We met with Secretary of Commerce Dr. Rahul Khullar and Chairman of the Max Group Analjit Singh on December 28th . Both leaders shared their visions of the reforms needed to keep India on a path to growth, though they came from very different past experiences. Dr. Khullar spent 30+ years in government service while Mr. Singh built a multi-billion dollar healthcare and insurance company that has redefined “quality care” in India.
Reform 1 – Agriculture: India’s economic explosion since privatization began in the 1990s has propelled per capital income growth. Now that people have more money in their pockets, they expect to eat better, which is causing demand to greatly outpace supply. The issue is that “India is woefully behind on the protein side,” said Dr. Khullar, and it’s not easy to just import eggs and meat. Food inflation also has been driving overall economic inflation, so getting agriculture under control will produce positive effects across the economy.
Reform 2 – Infrastructure: Energy and water pricing are not market driven, mostly because single entities own the full value chain from generation to distribution. The fact that energy – such as natural gas – is underpriced provides little incentives for companies to do exploration. This produces a vicious cycle. Then there is huge congestion on highways, in airports and at seaports. Our CBS group experienced this highway congestion first-hand. We drove from Delhi to Agra today to see the glorious Taj Majal. The 120-mile trip would have taken us 2-3 hours in the US, but it took us 4-5 hours. We had to stop at the 2 state border crossings to pay a taxes as well.
Reform 3 – Corruption: Dr. Khullar said, “Corruption is a very serious problem. But there’s too much hoopla in the streets about it. Solutions need to be more pragmatic. You cannot legislate a problem out of existence.” Mr. Singh added that it was a pain to work with the coalition government because there were so many different factions that made it difficult to create a single agenda. The US has experienced this with just 2 political parties. India has 6 recognized political parties. The government has begun to use technology more effectively through the creation of an E-portal for government transactions to offer greater transparency. Dr. Khullar’s department is leading this effort on the Commerce side.
Business Lessons: India is one of the most complicated places to do businesses because of the vast heterogeneity of the population. To add to that, Mr. Singh explained that the world is getting so much more complex that he has had to change his company’s business principles to live up to these new standards. Below are a series of changes Mr. Singh has implemented.
Past Business-as-Usual –> Current Business Needs
Market Protection –> Market Competitiveness
Commitment –> Passion
“Feels good” decision-making –> Value-based decision-making
Activity based –> Outcomes-based
Delegation –> Empowerment
Managing –> Leading
Incentives –> Ownership
Administrative reform –> Regulatory reform –> Full Transparency
Debt financing –> Small equity financing