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Prepare for next reforms wave, say experts

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Recent poll setbacks may make sections of the central government rethink inflation-inducing reforms, but corporate stalwarts are exhorting India Inc to prepare for the next wave of reforms by drawing lessons from the first wave of 1991.

At a book launch-related panel discussion last week, B Muthuraman, vice chairman, Tata Steel, said the company did not have any customer orientation back then. “Our price and our customer were decided by the government.  How much of what we should produce was also dictated by the government. There was euphoria, initially.  But then the fears began.”

Sharmila Kantha, economic consultant to the Confederation of Indian Industry, said her new book delves into such issues and documents how Indian companies yet coped with and leveraged reforms for success.

TCA Ranganathan, former CMD, Exim Bank, said, “Many big names disappeared from the scene when the first wave of reforms took place.  They are nowhere around today.  You will see many more names disappearing.  But the growth of the economy and employment will be phenomenal.”

Muthuraman recalled that experts had said then that reforms might imperil Tata Steel; that the group should hive off the company. But the management addressed issues like a huge workforce of 78,000 producing just 2 million tonne of steel, which resulted in right-sizing of staff through various generous schemes.

Tata Steel also engaged its customers like Ashok Leyland, Mahindra & Mahindra and Bajaj Auto through plant visits, and sensitised all employees to the need to improve the quality of the steel produced.

“Today, we are the second largest user of information technology in the world – more than any other steel producer anywhere,” said Muthuraman. “To survive the next round of reform, we will have to reform in at least four areas.”

One, there is a need for deeper social reform. Today, only 20% of India’s workforce is involved in economic activity.  If this could increase, India’s productivity would be incredible.

Two, agricultural reform, which will require using less land and water.  Unlike Germany which has 30% of its land used by industry and 30% by agriculture, India has 3% of land used by industry and over 40% by agriculture, he said.  

“We will need to produce more on less land.” Only then will industry be able to employ more people.

Three, technology upgrades, which would give Indian products the quality edge that the world requires.

And four, education where India will have to devise newer ways of educating people.

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