Analyzing the corporate response to economic reforms in India

Abstract

In this paper, we analyze the changes in the corporate sector resulting from the India’s move from the first generation reforms to second generation reforms over a 15 year period from 1991 to 2005 – and try to establish links between improvement in the performance of the corporate sector and the observed growth in the economy as a whole. Continuing the work begun in the paper ‘Corporate Response to Economic Reforms.' by Prof. Rakesh Basant (EPW, March 4, 2000) and extending its scope, this paper does the following: 1)Analyzes the evolution of the reforms in the corporate sector (Industry and Services). 2)Traces and analyzes the corporate response to economic reforms undertaken in India according to the following periodization: - 1991-1996 - 1997-2001 - 2002-2005 The key strategic dimensions along which corporate responses has been evaluated are- a. Expansions Strategies: Domestic investment and foreign direct investment b. Restructuring Strategies: Mergers and Acquisitions (M & A) trends c. Partnering Strategies: Foreign and other collaboration d. Manufacturing Strategies e. Technological strategies f. None-price Competition Strategies: Selling and Import Strategies 3) Assesses the contribution of the corporate sector to the observed growth in India in the past- reform period through performance measures like technological development, manufacturing capability development. 4) Indicates areas having scope for further economic reform in the corporate sector by indicating areas of shortfall: The rationale for this periodization is based on the pattern and speed of the reform process that has been observed in India. After the initial few years of aggressive reform, the reform process slowed down as a result of the Asian Financial Crisis and the overall global recession. The reform process has picked up again since 2001, as India entered into the second generation of reforms in many sectors.