Vice president says companies are not investing enough in research and are afraid of taking risks

Vice President Hamid Ansari raised concerns on Tuesday about Indian industry’s ability to adapt to the increasingly competitive and restrictive global economy and criticised industry leaders for failing to take risks, investing in research and turning complacent by living off government support.

“India's largest private company by market value, Reliance Industries, spent a negligible 0.32% of its revenues on R&D (research and development) in 2015, while L&T, an essentially engineering company, invested 0.36%. By comparison, Petrobras and PetroChina, two comparable companies from emerging markets, spent 1.3% and 1%, respectively,” Mr Ansari said at an event to bestow Tata Sons chairman N. Chandrasekharan with the AIMA - JRD Tata Corporate Leadership Award.

While German engineering major spent 5% of its revenues on R&D, just 1800 companies sought tax benefits from the government for investing in research and development in 2016, Mr. Ansari pointed out.

“Thus, merely offering incentives to industries may not be enough to spur innovative growth… Allow me to mention some harsh truths. For many Indian firms, competition per se is a new phenomenon,” Mr. Ansari said, exemplifying his point by stressing that apart from a few examples, most businesses have lacked sufficient grounding and experience in global competition because of the absence of intense inter-firm rivalry in the domestic business environment.

“Additionally, prolonged government protection has left them feeling complacent and ill-prepared to wage competitive battles at global level. There is a genuine need for change in the internal environment of Indian firms that can foster competitive thinking and behaviour,” Mr Ansari stressed.

“Currently, most Indian companies operate at the bottom of the global value chain by selling components or unbranded products. This is true even of our firms in the services sector. The test before our companies is to develop business capabilities that equip them to compete at the top of the value chain,” he said.

The Vice President said that Indian corporates’ ‘inherent weaknesses’ were compounded by slow global growth in recent years and their ‘debt addiction’, referring to a doubling in India Inc’s debt levels from Rs 20 lakh crore in 2009 to Rs 41 lakh crore by 2014.