Reinventing the mass market

At the partnership summit, organised by the Confederation of Indian Industry (CII) last January, leading management thinker Prof C K Prahalad had a simple message to deliver. In almost what sounded like a clarion call to Indian industrialists, Prof Prahalad said it was time they found a way to create a consumer market out of the poor. The Harvey C Fruehauf professor of business administration and professor of corporate strategy and international business at University of Michigan perhaps could have confined himself to finer nuances of corporate business strategy, but what he did choose to say took the brightest and most powerful CEOs by a certain surprise.

The Indian-born radical strategic thinker and management theorist was only reiterating a fundamental axiom of economics that has been conveniently forgotten over a period of time. Simply stated, the issue he raised was one of Indian industry's fundamental commitments to building and retaining its grip over the vast domestic market. True, the market for manufactured goods and services in the new global dispensation may never really evolve strictly within the national boundaries, but no economy has ever achieved significant industrial growth leaving behind the lower-end 600 million people, virtually untouched by its achievements either.

However, this sadly is India's predicament, even as self-styled experts and punters are trying to write off the industrial manufacturing era in India's economic history at the turn of the millennium.

The manufacturing malaise
Arguably, the concern over the alarming decline in the rate of returns-on-net-worth in India's manufacturing sector is a legitimate one, with the aggregate growth rate slipping down to 5.9 per cent in the second quarter of the current fiscal year. But how can industry sustain and speed up growth in the face of even greater challenges to unfold in the coming months and years, as India braces up to the WTO regime?

The question really ought to be not one of growth per se but the very constricted market space in which industry is trying to perform. Poor cost competitiveness, inability to absorb the latest technology, infrastructure bottlenecks, cheaper imports, high interest cost of capital et al are only symptomatic features of a deeper economic malaise.

Taken together, they demand nothing less than a radical transformation of the industry mindset and a renewed strategic direction. As Prof Prahalad would put it, Indian industry needs to virtually re-invent itself, in the light of new realities.