The Hindu Business Line : `India has to focus on building strong corporations'

THE most recognised barometer of business success, the Fortune magazine, is celebrating its 75th anniversary this year. In an interview with Business Line, Fortune's international editor, Mr Robert Friedman, shares his thoughts on how India should apply its success in the technology sector to its other industries and governance itself and the role of journalists in emerging economies.

How do you view India's progress so far?

I think India is (poised) at an interesting moment. It is at an inflexion point. It has come to that point as a result of the fantastic success in the technology sector, which is a home-grown, entrepreneurial, world-class business and it has shown to the rest of the world that India can compete. It has given India the confidence that it can compete globally.

What do you think India has done right so far which has taken it to this stage?

Clearly, the liberalisation of the economy in the early nineties, beginning of the tariff reductions, opening up a little bit to foreign investment. I think the biggest thing India did right, may be through accident, was staying out of the way of the entrepreneurs in the technology sector. Because even the best of intentions can mess things up. Particularly, the Indian Government.

If Fortune were to come out with a list of countries, which are the best among the emerging economies, where would you place India?

I think India is behind China. Probably because it got a late start, probably because its form of government is more chaotic which is based on consensus, but is a hindrance in development matters, particularly in building highways and rebuilding cities. China can just move the whole population, (if they were to build a highway or a city). You can't do that in India. But among all the emerging countries, India is in a better shape. Certainly, I would put my money on India before Russia because there are lot of uncertainties and what Mr Vladimir Putin (Russian President) is trying to do there. I don't think the Russian business spirit is as vibrant and entrepreneurial and imaginative as India's is.

This comparison about India versus China is only good up to a point. I mean you have to accept certain realities. India is not China. So, it is going to be different and it is going to have a different approach. Ultimately and in the long run, just because China is ahead right now doesn't mean 20-30 years from now it will still be the case. China will have to ultimately deal with democracy and totalitarianism issues and how that plays out, I don't know.

What do you think India should do to adopt as a strategy to move ahead. There is consensus among politicians in India on economic reforms. Infrastructure is the only stumbling block.

Infrastructure problems are symbols of governance issues. I think India has to focus on building strong corporations. Wipro and Infosys are good examples. They are not huge by global standards. But are strong competitors. They (companies) need to streamline their operations, and improve their operating mechanism. We are beginning to see that in some auto parts' companies. Second, it must create space for more entrepreneurs to build their companies. India, I think has strong entrepreneurial instincts. India can compete and it does not need to continue the regime of protectionism, to keep the foreigners out. I think the technology sector has proved that.

What goes behind making the Fortune 500 list? Has there been any cases where a company made it to the list, but had to drop off because they reported wrongly.

This happened exactly 50 years ago. One of the editors had been keeping a list of the biggest companies for his use. Somebody on the staff said why don't we publish this. Thus, began the Fortune 500. It was first published in 1955. And then it got expanded to the service sector and the industrial sector. By 1955, we came up with the global Fortune 500 companies. It is based entirely on annual revenues, as reported to us through audited statement and has to be audited as per GAAP or any other acceptable accounting standards. But if the company is lying then we are in trouble. You have the instance of Enron. They were using unacceptable accounting standards.

Do you think approach to reporting on emerging markets should be different from the way one would report about developed countries? What advise would you give to journalists in India?

I think they should keep asking questions. They should have the liberty to question what people say. Look behind the answers. Challenge the information you get. The more an individual reporter takes that adversarial position and instead of just reporting what the companies say, the better the product will be. I don't say all that a company says is untrue. But (reporters) should question, question, question.

At this point of time, Fortune's Asia Editor, Mr Clay Chandler, interjects:

I have a slightly different answer to this one. The great challenge for the reporters is to point out to the readers what these businesses are, what these large corporations can do. At Fortune, we are different from competitors. Our magazine does not come with a slogan underneath (saying) that we are a capitalist tool. We don't have editorials saying may be you should do this.

Corporations for better or for worse, can assert tremendous influence on the society and it is the single most dynamic, powerful social organisation anybody has figured out in a modern age, (from) harnessing human resources to mobilising capital, to unleash innovation and technology. Governments can't do this. We believe companies and businesses are too important just to be left to CEOs and CFOs and business people. They (businesses) should be explained in a reader-friendly manner and to everybody in an interesting and engaging way and specially in developing economies, to help people not used to thinking of the companies that way and to appreciate their role for good and for bad and how central they can be to the development of the society. Let's cover business the way that one might cover stories about politics and take it seriously. It is not a side show. This is the main show. This is where you can make or break the future of millions of people of lives.

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