1. How have businesses in India developed differently from their western counter parts?
India, from 1947 to 1991 followed the socialist system of industrial development, wherein the major industries were controlled by the state. The western countries have followed a policy of free market and capitalism during the same time period. The Indian economy was restricted by the License – Permit – Quota Raj, due to which the opportunities of developing new businesses were minimal. This policy insulated the Indian economy from the outside world , and led to monopolies in the public sector which were inefficient, similar to the U.S.S.R. Post liberalisation, with removal of these restrictions, the businesses in India, free from the shackles of the permit system have grown as a fast pace with improving efficiencies. However several businesses, which could not cope with the competition, fell by the wayside.
The western economies have in the capitalistic environment, graduated from family run businesses to control by institutional investors to control by private equity firms in many cases, whereas, their Indian counterparts still have a large proportion run by family run businesses and institutional investors controlled by the government.
Many of the PSU’s in India which have survived the post – liberalisation opening up of the economy are monopolies in their respective markets and today are quite competitive on the global stage. The family run businesses compete fiercely with each other and look for opportunities in newer areas, including global markets. In the western world, there is a growing trend of consolidation with oligopolies emerging in almost all industries, which are being controlled by PE firms. Overall, India’s form of ownership has barely changed over the past decade. The division of profits made by family firms between those in their first, second and third or older generations has stayed pretty constant. 2. Why has Indian business developed in this...
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