India's next industrial boom
India’s new directive for an ‘Aatma Nirbhar Bharat’ can be more effectively fulfilled by instituting pro-entrepreneur policies that attract efforts by millennial entrepreneurs
Years ago, Bengal's Marxist Chief Minister Jyoti Basu once asked one of his close business friends, Jit Paul of the Apeejay group: "What is the surest way to create employment fast?" To this, Paul's simple suggestion was: "Create as many employers as fast as possible. They will automatically generate employment." As the head of a multi-party Left Front government, Jyoti Basu was aware of his limitation to promote such a pro-employer policy and did not discuss the subject further with other close business friends like industrialist Rama Prasad Goenka and Tata Steel's Russi Mody. Few governments in the world have appreciated such a simple logic more than Communist China, especially since the time of its 'paramount leader' in the 1980s, Deng Xiaoping. Along with the then Party General Secretary, Hu Yaobang, Premier Zhao Ziyang and President Li Xiannian, Deng promoted an economic policy in 1982 fully focused on the creation of private entrepreneurs and promoting foreign enterprises with a clear export obligation that helped make China one of the world's top manufacturing bases and the biggest exporter over the next 30 years. In the process, millions of Chinese citizens got jobs. New job opportunities necessitated employment-oriented education in a host of areas, covering trade, finance, insurance, new technologies and entrepreneurship.
The Communist Party had no conflict with the emerging Chinese employers and capitalists. China's private employers have full allegiance to the Communist party. Their capitalist lifestyle did not bother the Communist Party big guns. The Government continued to offer extraordinary support to industry and entrepreneurs though it had been far less supportive to employees in terms of wages, job protection and working hours, especially in Chinese firms. However, contract implementation is more rigorous in foreign-controlled companies. Under China's labour contract law, job termination is valid due to operational reasons (Article 41), personal reasons (Article 39) and termination due to behaviour (Article 39). Reasons for an operational notice include insolvency of the employer and/or a merger of enterprises and a strategy change with resulting job losses. The employer can terminate the employment contract if the employee being unable to provide the service guaranteed under the employment contract. An employment relationship can be terminated if an employee culpably and seriously violates his or her obligations under the employment contract.
China's pro-employer policy and its state-owned enterprises — having practically no conflict with the private sector — made the country the world's biggest producer of steel, coal, energy, transport, construction and communications systems. China is also the world's second-biggest shipowner, biggest shipper, major general insurer, top international bankers, electronic data aggregators and payment system operators among others. It is the world's second-largest economy, far ahead of third-placed Japan. According to a report by Swiss bank UBS and PwC, China produced billionaires at the rate of two per week in 2017. The number of billionaires in China saw increased to 373, with a joint wealth of $1.12 trillion, said the survey.
"Over the last decade, Chinese billionaires have created some of the world's largest and most successful companies, raising living standards," said Josef Stadler, head at the UBS Global Management. "But this is just the beginning. China's vast population, technology innovation and productivity growth combined with government support, are providing unprecedented opportunities for individuals not only to build businesses but also to change people's lives for the better." There were only 16 Chinese billionaires as recently as in 2016, the report said, but now nearly one in five billionaires worldwide were Chinese. It said that 97 per cent of the Chinese billionaires were self-made, many of them in sectors such as technology and retail. The American region was still home to the largest concentration of billionaire wealth, but wealth creation there was slowing. In 2017, the US created only 53 new billionaires, compared with 87 five years ago. In western Europe, the number of billionaires went up by 17 to 414 in 2017.
The most interesting part of China's enterprise boom is the emerging millennials in the country's growing list of billionaires. Rich individuals from China claimed nine of the spots on a list of Asia's 10 wealthiest millennials issued by Wealth-X, a wealth intelligence consultancy firm, back in 2015. The only non-Chinese millennial was a UAE-based Keralite in the family-owned Jewellery business, John Paul Joy Alukkas, having a net worth of $820 million. The term millennials refer to those born between 1981 and 1997. Three of the nine featured on the list were women from China, who had a combined wealth of approximately US$10 billion, about 44 per cent of the top 10's total wealth. In comparison, the number of billionaires among Indian millennials are few and almost none of them are connected with manufacturing. With a combined net worth of only Rs 40,000 crore (2019 IIFL Wealth Hurun list), all of India's self-made entrepreneurs under 40 built their businesses from technology-based ventures.
Unlike billionaires on global lists which include heirs and heiresses, the young Indian billionaires on the Harun list are self-made. Rapid advancements in technology-enabled the 'millennial entrepreneur' such as Ritesh Agarwal from Oyo hotel chain and Nikhil Kamath from Zerodha/True Beacon. Bengaluru — not Mumbai — is the Indian millennial billionaires' capital. Ironically, a number of their enterprises have attracted Chinese financial investments. Among those at the top is Dubai-based Divyank Thurakia of Media.net, followed by Delhi-based Ritesh Agarwal of Oyo, Nithin Kamath of Zerodha, Sachin Bansal of Flipkart, Binny Bansal of Flipkart, Nikhil Kamath of Zerodha, Riju Ravindran of Byjus and Amod Malviya of Udaan — all from Bengaluru. Clearly, an Atmanirbhar Bharat will need hundreds of such Indian billionaire millennials in diverse fields. And, that can happen only if the Government takes a strong pro-entrepreneur, pro-enterprise policy, offering all necessary industry-specific supports to encourage multi-dimensional entrepreneurship development. Mere slogans will not help.
Views expressed are personal