Time to stop abusing Indian business houses, trust will help them build

Unhinged attacks on Indian business houses and their so-called trader mentality are unjustified

India Inc has many failings, but one thing it does not deserve is constant abuse and delegitimisation by political parties or public intellectuals. When major politicians start attacking it — Rahul Gandhi now and Arvind Kejriwal earlier — it does not help India’s cause, even assuming India Inc has made mistakes. To endlessly rant about Adani and Ambani, and then expect the same business houses to invest and take the India story global, is sheer foolishness. It is one thing to prevent monopolies, quite another to assume that India does not need giant conglomerates of its own. 

Unhinged domestic criticism of big business houses will tempt foreign powers to do the same thing to undercut Indian interests. It is not a coincidence that the United States Securities and Exchange Commission and Hindenburg Research targeted Gautam Adani over actions that affected no American citizen’s rights. Nor is the recent rant by US Treasury Secretary Scott Bessent, alleging that India (read: Reliance) is profiteering from cheap Russian oil by refining it and exporting to the West. White House trade advisor Peter Navarro went further, accusing India of being Russia’s “laundromat”— and worse. 

If anyone has profiteered from the Ukraine war, it is America’s military-industrial complex, which has been counting its shekels all the way to the bank as both Ukraine and Europe buy more defence equipment from it. If any economy is the world’s true “laundromat”, it is America’s. There is no drug cartel or illegal business anywhere in the world that does not use the US dollar to launder money. A paper by the Federal Reserve Bank of St Louis estimated in 2022 that over $1.1 trillion in US cash — two-thirds of it in $100 bills — is held by non-central banks abroad. Crypto may be changing that, but with Donald Trump now in the crypto game, this laundromat will start working even better. 

There is also a nuanced truth that critics of Ambani’s refining margins forget. Private companies have imported crude and exported refined products well before cheap Russian oil became available. India’s state-owned oil companies face regulation on pricing, something that the private sector is exempted from. The result: A significant portion of private refining capacity is used for exports. If oil prices are truly deregulated, more refined products would be sold in India. 

More damaging, however, is unnecessary criticism by public intellectuals like Pratap Bhanu Mehta, who wrote in his Indian Express column that Indian capitalism “emerged largely from (the) trading classes, (who were) unmatched in their capacity for arbitrage but less adept at building”. It is fair to criticise India Inc for not investing enough in research, to build rather than just import, and sell at a profit, but this is more the result of the licence-permit raj, and now the regulator raj. Both politicians and bureaucrats do not trust India Inc to do the right thing for themselves and the country. If this changes, business will adapt and build more Indian intellectual property rights (IPRs), platforms and products, and strengthen the country’s economic forces.

 

It is pointless to blame Indian businesses alone for having a trading mentality. The entire retail sector in the US and Europe thrives on the same model — buying cheap Chinese products and selling them at home. Both trading and building are essential to business. When you are uncompetitive, you make money by trading, which allows you to build a customer base for eventually building your own products. It wasn’t just Ambani or Adani, Birla or Tata who made money from trading. Consider what was, and is, happening in mobile phones and white goods. A decade ago, Indian brands like Micromax and Karbonn held big market shares based on imported sub-assemblies from China but they simply could not compete on Chinese prices. Now, the same markets have been grabbed by Chinese brands like Vivo and Xiaomi.

 

India’s IT services companies are also into trading and arbitrage — buying cheap Indian coders to service high-margin markets in America and Europe. They are no different from traders, except that they do labour arbitrage.

 

The point one wants to make is that when trading makes sense, most businesses will do it. When it doesn’t, they may start building, assuming the business climate in India evolves to a point where business and government can trust one another. As Kishore Mahbubani, a Singaporean academic, once said: China succeeds because of its government; India in spite of its governments. When this government-business equation changes to one of trust, India Inc will not be found wanting.

 

If anyone has failed to notice, this is exactly what is beginning to happen. Starting with defence, the private sector is now developing military equipment for the country and for exports. Zomato’s founder is investing $20 million of his own money to build gas turbine engines to power short-takeoff-and-landing aircraft and unmanned aerial vehicles (UAVs). The Tatas and Mahindras have started building car platforms not just for India, but for global markets. Research and development (R&D) spends in some two-wheeler auto companies have now begun crossing the ₹1,000-crore mark, as this newspaper reported a few weeks ago.

 

Mukesh Ambani’s Reliance has just announced big investment plans in green tech (solar and hydrogen) and Adani will do the same in other fields. Conglomerates like Larsen & Toubro, Godrej, Tatas, Birlas and many smaller startups are investing large sums to build aerospace, defence equipment and drones, not to speak of semiconductor chips and fabs.

 

Apart from regulation, a real distraction for companies with the resources to invest in deep tech, products and platforms is the stock market. Infosys, TCS and HCL Tech have huge cash flows that can easily be invested in developing lots of India-owned (IPRs), but instead they now use this cash to keep shareholders, including many abroad, happy. Either they must reduce dividend payouts and invest the savings in building greater IPR, or their founders must use their own billionaire wealth to build huge platforms and products.  The obsession with shareholding control means that a significant part of promoter wealth constitutes useless pieces of paper. If Deepinder Goyal of Zomato can do this — ie, invest in R&D using personal wealth — why not the remaining billionaires? Investing in long-gestation IPR, whether in tech or pharma or products and platforms, needs patient capital which can come only from private wealth and public funding. Some listed companies could consider delisting in order to pursue long-term IPR projects.

 

Trust in India Inc is vital to ensure that it will come to the party. Mistrust and accusations of a trader mentality will not help. Who else will take on the might of Microsoft, Google, and Amazon if not the Adanis, Ambanis, Birlas, or Tatas? The late US President Franklin D Roosevelt is known to have said of a Latin American dictator: “He may be a ‘sob,’ but he is our ‘sob.’” Warts and all, we must protect our big businesses. If they cross the line, we must deal with their transgressions here, not allow foreigners to undermine them.

 

The author is a senior journalist