Articles by Sebastian Morris

The IT industry (both software and hardware) is characterised by 'vast consumer side scale and scope economies' which are incomparably larger than in other industries with supply side network economies like pipelines or electricity distribution. In IT the supply side economies are also incomparably larger because the marginal cost of an additional unit of the software or hardware especially the former is very small. But its uniqueness arises on the demand side. The interaction of these two economies, in a situation of heightened technological dynamism, imposes a greater degree of contingency, and hence path dependency in the developments in the industry as a whole. It makes possible giants like Microsoft and CISCO. Even as they extract a significant part of the scale economies in the form of large profits, such firms are competitive in the more relevant dynamic sense. In this respect these industries are therefore distinguished from nearly all other prior industries. Traditional anti-trust like regulation or price regulation is entirely outmoded for the development of these industries. Strategies with the most potential would involve promoting inter-firm linkages, promoting industries with the least need to be in contact with other firms, in fresh clusters. The costs of disassociation are too large even for large countries attempting to have a role in the evolution of IT industries, so that closed-door approaches are almost entirely unworkable.

True reform and restructuring of any state electricity board in India would have to address the enormous leakage of revenue from the system. This would call for privatisation of distribution, and change in the institutional mechanism for the administration of the subsidy. Rather than the detailed regulatory mechanisms which are being pushed by the central government and the regulators, light and price-cap type regulation would suit India better. A model plan for change is put forward for the Gujarat State Electricity Board, which is quite general and could easily apply to other SEBs. A complete separation of distribution from generation is neither necessary nor desirable. Existing IPP contracts would have to be extinguished and methods to carry out the same are suggested. The danger of mounting regulatory risk, either shutting out private power production, or resulting in massive tariff increases taking place are real.

Sebastian Morris Since the cancellation of the Dabhol Power Project (DPP), the debate about electric power in India has come into the public view, raising hopes that corrective measures can be taken to have a viable, cost effective and growing power industry, A critical examination of the recent policy changes especially as regards the Independent Power Projects (IPPs) reveals that there are many dysfunctionalities in this policy particularly in the enormous and quite unnecessary burden it places on the balance of payments, and in the additional constraints against improvement and change in the state sector. It would be damaging to indigenous power equipment manufacturers, particularly the BHEL, just when it is showing the potential to be an important international player in the industry.

This paper discusses the implications of trends and patterns in foreign direct investment and-of the policy and structural changes in India for foreign direct investment in India in the 90s. It is argued that while the FDI inflow into India is likely to increase, it would never be anywhere near the $ 4 billion or so per year that is anticipated by the government and hoped for by business. By contrast, international subcontracting by foreign firms could play a major role in manufactured export growth. This is an aspect which, while vitally important for Indian manufacturing, has attractea little attention in terms of policy.

Multinational Affiliates in India Why Are They Different from Indian Firms?
Sebastian Morris Multinational Enterprises in India-Industrial Distribution, Characteristics and Performance by Nagesh Kumar, Routledge, London and New York, 1990, pp x +141.