The indian capitalism

Textile shop, India.

Despite ( still) being a poor country, India is a new economic giant, an IT and high technologies flagship with an annual growth rate between 7 % and 9 % since 2003. Because of its dynamism, the country could even become the third world power in 2040. Behind China and the USA.

But if the economic boom is recent, the indian capitalism is an old tradition. In the Middle-Ages, trade was reserved for families belonging to the Vaishya class ( the hindu business class) or the jaïn community. Among them, the most powerful ones made significant profits thanks to the silk roads commerce. ( Silk roads were a network of commercial routes connecting China and India to the Middle East and Europe.) Caravans were carrying silk and porcelain from China, and spices, precious stones, perfumes from India to the Middle-East, furs and weapons from Europe to the east. But slowly, this commerce disappeared because of the competition with sailing boats. In the 19° century, the construction of railways and the introduction of new technologies gave a tremendous impetus to the production and trade. The ports of Calcutta and Bombay became the new commercial centres instead of the towns of Rajasthan ( a state in western India, a stopping-off place for caravans). So, at this time, many trade and bankers families moved to the new business centres and shifted into industry.

One of these old families is the emblematic Tata dynasty. The founder, Jamsetji ( 1839-1904) is considered as the first indian captain of industry. In 1874, he created his first textile factory at Nagpur ( central India) before investing in activities like hydro-electro power and steel industry. His son diversified the company and opened an automobile activity. From generation to generation , the Tata empire edified : Tata Airlines, created in 1932, became Air India and Indian Airlines. The group acquired “anything that is possible to acquire” ironise the Indians. From the agriculture sector to services, technologies and industry, the Tata label was and is still everywhere in India : tea, biscuits, shoes, steel, transports, IT,… In the 80’s, the group was so powerful that it was nicknamed “the octopussy”.

Other entrepreunarial families begun their activity in the beginning of the XX° century. After the WWI, the british economy was weakened by the war and its factories were damaged or destroyed. So, Great Britain turned to its colonies to satisfy the needs of its consumers, to produce what they wanted. It was an excellent opportunity to seize for the indian businesses. At this time, the Birla family, who made fortune at the end of the XIX° century in the opium trade, developed textile factories before diversifying from machine tools to food-processing and cement. The Bajaj family fortune, still today the main scooters producers, go back to the inter-war period. Two-wheelers are produced since 1960 thanks to an agreement with the italian company Piaggio while a partnership with Kawasaki in 1983 allowed Bajaj to produce motorcycles.

Partnerships between foreign multinationals and indian companies are not new. At the time of Independence ( in 1947), indian firms had to form such alliances to modernize their means of production, to carry out technology transfers. In the 50’s, Tata associated with the german company Daimler-Benz to produce trucks. Good idea ! Tata-Daimler-Benz is now in a virtual monopoly position in this sector. In 1962, American Motors entered into the capital of Mahindra, the car manufacturer. In 2006, the same company has signed an agreement with Renault, the french car manufacturer, to produce cars for the large families of the middle class.

Indian firms turned to other countries too to open factories : in Africa, in the Gulf countries, then elsewhere in Asia.

Since the 1991 liberal reforms, the “largest democracy in the world” attracts more and more foreign investments and is now seen as the new eldorado for relocations because of a qualified and cheap labour force. The service sector is booming : it represents something like 50% of the GDP. And India is renowned for the quality of its services to companies. Banking management, call centers, development of software, medical imaging,… Indians innovate and more and more multinational companies call upon to their services.

20 years after the liberal reforms, India has become a major power and is gaining its financial independence. There are more and more nouveau riche who like to flaunt their own success story. And a powerful middle-class has appeared : more than 400 millions consumers !


About travelerreport

My blog is all about travelling and photography
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