2006-07, ECONOMIC TIMES
It has been one of the most exhilarating years for Indian business because the mindset has shown definite signs of permanent change.
First, there is a spirit of can do, second there is a visible aggression and last, the long suppressed native entrepreneurship of the industrialist is in full flow. Viewed in terms of growth, competitiveness, and globalization, it has been a landmark year. The acquisition of Betapharm by DRL, Brunner Mond by Tata Chemicals, Ritz Carlton, Boston by Indian Hotels amongst many others have been impressive. It is almost as though India Inc has acquired a Platinum credit card for acquisitions, and is out shopping.
The post-acquisition processes and successes will not be tracked as enthusiastically by the media, but the analysts would certainly watch. If past studies are to be believed, three fourths of these multi-billion dollar investments will not deliver the targeted benefits. That is quite scary. So, pop the champagne, dear India Inc, and make sure you have your nose to the ground efrom early in the New Year!
However, India Inc is a microcosm of India. And the story becomes hazier for India. If India was a school student, then the teacher’s annual report for 2006 might read something like:
“Excellent progress in Industry and Services. Results disappointing in Agriculture, Infrastructure, Public Governance and Employment. Rapid improvement essential to avoid a bleak future. Performing much better than before, but only in parts, and well below true potential. Must behave with more discipline.”
Good or bad report? Depends on the parents’ expectations and the lens through which they interpret these comments!
Indian performance has risen with the tide of good economic performance all around. During the last four years, many countries around the world have experienced strong growth compared to the polarized growth of the 1950s: America and Argentina, Kenya and South Africa, Britain and Germany, Pakistan and Chindia and so the list goes on. In all these countries, plain folks cannot figure out whether their boom is because of clever government policies, or, cynically, whether it is occurring in spite of their government!
Growth has been excellent, but only for those in urban India (driven by services and industry) just a third of the population. The stock market has boomed, but only for the large cap sector. Indian companies have become adventurous and global with respect to acquisitions, but largely in sectors like auto, metals, and chemicals.
The poor part of the report card stares us in the face: agriculture, infrastructure, public governance, and employment. Everyone recognizes them, many know what to do about them, yet effective action is so difficult and elusive. You cannot escape these while setting an agenda for 2007.
Successive prime ministers have expressed urgency with respect to agriculture, but the action has been super slow. Excluding two thirds of the people from growth is creating a new class of underprivileged; in a half century from now, another JJ Irani Committee will be needed to report on how to be more inclusive! The deregulation of agricultural marketing, a rational approach to land reform and increasing farm productivity are all crying needs. Thanks to a flip-flop pricing policy, no new investment has happened in the fertilizer sector for a decade! Domestic production of urea is stagnant and imports are galloping.
In infrastructure, there is fifty percent more investment going on as compared to the past, but it is still at less than half the annual rate required. As MP Suresh Prabhu points out, India supports 16% of the global population with 2% of the land and 4% of the water resources. India needs a land and water policy to avert
some of the unfortunate and unsavoury episodes we have witnessed in recent times.
To celebrate the successful bidding for the ultra mega electricity projects is alright, but the fundamentals of distribution losses await attention. The states are on the right track, but are not narrowing the gap between their voters’ expectations and the reality. How can a state government watch helplessly while electricity is being stolen wantonly under its nose? Property rules are an essential component of constitutional liberalism.
With regard to public governance, if our courts dispose of the pending cases at the current rate, it will take 300 years to deal with the workload! How can an economy sustain high growth levels if there is no sensible mechanism to deal with the inevitable disputes that accompany economic growth? Yet, it is not all cause
for gloom, looking at the outcomes of the Jessica Lal case and a few political murder cases.
Another facet is the rock bottom image of the police. In a survey conducted among villagers, the image of the police emerged poorer than that of the political class!
Citizens’ services, especially with respect to the social sector, are another thrust area—public health and education.
With respect to employment, what we are walking into is scary. Twelve million people are added each year to the working population, and only a small proportion is absorbed into full-time, organized employment.
Rural people are trapped between the hopelessness of agriculture and the misery of slum dwelling in the urban areas.
What we need is a policy with regard to promoting rural entrepreneurship, which encourages people to use their natural entrepreneurship to seek their own future. This means increased financial inclusion, and a less rapacious administration.
Role of states
But as Vajpayeeji had once said, “Yeh sab hoyega kaise?”
The solutions for all lie with the states. The absence of finality is the essence of politics, so we need more political dialogues among political parties, between the states and centre, more encouragement, and more strongly linking reform with central funding. The focus has to shift from Delhi to the 25 state capitals. The sooner the FICCIs and CIIs reorient to these realities, the better is the likely outcome.
Mughal emperor, Muhammad Shah ‘Rangila’, ruled Hindustan for 29 years from 1719-1748. History records him as having the cleverness to divide his opponents, but not the vigour to himself rule. In short, he could preside, but not inspire. India should not get into another such phase!