Time to Stop Vilifying Wealth Creators

Story by  ATV | Posted by  [email protected] • 3 Years ago
Ratan Tata, Chairman, Tata Sons
Ratan Tata, Chairman, Tata Sons

 

 Sushma Ramachandran

Wealth creation is essential for economic growth. As are wealth creators. Sadly, in this country, making money has been viewed as an undesirable activity and those who make money are considered equally undesirable.  Prime Minister Narendra Modi’s speech recently about the need to give primacy and respect to wealth creators is not his first exhortation on these lines. He has earlier expressed similar views. This time around, however, there is greater resonance since the government has committed in the budget proposals to privatise the bulk of the public sector enterprises.  He also spoke of the need to widen the pool of human resources for management of these companies instead of leaving it to the select category of IAS officers.

Derogatory term

The issue of the public perception of industrialists being as villainous caricatures goes way back to the Nehruvian era, when the public sector was considered to be ‘good’ business and hence deserved to be at the ‘commanding heights’ of the economy.

At the time, the catch-all phrase for corrupt corporates was the term, Tata-Birlas, just as now it has become Ambani-Adanis. Never mind, of course, that the Tatas insisted they never paid bribes to government functionaries. Other business houses made no such claims, given the fact that government leaders and bureaucrats had then to dole out favours simply to allow them to operate in the normal course.

Crony capitalism was the order of the day but it would be unfair to blame business alone for this situation. It was more a case of a system having been put in place that encouraged rent-seeking activity.

The Beginning of the Change

Liberalisation and the pathbreaking economic reforms of 1991 changed everything. Sunrise sectors like information technology grew without any regulations or controls to make India one of the biggest exporters of software in the world. The telecom sector blossomed, right up to the 2G scam cases and even afterwards. The dam had indeed broken and the potential of the Indian economy was realized exponentially with growth rates going up to 7 to 9 per cent annually.

The bias against wealth creation, however, had not disappeared. Neither had the cosy relationship between government and industry. This became increasingly evident with the rise of many new industrial giants that maintained close ties with nearly all political parties. The1991 reforms had not wiped out all regulations and it was still essential for the business to cultivate government to continue functioning and expanding. Innumerable regulatory clearances were still needed for any company to flourish even in the new environment.

There are undoubtedly dark sides to industrial culture in every country but it cannot be denied that corporates have created actual productive assets. The Tatas, Birlas, Singhanias, Goenkas and many other industrial houses set up factories and produced goods needed in the country, most times far more efficiently than in the public sector. Later, it was the turn of Reliance and Essar in the oil sector, computer companies like HCL, a whole host of pharma companies, the telecom industry and the vast array of FMCG companies that have made India into a manufacturing nation. 

Vajpayee’s upfront approach

As for privatization of public sector companies, this remained untouched by the 1991 reforms. It was left to the Atal Behari Vajpayee – led government in 1999 to set up a full-fledged Disinvestment Ministry and start the process of privatization. Even then, it was controversial with many observers insisting that the companies had been sold for a pittance. The same old argument that the country’s crown jewels are being tossed away was trotted out by many critics.

In retrospect, it has been found that nearly all the viable companies sold then are doing better in their new avatars. But there is no doubt that the furore over selling valuable land assets at the time have led to the current decision to monetize assets both outside and within the privatization process.

The sensitivity of the very term privatization and the political upheaval that any proposed sale could create, can be gauged from the fact that the plan to sell off the defunct entity, Scooters India Limited was first outlined during the Rajiv Gandhi government. It was among a list of eight or ten companies that were then identified for sale. The Lucknow-based SIL remains unsold till now, 35 years after the proposal was initially mooted by those looking to promote economic reforms at the time.

Modi’s turn

In hindsight, therefore, the resolve of the Vajpayee government to go ahead with privatization was remarkable. All the more so, when one recognizes that the Modi government has gathered the courage to carry out this same initiative only in its second term. It is equally disappointing that the UPA government, led by the architect of the 1991 reforms, Dr Manmohan Singh did not take any steps in this direction despite having two full terms to do so.

On tapping a wider pool of human resources, the call for looking beyond the IAS is indeed commendable but somewhat late in the day. A proposal mooted a few years ago to allow lateral entry of bureaucrats does not seem to have changed much in the iron frame system laid down by colonial rulers.

The galvanizing impact of bringing in direct recruits to the system can be viewed from the fact that the 1991 reforms were initiated and supported by persons like Montek Singh Ahluwalia, who was not from the civil services. India has many similar distinguished experts in various fields of academia both here and abroad. As is done in other countries, they should be asked to join the government on fixed-term contracts to bring greater dynamism to policymaking.

It is high time the political landscape is rid of efforts to vilify those who are running the engines of the economy. It is routine for business houses to be described in derogatory terms by political leaders in a bid to tarnish the image of the government of the day. Not only that, but policy-makers also harbour suspicions about corporate leaders which in turn makes them formulate intricate regulatory processes that are inimical to growth. Prime Minister Modi’s words, therefore, need to be taken seriously not just by those outside the system but even more so by those working within the existing framework of governance.