Subject: Economy

The economic liberalization of 1991 marked a paradigm shift in India's corporate landscape, transitioning from a protected market to an era of global competition and integration. The journey of Indian companies post-liberalization presents a mixed picture of challenges and opportunities.

Impact of Liberalization on Indian Companies

• Market Access: Indian companies gained access to global markets, technology, and capital, leading to 30 Indian companies exceeding ₹1 lakh crore in revenue by 2023.

• Technological Advancement: Exposure to international competition forced Indian firms to upgrade technology and improve efficiency (e.g., TCS becoming a global IT leader).

• Financial Performance: Companies faced cyclical challenges, with 2015-16 witnessing the lowest sales growth of 1.6% since liberalization, but showed resilience with 8-10% revenue growth in September 2023 quarter.

Competitiveness with MNCs

Strengths

• Local Market Understanding: Indian companies leverage their deep understanding of domestic consumer preferences and distribution networks.

• Cost Advantage: Lower operational costs and skilled workforce help maintain competitive pricing (e.g., Reliance Industries in petrochemicals).

• Innovation Capacity: Indigenous innovation in frugal engineering and digital services (e.g., UPI payments system).

Challenges

• Capital Constraints: Limited access to cheap capital compared to MNCs affects expansion capabilities.

• Technology Gap: Some sectors still lag in cutting-edge technology adoption.

• Scale Economics: Many Indian firms struggle to match the global scale of MNCs.

Way Forward

• Investment in R&D: Need for increased focus on innovation and technology development.

• Strategic Partnerships: Collaboration with global players for technology transfer and market access.

• Policy Support: Government initiatives like PLI scheme and Make in India to enhance competitiveness.

The liberalization journey has been transformative for Indian companies, with many emerging as global players while others still adapting. The recent surge in manufacturing FDI and implementation of Atmanirbhar Bharat initiatives signal a positive trajectory for Indian corporate competitiveness in the global arena.