UPSC Mains 2013 GS Paper 3 Q7: model answer

In 1993 a group of Indian industrialists, later called the Bombay Club, asked for a 'level playing field' before foreign firms were let in. Two decades later, Tata Steel had bought Corus and Hindalco had bought Novelis. Liberalisation did not finish Indian business; it sorted it.

What changed

• Delicensing and the end of MRTP size curbs let firms grow.
• Lower tariffs and open FDI brought competition at home.
• Capital markets reform gave access to equity and foreign funds.
• Disinvestment and the end of reserved sectors opened steel, telecom and aviation to private firms.

Impact on Indian companies

• Efficiency and quality rose; many firms modernised plants.
• Consolidation: weak firms closed or were bought.
• Global reach: Indian MNCs in IT, pharma, steel and autos.
• Losses too: Thums Up was bought by Coca-Cola; many electronics makers vanished.
• Joint ventures taught technology: Hero Honda and Maruti Suzuki trained a whole supplier base.

Are they competing well?

• Yes: IT services (TCS, Infosys), generic pharma, two-wheelers, auto components.
• Mixed: cars, where Maruti–Suzuki leads but Indian brands trail.
• No: consumer electronics, capital goods, chips.
• Handicaps: costly credit, power and logistics, and low R&D (about 0.65% of GDP).
• Scale gap: few Indian firms appear in the Fortune Global 500 outside oil, banks and steel.

Verdict

Where Indian firms had skilled labour or scale, they competed; where technology and patient capital mattered, MNCs won.

Liberalisation gave Indian companies a chance, not a guarantee.