The one thing: Export

In the mid-1990s, when Indian companies were struggling to handle an economic slowdown and high interest rates, I had developed a rule of thumb to filter high-quality companies: Does the company earn a significant part of its revenues from export?

- DEBASHIS BASU

The logic behind this was straightforward. If a company could thrive in the fiercely competitive global marketplace, despite India's red tape, poor infrastructure, and high taxes, it must be running high-quality operations. Of course, one had to be cautious. Back then, tax breaks and subsidies for export often led to inflated figures and the risk of "fake export". But this could be tackled by examining the size of the business, the quality of the promoters, cash flows, debt, and other metrics. A simple focus on export would have thrown up the biggest gainers of the last 30 years: Pharmaceutical companies.

Can this logic be applied to a country? It is no surprise that all developed countries have a very strong export sector, especially the four-five that have actually become developed nations within one generation in the past 100 years. There are about 200 countries for which the World Bank and United Nations Conference on Trade and Development have compiled per capita export data. On that list, India is ranked 153rd, as against South Korea at 44th and Taiwan at 35th. If you think India is a services export powerhouse, India's ranking in per capita services export is 89th out of 114, trailing nations like Malaysia, Turkey, and Thailand. Many highly promising economies of the past few decades, like Brazil, which were supposed to achieve rich-nation status but could not, have, coincidentally, poor per capita export figures. Even China, the world's manufacturing powerhouse, is at 103rd; this could be because (apart from a large population base) its exports are of lower value than those of Japan, Taiwan, and South Korea.