Invest in trust to promote entrepreneurship

Think of past crises which delivered dramatic opportunities for India: for example, Quit India (1942), Green Revolution (1964) and Liberalization (1991). Crises excavatesociety’s hidden energy.  Even the current crisis shows signs of our society doing ‘impossible’things.

Gopalakrishnan*

 (*The writer is an author and corporate advisor. He is a Distinguished Professor of IIT Kharagpur. He was a Director of Tata Sons and a Vice Chairman of Hindustan Unilever).

Email: rgopal@themindworks.me

Covid crisis is opportunity to increase trust for entrepreneurship

Think of past crises which delivered dramatic opportunities for India: for example, Quit India (1942), Green Revolution (1964) and Liberalization (1991). Crises excavatesociety’s hidden energy.  Even the current crisis shows signs of our society doing ‘impossible’things.

Driven by Covid, innovation is bubblingin companies and start-ups, indeed to a visible extent in government as well. Biotech innovators on PPEs or vaccinesspeak highly abouthow they received administrators’ supportby texting officers.Indigenous production of PPE/ventilators has increased manifold within eight weeks. The inspirational work going on within public research institutionsmakesyou wonder where such result-oriented energy was hidden all these years. Our society has benefittedfrom the damaging covid: a crisis is too good to waste, as the adage goes.

Entrepreneurs need only two things: first, clear rules and coordinated decision-making among government’s multiple arms because too many departments have the authority to say Nyet without accountability to say Da.Second, when inevitable disputesarise, theyshould be judiciously and speedily resolved.Although policy makers think that India has dramatically improved EoDB (ease of doing business), investors and business leaders perceive improvement at a lower level.

Coordinated decision-making: The nation needs increasing levels of collaborative engagement between States and Centre.  Our constitution assumed that Centre and State would have a civilized conversation and cooperate. It lists the responsibilities of Centre, States, and shared responsibilities. Earlier, the National Development Council and Planning Commission providedformal platformsfor Centre-State dialogue.The GST Council was yet another such forum to foster cooperative federalism. Formal channels were supplemented with informal dialogues and shared goals. Recall how Atal Behari Vajpeyisaved the Sukhoi deal for India in 1996 by leveraging the informal channels of communication with opposition leaders and media.

Presently what we observe is a dilution of the formal channels,while there is not much evidence of the informal ones.Communications between Centre and States as reported in the public domain appear vitriolic. Old time entrepreneurs had harrowing experiences, running from pillar to postduring the license raj; regrettably, they still have their bitbecause government processes are a complex spaghetti. The absence of Centre-State dialogue shows through knee-jerk reactions like some Statessuddenly suspendinglabor lawsfor a while; or Centre announcing resumption of flights while States drag their feet; or millions of informal industrial laborers being pilloried on the streets mercilessly and without compassion. (read Call of the hearth, Ashok Ganguly, The Telegraph, 21st May 2020).

Judicious dispute resolution: This is a big subject. I am not a lawyer. The speech by lawyer, CS Lodha, to the Bombay Tax Bar Association on 9th May2020 is an eye opener (https://youtu.be/EB7E5R1oNNc). The speech was about Promissory Estoppel, a legal principle of not reneging on public promises, underlining a basic moral principle. The speech describes how in the last half a century, almost every State and Central government, at some time or the other, attempted to renege on its promises to business–of tax breaks or policy pronouncements. It is not that one political party or another has done so, all have.

In the past, the judiciary stepped in to mitigate or redress such administrative overreach. However, the entrepreneur lost on legal fees and decades of time. This added to woes of doing business–WoDB instead of EoDB! With the contemporary thrust on EoDB, has the government assured the business community that they can be trusted and that retrospective amendments of laws were an aberration of the past? It does not appear so.

On 22nd April2020, in a case of Union of India vs VVF Company and others, a three-judge bench of the Supreme Court changed the jurisprudence and accepted the view that Government can withdraw from its promisesin ‘public interest.’ To a lay person, it appears to have thrown the principle of promissory estoppel to the winds, the very principle on which trust is built in a society. In future, governments will be free to make promises and break them so long as they think it is in the public interest.The rigor to establish to an independent court that a supervening public interest existed seems to have been lowered, according to legal professionals.

We are a nation of excellent entrepreneurs, but not a globally competitive business fraternity; a nation with talented administrators, but not a purposeful bureaucracy; a nation with superb judges, but not a consistent judiciary.

The COVID crisisshould foster a betteratmosphere of trust–for entrepreneurship and for the citizen alike.

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