India appear a continuation of the flip-flap of American corporations’ experience in India. Historically Indian businesses were more attuned to collaborating with British companies. The foundation laid by the East India Company brought along dozens of large entrepreneurs who flocked to India and flourished. Understandably, sizeable investments and technologies flowed for years from Britain and to a less extent from other countries of Europe, notably, Germany, France, Italy, Netherlands and Switzerland.
In the south we had British companies that flourished for over a century – Best & Crompton, B&C, Parrys, Simpson, A&F Harvey readily come to mind.
Because of the distance and lack of travel facilities the advent of American companies was late and much smaller in numbers. India did have limited US collaborations largely technological. In the south Mansfield Tier collaborated with MRF and Goodrich with Chemplast.
The socialist policy of the Nehru government was also a deterrent. Remember at the time when the Indian steel sector was undergoing large expansion in the 1950s and 1960s? The British, Germans and Russians readily entered to set up million tonne capacity steel plants. The US dilly-dallied over Bokaro and finally dropped it.
WHEN COCA-COLA AND IBM LEFT…
Coca-Cola and IBM did make an impressive foray into India in 1950-51 and progressed well. But the diktat of George Fernandes as Industry Minister of the Janata government [1977-79] limiting foreign investments to 40 per cent of capital and sharing know-how resulted in both these prized American companies quitting India.
Till liberalisation in 1991, American interest was limited to modest minority investments and technical collaboration for limited periods. Even Amoco Corporation that entered with minority participation in Madras Fertilizers and Madras Refineries, which did contribute to the quick and effective implementation of the projects and in their impressive quick take off left. I remember the spectacular seeding programme of Amoco that helped establish MFL as a profitable entity right from day one of commencing production.
The opening up of the Indian market in 1991, combined with the more convenient travel facilities, did result in a number of large American corporations entering India. In the 1990s DuPont and Ford Motors set up production facilities in Tamil Nadu. General Motors entered soon after. There was also the re-entry of IBM and Coca-Cola. The large pool of scientific and technical manpower available at modest cost also attracted interest in setting up back offices and R&D centres. The IT boom also helped in handsome expansion of the IT services with access provided to the lucrative American market.
CONTRAST PROVIDED BY CHINA
Yet India lacked the aggressive thrust to attract American investments in a vast range of manufacturing industries. This is precisely the area where China excelled by opening up massive opportunities for MNCs across the world to bring technology and investments on attractive terms. China’s huge domestic market also proved to be a big attraction. In quick time China absorbed and built on such technologies and emerged on its own a strong manufacturing power.
The Enron fiasco, the decline of GE and the subsequent folding up of operations by GM and now by Ford, point to some serious problems.
An instance of the laidback approach of American corporations was provided by a senior bureaucrat. The American company Pilkington is a leading global manufacturer of glass. It planned to set up a large glass manufacturing facility in Tamil Nadu. 170 acres of land was allotted at Sriperumbudur. Over two years the company spent around Rs 170 crore on this project. The project was abandoned. Contrast it with the flourish of Saint Gobain Glass from France that revolutionised the face of the glass industry in India!
