Sunday, July 02, 2006

Man and his mettle (July 3, 2006)

By Swapan Dasgupta

In the mid-1990s, when India’s economic liberalisation was still in its infancy, it was relatively rare for the Indian community to welcome an entrepreneur from India as a new settler into Britain. There were lots of bankers, MNC executives and even a clutch of refugees fleeing from FERA and COFEPOSA who made London their home, but a well-to-do, legit entrepreneur was a different ball game altogether.

S.N. Gourisaria, an endearingly eccentric Marwari who came to London as a student and never returned, made this point to me in 1996 while introducing Lakshmi Mittal, “the new boy” in town. Gourisaria, who then ran a small weekly newspaper, was a repository of knowledge on matters “Indian-Indian”, as opposed to British-Indian, could be trusted to detect an emerging trend.

I recalled Gourisaria’s observation in the summer of 2001 while attending a party at a house in Regent’s Park hosted by another successful London-based Marwari entrepreneur. Two things struck me about that June evening. First, the complete absence of white faces among the guests—they were very much there as waiters. Secondly, the visible signs of a significant entrepreneurial exodus from India to London. I came across at least eight Marwaris, all below 40, who had shifted base to London in the past two years. They were all from established business families and they had all invested their Indian seed capital in businesses controlled from London.

Today, in part thanks to enlightened, investor-friendly British immigration policies, many hundreds of high net-worth individuals from India have made London their operating base. These new immigrants are qualitatively different from the Indians, Pakistanis, Bangladeshis and East Africans who immigrated to Britain in the 1960s and 1970s. The manufacturing units of the new entrants may be located in Ireland, China or Kazakhstan, and, like Mittal Steel, their companies may be incorporated in Holland, but London has become their new home.

I refer to this phenomenon in the context of the jubilation across India at Mittal’s successful merger of his Mittal Steel with the blue-blooded European steel giant Arcelor. Since the flashy tycoon, who also happens to be the richest man in Britain and the third richest in Europe, had to negotiate racist taunts and social snubs to overcome the formidable opposition of the Arcelor management, there is a temptation to view Mittal’s success as symbolic of a resurgent India prevailing over a declining Europe.

Without dampening the sense of national pride at Mittal’s achievement, it is necessary to drive home an obvious point that India has chosen to conveniently gloss over. The meteoric rise of Mittal over the past decade constitutes an advertisement for Britain, rather than India. It is well known that the United Kingdom is a high-tax, high-cost economy. The cost of property and labour is absolutely prohibitive, even by Western standards. Despite these obvious shortcomings, why has a community of Indian entrepreneurs flocked to make London their base? What does the UK offer that India doesn’t?

The answer in one word is environment. Over the years, India has produced a steady stream of economic refugees who have gone overseas in search of opportunities. Initially the problem was absolute scarcity. Gradually this gave way to the oppression of the license-permit-quota raj. Finally, when the futility of socialism was grasped, our politicians refused to let go all the reins of control.

Just examine some of the hurdles Mittal had to overcome. First, there was the contrived xenophobia over preserving “European values.” It was almost akin to the bogus invocation of “swadeshi” by the ITC management when BAT tried to resume control over the cigarette giant in the mid-1990s. However, whereas the Arcelor management’s posturing was shunned by organised shareholders, BAT couldn’t muster the courage to move ahead in a climate of xenophobic hostility.

Second, Mittal had to deftly fight away the political opposition of the governments of France, Spain and Luxembourg. He succeeded because he put the cold logic of capitalism above sentiment. Imagine a hostile takeover bid in India that has also to confront government opposition. Will any entrepreneur either dare or be allowed to counter politics with economics? When any Indian government wants to block a corporate move, it has to merely unleash the organised might of babudom on the victim. If it wants to favour someone, things are made to happen.

Mittal wouldn’t have done too badly had he stayed on in India. But, like the Tatas who battled on bravely in India, he wouldn’t have been the world leader.

(Published in DNA, July 3, 2006)

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