Book Review : India, Uninc. By Prof. Vaidyanathan

Book Review : INDIA, UNINC

By Prof. Vaidyanathan

About The Author : R. Vaidyanathan is Professor of Finance and Control and UTI Chair Professor in the area of Capital Markets. His areas of interest are Corporate Finance, Investments, Portfolio Management, Risk Management and Pensions. He is the Chairperson for the Centre for Capital Market and Risk Management [CCMR] at IIMB. He is a National Fellow of ICSSR. A graduate of the Loyola College, Madras and a Masters from the Indian Statistical Institute, Calcutta he obtained his Fellow in Management (Doctorate) from the Indian Institute of Management Calcutta where he also taught for four years... Read his full and very impressive Biodata and achievements Here

ABOUT THE BOOK

The book is about the unsung and discounted sector of the Indian Business Environment and Economy in the first part; it goes where no book has gone before, at least not in my readings. This is a book that looks at the Small and Medium Enterprises, or more specifically, the unincorporated sector and its contribution to the Indian Economy in exhaustive and nevertheless entertaining detail

The second half is where the real fun and games begin, as the author takes you into deep insights and truths about the Indian Business Environment, in a roller coaster journey that will leave you breathless. These are not words that can normally be used to describe a business book, but fit the bill nonetheless. The Author has skillfully managed to connect culture with business, in a fashion that makes eminent and practical sense. How? Read on! 

This is a book that should be compulsory reading in each and every Business School and in each and every organisation. Why? Read on!

THE REVIEW

The first part of the book is a treat in numbers, and more numbers - and when you get tired, you get treated to even more numbers. Then, you get exhausted. And, as a welcome relief, you get an even greater variety of numbers. The beauty lies in the presentation - an easy to understand tabular presentation that drives home the point the author makes. Then, the long and uninterrupted series of numbers are never boring, because each is cogently explained by the text, as well as concern a variety of areas and sectors, keeping the reader riveted. 

This is a point that needs to be underscored, as the Author has presented a theory that shakes many a concept in our minds - making it vital that the theory be supported by data. What is even more important, the author has relied on authentic and irrefutable data from official sources, and has also presented a multitude of perspectives and data sources from various data-collection and presentation sources, ranging the entire gamut of available data. 

The Unincorporated Sector

The book looks at several aspects - contribution of the Unincorporated Sector in GDP, Income, National Savings, Employment. The data is conclusive; the unincorporated sector is the major contributor to the Indian Economy, whereas the corporate sector contributes only 18%. If you add Unorganised Agriculture, the contribution of the Unincorporated Sector comes to a humongous 60%+, which is a shocker, and a wake-up call, as the data forces you to rethink quite a number of concepts. {I shall go into details in further articles, as this is a book that can spawn several lines of thought and analysis}

Factors of Business

It looks at the important factors of business - especially credit offtake from banks and support mechanisms, the role of Social Support Groups, Chit Funds, NBFCs, Taxation coverage, Bribery as well as the challenges faced by this sector bringing you face to face with a rather uncomfortable reality of the problems faced by these organisations. The most important is the data-supported contention that Bank Credit is not easily available to this sector - which contributes the most to our Economy. 

Service Sector

The book takes on a life of its own in two segments - the Service Sector, and the social aspects of business. The data and logic presented in the entire section on the Service Sector is superfluous, as the argument presented is completely logical and intuitively sensible; you end up wondering why didnt you see or think of this, as you see it around you every single day! 

We think of the service sector as the or in terms of the IT industry, in our uninformed or prejudiced urban metro MBA-schooled viewpoints; here is data - irrefutable data - that proves that IT isnt even a drop in the ocean as on date; it brings you face to face with the intuitively logical reasoning that IT is only and only an enabler, and that the real service sectors' contribution far outweighs not only IT but a good many other sub-sectors; we are referring to {"we" as I fully agree with the Author here} the innumerable retail kiranas, travel shops, restaurants, transport, real estate, construction services etc. 

And in this sector, the unincorporated sector has a 75% contribution, dwarfing the other corporate contribution. I find it hard to refute the statement that conversely, it is the corporate sector that is garnering the lion's share of the focus of everyone in India, whereas the data shows that reverse should be the case. We should actually be celebrating the innate ability of the small Indian Entrepreneur to succeed, given the environment and the chance. 

The Social Aspects of Business

This is the frontispiece of the book, the piece de resistance. In 4 or 5 short chapters, the author has presented what can be called the real Indian way of doing business, and this is something that needs no data proofs - it is obvious to anyone who has been in business in India, and has seen and observed keenly. The way Indian Entrepreneurs leverage social contacts and social structures to create a business, open markets, gain access to working capital, employment is evident in the cornering of various verticals by various groups in India - numerous examples can be quoted, and have been extensively quoted in the book. 

The Role of The Stock Markets

The book contains all this and more; it looks at the inflated role of the stock markets, and the obvious conclusion that they arent representative of the Economy {we intuitively knew that in the recent past, comparing the stock indices which is diametrically opposed to the fundamentals of the economy; it was an amazing sight : disturbed and shaky fundamentals,and yet a robust stock market!}; here you find the data to back that intuitive logic. 

If corporate India contributes 18%, and Unincorporated 45%, Agriculture {unorganised} 17%, if 34%-41% of manufacturing is by the unorganised sector, if 70% of national savings are by households and unorganised sector, then by no stretch of imagination can an index representing 30 or 100 or even 500 stocks be called representative. Period. End of argument as far as I am concerned. And yet, the focus is all on Corporate India. 

Summary and Criticism...

I am purposely summing them in one, after expostulating the many positives of the book; the reason is that this book is a must read despite its weaknesses. The book draws a contention that the unincorporated sector succeeded despite the corporate sector and the government, and draws a clean line of separation. That cannot be strictly true - only partly true; as the role of the corporate sector and the government in creating opportunities that could be exploited by small units, travel shops, restaurants, hotels, construction etc cannot be denied.

Having said that, it is equally true that, given the paucity of Bank Credit, and an attendant lack of focus, the achievements of this unsung and real-cum-most-important sector  of the Indian Economy are truly fantastic in the past 2- years. That cannot be doubted. It is equally evident that this is a feat that required commendable ingenuity, planning, strategising, courage as well as superb execution skills to achieve. That is a given. 

The other weakness is the rather critical tone that is taken on many aspects, and the sometimes flippant attitude; but this is not a major concern anywhere in the book. Yes, it does stray significantly in one conclusion - FDI in retail, where I dont agree with the contention that FDI and organised retail will destroy Indian retail. The book itself is the greatest proof-  the small entrepreneur has succeeded because of self-driven passion, and without much support; hus, the contention that organised retail will inconvenience them in any way seems fanciful at worst, and premature at best, to be honest. 

Summary...

This is a book that brings to face to face with the real India, the real Indian Economy - not the one extolled by the Pink Papers, or other Media Outlets and Business Pundits. This is a book that brings you face to face with your business prejudices, and raises several deep and penetrating questions in your mind, its shortcomings notwithstanding. This is a book that presents a fact-based, extensively data-supported and nearly irrefutable chronicle of all that is wrong in our approach individually and severally, and that India is different to The Great West in just about every way from Religion to Culture, and from Economics to Trade. 

This is a book that introduces you, possibly for the first time in your business career, to the Real Indian Business, The Real Indian Economy, and the real way forward. But that is another story, to be told in another blog post; for now, suffice it to state that this book stands as one of the most powerful, entertaining and educating books I have ever encountered in my entire life...