M K Venu discusses two big success stories in Indian industry: the manufacturing of automobile parts and generic drugs, which have captured the market internationally. He brings up the rent-seeking behaviour of state agencies that continue to harass small enterprises and argues that license raj has continued for this segment of the population.
Read the complete transcript below:
We created many world-class auto companies, we created a whole of ecosystem for auto components and today, India’s auto sector is a big exporter to the rest of the world. So, you have General Motors, you have big global companies buying auto parts from India.
So, pharmaceutical has been a big success story. In generics we have, 30% of the US market today, in generics. That was born more amount of protection given to the pharma sector. So, not necessarily very open global competition. They compete also now.
But unfortunately for small businesses in India, I feel, when I say small business I mean in India, 50% of India’s employed labour force of roughly 480 million, 50% of that, close to 50% is self-employed and many of the self-employed entrepreneurs, hawkers, small service providers. Unfortunately, for these people, control raj and license raj hasn’t gone. And they come is various insidious ways, like police collecting hafta from small hawkers. So if you look at the kind of rent-seeking that they suffer, you know, from the state, it’s massive. You know hawker may earn 1000 rupees a day and if he pays 100 rupees to the police, so he is paying 10% of his turnover to the police.
So, Imagine a big business organisation paying 10% of its turnover to the authorities as rent. They’ll be destroyed. So big business in India have prospered with, also because they pay political parties, there is a nexus between political big parties and big corporates. So, they manage to get around the regulatory framework, even justified, valid regulatory institutions of regulatory framework, have been sort of, frameworks have been violated by big businesses. But small businesses are at the receiving end. This is an unfortunate part.
