Cambridge; New York: Cambridge University Press, 2012. xxv, 426 pp. (Figures, tables.) C$30.95, paper. ISBN 978-1-107-62286-9.
This book is a bold manifesto on the imperatives of India’s modernization and industrialization. The plan for action deserves debate. First, India needs to build on its significant entrepreneurial resources. The revolutionary reforms of 1991 will aid this process. Second, the services-led growth story is portrayed as a mirage and manufacturing is considered the essence of industrial development. India should emulate Britain, the United States, Germany, China and South Korea in this regard. Third, India needs to move away from customized and low-end software services to software products, especially embedded software products that function in airplanes and advanced automobiles, and in almost every modern industrial process.
India’s entrepreneurial resources are substantial. The book traces the entrepreneurship story since the Indus Valley civilization to present times and notes that India was producing 25 percent of the world’s manufactured goods in 1750 when the same figure for Britain was 2 percent. British rule played a largely debilitating role in draining India’s wealth. The book traces the precipitous decline of Indian manufacturing after Lord Clive. It also notes some elements of modern commerce introduced by the British: Dwarkanath Tagore was a partner in India’s first holding company; company laws are a British legacy; modern education made a positive impact on entrepreneurship; nationalism, especially after the partition of Bengal, propelled industrialization; and, events like the Crimean War and World War II created demand that spurred Indian entrepreneurs. It was under these circumstances that Jamshetji Tata and Dorab Tata created a steel plant in the mineral-rich Sakchi village (now Jamshedpur) in Bihar—an achievement the British authorities thought was unbelievable.
The not so well-known cases on contemporary entrepreneurship are discussed as well. Poor women have become empowered by donating their reproductive capacity and more enterprising women who supply donors to in-vitro clinics can even earn the salary of a university professor. There is the fascinating story of Jagdish Khattar, a senior Indian Administrative Services officer turned chief executive officer of Maruti Suzuki Corporation, who founded Carnation Automobiles after retirement. Carnation services automobiles comprehensively after they land with a consumer and may well transform the servicing landscape in India. This transformation could be as significant as the advent of the Maruti Suzuki car in India, which has taken customer satisfaction to a significantly higher level since the mid-1980s. The post-1991 landscape has many first-generation professional entrepreneurs, like Sunil Mittal of Airtel, R.K. Dhoot of Videocon International, Desh Bandhu Gupta of Lupin Laboratories, and Krishna M. Ella of Bharat Biotech International, among others. Many of these entrepreneurs constitute a reverse brain drain from the US to India. It is significant that software tycoons such as Azim Premji and N.R. Narayanmurthy do not find a mention in the book.
Entrepreneurship, the reforms of 1991, and a positive spurt in Indian manufacturing, notwithstanding, India needs to pay greater heed to promoting manufacturing, like the other countries that participated in the Industrial Revolution. The author posits a robust relationship between improvements in manufacturing productivity and economic growth. India is urged to emulate countries like China and South Korea. Samsung’s tryst with microwave manufacturing is held out as a role model in business strategy. It is efficient production with technological progression rather than low wages that produces industrialization. This progression is impossible in India’s unorganized sector, comprised of a multitude of small commercial operations employing the bulk of Indian workers. This sector therefore needs to be better organized with manufacturing processes to harness it productively. Defense-commercial spinoffs, which led to the evolution of the Boeing aircraft and the Internet, are applauded. Guns do not necessarily come at the cost of butter and deploying defense technology for commercial purposes is considered essential. And, India’s manufacturing-driven growth story will consume much more energy, at a time when China’s energy consumption is three times that of India’s. The country will therefore need to provision for energy consumption.
The book is largely critical of the role of the service sector in India’s development. Not one Indian company is among the top hundred revenue earners in the information technology sector, when Chinese and South Korean firms are to be found in this category. The reason is India’s dependence on customized software rather than software products that enjoy superior revenue-generating potential. This business depends on lower wages rather than higher productivity—a factor that will cease to be a cost advantage for India. India therefore needs to develop software products, especially embedded software products that are part of airplanes and expensive cars. Though these are very important arguments, one wonders whether some high value-added embedded software is developed when Indian firms provide software for airplanes like Airbus or the National Aeronautical Space Administration (NASA). That story is altogether missing from this book.
This fine, well-researched book deploys economic history and economic analysis to lay out what it considers the elements of India’s industrial revolution. This exercise draws lessons from comparative industrialization. The author is acutely aware of the importance of politics but does not discuss it. But India’s services-driven rather than manufacturing-inspired growth may be more the result of infrastructural capabilities such as a decent financial and communications infrastructure but dismal roads, ports and electricity provision. Recent scholarship has revealed that the varied nature of infrastructure provision has more to do with Indian politics than entrepreneurship. This book should inspire future scholarship to integrate the story of entrepreneurship with the political economy of regulation.
Rahul Mukherji
National University of Singapore, Singapore
pp. 170-172