What Ails India Inc. and is it a Crisis of Leadership or a Structural Issue to be Addressed?
What Ails India Inc.? Some Signs that All is Not Well
All is not well with the Indian corporate world or India Inc. as it is referred to in the popular press. From a scramble for profits in a low growth environment to a mad race to the bottom as far as costs are concerned, in addition to boardroom battles and hostile takeovers, the Indian corporates and their leaders are not having it easy.
Whether it is the suicide of the celebrated entrepreneur, V G Siddhartha, of Coffee Day, or the recently concluded hostile takeover of Mindtree by L&T, to the latest bombshell from whistleblowers alleging fraud in Infosys, the troubles of India Inc. seem to be never ending.
Moreover, even the scions of business dynasties such as Anil Ambani and the notorious businesspersons who ran up huge debts and then, disappeared abroad, and the tales of many scamsters all point to a deep crisis within the Indian corporate sector.
So, the legitimate question to ask here is whether this crisis is temporary and can be handled by change of leadership or when the economy improves, or the bigger and more worrisome aspect of whether India Inc.s problems are structural in nature.
Is this the Effect of Worsening and Recessionary Economic Conditions?
At first glance, these crises of leadership and economic and financial gloom and doom appear to be ones that have been caused due to worsening economic conditions and hence, it is easy to say that India Inc. would be back on its feet once the recessionary conditions end.
Indeed, there is enough evidence to prove that high debts and overvalued firms at the height of the economic boom during the last decade are the primary reasons for the present state of affairs.
Moreover, as can be seen in the linkage among all these crises, the corporate leaders often find themselves in soup as the good times have ended and the debts are coming due.
In addition, with the deteriorating global economic factors, it is easy to see that global headwinds in the form of shrinking exports and intensified global competition is leading to profit pressures and stress on the bottom lines of firms.
However, it is also the case that there is something beyond mere financial and economic reasons and the inescapable conclusion seems to be that the present set of corporate leaders are badly in need of some serious rejig and hence, fresh faces and fresh approaches would address the issue.
Are our Corporate Leaders to Blame and whether it is enough to Groom Better Leaders?
The reasons for this assessment stems from the fact that India Inc. has been through bad times before when one takes into account the Dotcom bust of 2000 and the Great Recession of 2008 and each of these times, they have bounced back helped along by extraordinary and legendary corporate chieftains.
Indeed, whether it is Infosys under NRN or Nilekani, or the Tatas under Ratan Tata, or Wipro under Premji, or any other famous leaders, the Indian corporate sector was and has been resilient even under duress and extreme pressure.
However, there seems to be a crisis of leadership among the current set of leaders as can be seen from the collapse of Kingfisher, Fortis, or for that matter, the present fights in Indigo. Moreover, even the celebrated CEOs (Chief Executive Officers) seem to have Feet of Clay as can be seen in the unseemly battles over ethics and other violations that have resulted in almost 80 of the largest Indian corporates filing for bankruptcy and insolvency.
Thus, one tends to conclude that the present crisis is a crisis of leadership and hence, the solution seems to be change the leadership or groom a new generation of leaders who would follow in the steps of their illustrious predecessors.
The Troubling Assessment: A Structural Crisis That Needs Systemic Reform
Having said that, there is a nagging feeling that India Inc. is in the midst of a structural crisis in terms of how it operates and whether its modus operandi is itself suspect.
To explain, Indian businesspersons have been used to favourable treatment from everyone including bankers, politicians, regulators, and society as well since they were seen as wealth creators who would help the country become prosperous.
However, the chummy friendships between them and the stakeholders mentioned above also led to crony capitalism and cowboy capitalism wherein for the last few decades or so, there has been a transfer of wealth rather than a distribution of wealth.
Moreover, as V G Siddharthas suicide shows, there is also some other dimensions at work wherein connections and friendships have a negative effect when the chips are down.
Apart from this, one wonders whether the very operating model or the business methods employed by generations of Indian businesspersons are now being tested under unfavourable conditions and hence, there is a doubt whether the crisis is structural in nature.
Indeed, among the three causes discussed in this article, this is the most worrisome part.
Looking to the Future and Not the Past
As India prepares to leap into the future, it is the case that the present crisis in India Inc. be addressed as soon as possible with the active involvement and participation of all stakeholders.
The alternative for the economy and the country is a return to the much derided Hindu Rate of Growth that for decades was the bane of the country.
Moreover, the country needs its wealth creators to be job creators at well at this crucial juncture where we are wasting the Demographic Dividend and to conclude, we just cannot afford the crisis in India Inc. to take us back to the state that we thought we left behind.
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.