Due to high tariffs before the liberalization period, most Indians firms enjoyed protection of some kind or the other. Free imports were not forthcoming. Restrictions on royalty payments discouraged foreign suppliers to offer latest technology to Indian partners. Manufacturers had a field day as this situation continued for a long time, leading to the creation of artificial scarcity even for basic items such as passenger cars and scooters. MRTP restrictions FERA barriers, a restrictive licensing policy, price controls (steel, fertilizers, lubricants etc.), public sector monopolies, entry barriers for MNCs in power, electronics, mining, infrastructure, aviation, oil, telecom, sectors, capital market restrictions came in the way of investing in technological up-gradation, buildings viable and globally competitive plants and offering goods and services to customers at an economical cost.
Licensing barriers restricted the entry of global players. There were very few players, there was scarcity of raw material, so shortages prevailed during the pre-liberalisation days and no attempt was made to upgrade the technology.
Post liberalization majority ownership to foreign companies was allowed, global giants were allowed to set up manufacturing facilities in India (Suzuki, GM, Ford, Daewoo, Hyundai, Mitsubishi etc.), capacity expansions were allowed freely, quality and customers’ services improved rapidly.
Segmented into engine (26% in value terms), electrical, transmission and steering (16%) suspension and breaking parts (13%), equipment and others; large number of players with small, uneconomic capacities where most have not invested in the expanding capacity or modernising plants; very few changes in Maruti cars during the past 15 years or so and hence suppliers also did not feel the need to have product development skills.
Post-liberalization efforts leading to additional capacities did not yield results because volumes of passenger cars did not improve as fast as expected. As a result, even established players like Sundaram Fasteners, Sundaram Clayton, Delphi Automotive Systems, MICO, Sona Steering, etc have suffered due to falling sales volumes and slower growth rates. The situation has changed during the last five years or so once these companies have turned their attention towards the international markets and started coming out with products in line with global quality and cost specifications.
Air Conditioner Industry:
There were few players before liberalization and technology up-gradation did not take place. Blue Star, Voltas, SIEL did not invest heavily in R&D. Post –liberalization new players with latest technology have hit the market place (Carrier, Mitsubishi, Hitachi, LG, Tecumseh, GE & Matsuhita); competition from indigenous brands, high taxes, low margins have come in the way of selling branded goods in significant numbers in recent years, however the household demand is the keeping industry hopes alive.
Before the 90s, the market with several players was sharing the abnormally high revenues due to restrictions on entry of MNCs. In the CTV market, technology plays a major part and the Indian majors BPL, Videocon, Onida survived the onslaught from MNCs after 1994. Videocon have a volume base of over one million sets and are technologically equipped to go beyond the 21 inch sets, because of the technological support from their affiliates. Other MNC players have been scaling greater heights, due to their superior technologies and phenomenal brand reputation especially, LG, Samsung, Thompson, Sony, Sansui, Panasonic etc. The entry of Chinese brands has complicated the picture in recent times, with brands like Konka, TCL, picking up respectable volumes in this price sensitive market due to their technological edge (in high definition televisions). Indian players continue to lose their market share because of stiff competition and their dependence on overseas technology, (in terms of royalty payments; Chinese do not depend on overseas technology).
Power, Telecom Industry Sectors:
In the days gone by power generation and supply was in the hands of central power corporations and state electricity boards. Long gestation periods, FDI restrictions, rigid tariff controls prevented the entry of global giants. The local players failed miserably in meeting the growing power requirements. Monumental losses and the demand supply gap compelled the government to open up the sector with attractive incentives to global giants (Enron, Cogentrix, Spectrum, Tech, Mission Energy, National Power, GEC, EDF and JLPC). Telecom revolution is a recent phenomenon as the erstwhile scene was dominated by government controlled and owned Units (VSNL, MTNL) taking the customers for a ride. Both the hardware and the software segments witnessed stunning changes in recent times with the opening up of the sector in a big way. As a result AT &T, Alcatel, Nynex, NTT, Telstra, Bell South, Motorola entered the field with a bang especially in the late 90s.
Other sectors continue to reel under the weight of other prohibitive conditions in varying degrees 1) Cotton yarn industry (lacks global competitiveness, poor quality, too many players, high power, wage and interest rates apart from out dated power looms 2) Paint industry continues to suffer due to high raw material costs (45% sales) 3) Steel industry (flat products) faces the threat from protective barriers created by developed countries. Unused capacities, poor labour productivity are the other major problems 4) Pharma industry: R&D investments are low here (hardly one per cent of the total turnover).
Now there is a much desired improvement in all sectors. In fact the IT technology, Automobile manufacturing and Pharma are finding their hub in India for the entire commercial world. Even the most advanced countries are registering patents from India especially in the Pharma sector.