The Vice President of India expressed concern about Indian companies’ ability to provide employment for all and the hardships that the Indian firms face in order to sustain in the global competitive world. M. Hamid Ansari highlighted the need for investing further in Research and Development across the sectors.
“India's largest private company by market value, Reliance Industries, spent a negligible 0.32 per cent of its revenues on Research and Development (R&D) in 2015, while L&T, essentially an engineering company, invested 0.36 per cent. By comparison, Petrobras and PetroChina, two comparable companies from emerging markets, spent 1.3 per cent and 1 per cent, respectively,” Ansari said.
While German engineering major spent 5 per cent of its revenues on R&D, just 1800 companies sought tax benefits from the government for investing in research and development in 2016, Ansari reflected.
Speaking at the AIMA-JRD Corporate Leadership event, Ansari highlighted that India ranks 66th out of 128 countries in the Global Innovation Index and lagged behind China, Russia and South Africa among others.
“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,” Ansari said.
“There is a genuine need for change in the internal environment of Indian firms that can foster competitive thinking and behaviour,” Ansari stressed.
He also highlighted that the debt among the companies is increasing and while the service sector constitutes to 60 per cent of the economy, it provides only 15 per cent employment. The manufacturing sector is benefitting the GDP more than the service sector. But there is an essential need for the manufacturing industry to grow too.
“Currently, most Indian companies operate at the bottom level of the global value chain by selling components or unbranded products. This is true even for 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.