Indian Markets: Open Sesame
n a rather candid conversation last year with Forbes India, Sunil Mittal, chairman, Bharti Enterprises told us, “Now, India is done. Of course, there is still some growth left. I’m not saying it’s all over… but we need to expand our horizons and go out of India.” The context was Mittal’s Bharti Airtel bid for MTN, the largest telecom services provider in Africa. The stock markets perceived this a foolhardy attempt and hammered Airtel’s stock down to its lowest levels in a long, long time.
Mittal though remained unperturbed and clear on why Airtel had to be in Africa. It is home to a middle class variously estimated at anything between 350 million and 500 million people, as large, if not larger than India’s. If his company intended to sustain the momentum it had gained in India, it needed access to new markets.
A few weeks after the interview was published, he aborted the attempt to gain control over MTN, kept low for a few months and finally wrested control of Zain Telecom, the second largest player on the continent, after paying $10.7 billion.
If you ignore what the stock markets think for a moment, then Sunil Mittal is clearly a metaphor for India’s aspirations. What he is attempting for Bharti Airtel represents a microcosm of everything India ought to be attempting, but on a larger canvas. Over the years, he worked hard at innovating and integrating the best practices and technologies available to telecom businesses to build a compelling proposition. And when the time was right, he worked harder at prying open the African market to secure his future.
To that extent, the issues Indian planners now have to deal with over the next decade or so are these: What is it that they can do that will open up for Indians like Sunil Mittal access to new markets? And, what are the kind of tools they ought to arm men like Mittal with that will give them the edge they need to become significant players in the global arena?
There is a larger issue here. To lift close to 500 million people out of poverty, India needs to grow at 10 percent for at least 10 years. Which means, exports that now account for 15 percent of India’s GDP ought to grow at anywhere between 20 and 25 percent.
To meet these targets, India needs to provide its foot soldiers like Sunil Mittal access to new markets in other parts of the world. But gaining access to new markets comes at a price — you open up your markets to others as well. And this isn’t something India is entirely comfortable with yet.
Legacy Baggage
It was only after 1991 that India started to transition into a more outward looking economy. It began to scramble for an increased presence on tables of the kind hosted by bodies like the World Trade Organization (WTO).
Much water has passed under the bridge since then. India is now among the most important decision makers at the WTO and the challenges it faces now are significantly different. As recently as five years ago, Indian negotiators at the Doha Round of the WTO figured the initial negotiating stances they had assumed were now counterproductive to the country’s interests.
For instance, India is now deficient on oil seed production. But barriers exist that prevent imports of oil seed into the country. “It is difficult to understand why oilseed deficient countries restrict import of oilseeds,” says Amitendu Palit of the National University of Singapore in his paper “India’s trade strategy for acquiring greater market access”.
To be fair though, this is a legacy issue. When India got on these tables in the early years, the compulsions to protect agriculture was both economic and political. Over the years though, as the economy morphed into a different animal, negotiators found themselves defending economically unviable positions.
“For us, it is a livelihood issue of some of our poorest citizens,” argues Rahul Khullar, India’s commerce secretary. “We cannot allow the whole groundnut economy of Andhra Pradesh and Gujarat to be wiped out for some economic gains,” retorts Khullar. Be that as it may, sensitivities around allowing agricultural imports have resulted in India being one of the most protected countries among emerging economies. This needs to change, and this is also where the problem lies. It is against this background that pointers on India’s strategy to carve for itself access to new markets are emerging.
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