Globalisation and Opening Markets in Developing Countries and Impact on National Firms and Public Governance The Case of India
Project Co-financed by the European Union under the EU-India Small Projects Facility Programme
Scientific Coordinators Jean-François Huchet & Joël Ruet
Executive Summary: India, Globalisation and Firms
The question of ‘India in globalisation’ is relevant in a fundamental manner. It is important in itself on account of its billion-strong population, its enterprises and its development model. Modern India nurses the ambitions of a continent and has the potential of a double gamble: The emergence of world-class Indian companies busy developing specific strategies to seek realignments and strategic partnerships in world network capitalism and aiming at becoming ‘price-makers’ in their niche markets. Setting up a new development model for ‘emerging’ countries, which is not only designed to compete (and cooperate) with the Chinese model but can also be exported to developing countries of the South and which seeks above all to avoid the Manichaeism proposed to poor countries, viz. the deadlock of importsubstitution vs. a dependent integration into the hierarchical world structure of liberalism.
No doubt a narrow path: India has the necessary industrial assets, the capacity to test its products in situ, the intellectual and human capital needed to entertain such an ambition, while it has to handle the issues of economic redistribution and social cohesion, with their strong and structuring Indian specificities. Economic globalisation of India has materialised as major changes in trade (imports of equipment as well as opening of opening of the domestic market), has combined with new regulatory and industrial policies, been accompanied by new World Trade Organisation (WTO) agreements and recent evolution on Foreign Direct Investment (FDI) policies. It is important to understand how the functioning of firms has further been impacted on three main areas:
1. The impact on industrial policy and the relationship between the economic administration and firms. Various studies show the central role of the State in the take-off of national industries and services. Not necessarily through simple protectionist measures, but also through an overhaul of regulation, research transfer and targeted infrastructure investment. 3 i
The related question is, from the viewpoint of the state, how to redefine its role and position in the context of an open internal market?
2. The impact on the corporate governance of industrial groups. Industries like manufacturing, cars, equipment that find themselves in the public sector for either historical or maturity reasons, now globalise worldwide. Our research concentrates on firm-level strategies, but also broadens the discussion to how and whether the compulsions created by the opening of the internal market (more FDI, growing private sector) are providing an impetus for a better corporate governance system for public and private corporate groups.
3. Technological catching-up and emancipation
For national groups to emerge from former planned, command or imports substitution systems, they have to catch-up technologically, and to achieve emancipation through R&D and both technological and commercial agreements and partnerships. The question is whether they go for sub contracting, on producing for “niches”, or directly target global competitions. More and more FDI are also dominating internal markets in different sectors through joint-venture or Greenfield affiliates, which put several limitations on the possibility for national firms to achieve technological catch up. This report presents initial findings on the evolution of Indian firms along these three lines, at times with comparison with the Chinese case. It is to be completed by July 2006 with a report entitled “Globalisation and Opening Markets in Developing Countries and Impact on...
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