The Foreign Challenge

On broad efficiency parameters, studies by the Centre for Monitoring Indian Economy (CMIE) show that foreign firms have been slightly ahead. Between 1990 and 1996, value of output per unit of capital employed grew 50 per cent for the Indian private sector compared to 52.2 per cent for the foreign private sector. The latter also did better in terms of value of output per unit of net worth in the same period.

But Indian enterprises scored when it came to workforce utilisation. In 1996, wages and salaries per unit of sales was 4.8 per cent for Indian firms compared to 5.5 per cent for foreign firms. Both categories, however, were matched in terms of reducing expenditure at (-) 1.6 and (-) 1.7 per cent respectively. In theory, savings in wages and salaries could partly compensate for domestic companies