Perspectives on the Indian Corporate Economy

As this book goes to press, exactly ten years have passed since the economic reforms were formally launched in India. What was initiated as a response to a deep and intractable crisis exacerbated by ‘external’ pressures, has since evolved into a highly focused and coherent policy regime. This regime comprises three primary elements: a reduction in the role of the state, an enhancement of the market, and the development of a symbiotic relationship between domestic and global capital.

In this chapter, I will explicate certain theoretical notions with respect to the corporate economy. Obviously, much of corporate theory as we know it today has evolved in the West, alongside the development of corporate capitalism. While the developmental dynamics in the developing world have been quite different, some of the basic institutional mechanisms of Western corporate capitalism have been imported to the developing world through the relationships of colonialism. As DiMaggio and Powell (1983) have argued, a colonial history produces a certain degree of institutional ‘mimicry’, whereby organisational forms adopted by post-colonial states come to reflect colonial structures. In any case, it is possible to argue that certain similarities characterise capitalisms of both worlds, at least to the extent that they both concern the accumulation of capital through the institution of the modern corporation. In both worlds, the corporation seems to have provided an enduring framework for the ownership and control of assets, the investment and accumulation of capital and the organisation of production.

As I pointed out in Chapter 1, my aim in this work is to develop an historical analysis of the Indian corporate economy. In particular, I wish to assess to what extent the specificity of Indian corporate capitalism can be used to explain the lack of sustained industrial growth, a phenomena that seems to plague India even today. Broadly speaking, two sets of reasons have been considered in the mainstream literature on development, particularly in the context of liberalisation and structural adjustment: the problems of labour productivity and of firm-level or corporate profitability. My focus here will be the latter, i.e., the problem of corporate profitability. Specifically, I will try to assess whether and to what extent low corporate profitability may have hindered industrial development in India. In this chapter I will examine these questions in the context of the colonial period, spanning roughly the years between 1914–1947.

In Chapter 3 I sketched the genesis and transformation of corporate capital in colonial India. In this chapter, I will attempt to develop a similar characterisation of capital in Independent India, spanning roughly the period 1950 to 1985. First, I will sketch the general context in which the interventionist model was adopted. Next, I shall discuss the principal structures of corporate governance associated with this model, looking at both the micro-level structures internal to the firm as well as the broader political-economic structures within which the firm was embedded. In the third section I will outline the nature of growth and corporate profitability that occurred as a result of the various governance structures specific to the period, and in the final section I will attempt to relate the discussion in the three sections to examine the relationship between the growth of the corporate sector and the overall growth and transformation of the Indian economy during this period.

In the previous chapters, I have attempted to delineate the contradictions of the Indian corporate economy as it existed until the eighties. The primary contradiction, I argued, was manifest in the fact that, despite considerable growth and expansion of the corporate economy, and fairly high levels of profitability, the effects of this growth were hardly evident on the rest of the economy. It is this contradiction that I take as the starting point for my discussion of the post-interventionist model. The thrust of my arguments can be summarised as follows.