Nothing illustrates the widening polarity between the political class and India Inc than domestic reactions to US President Barack Obama’s exhortations to India to deepen economic reform.
The former, as represented by the redoubtable Anand Sharma, has made appropriately muscular (and not invalid) counter-statements about a country’s sovereign right to decide domestic policy. For good measure, he added the point that the US would do well to take forward the stalled Doha Round of the World Trade Organisation (WTO); had he thrown in the US’ egregious role in stalling meaningful action on climate change, his criticism would have been truly rounded.
Corporate Affairs Minister Veerappa Moily has darkly ascribed the US president’s remarks to “certain international lobbies” (that pesky “foreign hand” again) and suggested that the President was “not properly informed”.
Contrast this with the nuanced reactions from the chambers of commerce. After paying due obeisance to India’s sovereignty and so on, they acknowledged that there were “larger issues that needed to be addressed” — reforms in retail, aviation, defence and insurance, for instance. Ficci Secretary General Rajiv Kumar went as far as to add the word “urgent” to otherwise cautious remarks. For a community that is ultra-careful about criticising the government, this may be considered radical.
The point is that Obama (or Time for that matter) did not say anything that two respected business leaders Azim Premji and N R Narayana Murthy hadn’t said just two months before and, that too, in more trenchant terms. Premji had pointed to the fact that India appeared “leaderless” and the image had hurt its global image; Narayana Murthy pointed to the lack of policy action. They, too, attracted vocal criticism from Moily and, of all people, MP Mani Shankar Aiyar. The latter chose to distinguish between “national interest” and business interests.
It may be okay for the political class to discount Obama’s strictures. But there’s good reason to listen to business and industry in India, if only because it has demonstrated an inexorable realism in an operating environment that can politely be described as extremely challenging. The manner in which uncompetitive industries streamlined themselves as the barriers to competition came down are well documented. But here’s one example of beneficial realism an entire industry demonstrated in the face of global challenges that may have been driven by self-interest.
In the late nineties, buyers in Europe, mainly from Germany, Netherlands and Austria, and the US suddenly stipulated that they would stop buying textiles from India that were made in factories that either employed child labour or used environmentally damaging dyes (Azo dyes being a prominent one) or both.
The ban hit Mirzapur-Bhadohi in Uttar Pradesh, India’s biggest carpet-producing and -exporting belt, the hardest. Coming as it did a few years after domestic unrest over the signing of the updated GATT agreement in 1994 under the World Trade Organisation, the reaction was fierce. These stipulations, the objectors insisted, were nothing but non-tariff barriers that the venal West was raising now that the WTO agreement had lowered global tariff barriers.
The protestors may have been partially right, since commercial entities anywhere in the world can rarely be relied on to be purely altruistic. But even accounting for these motives, the facts on the grounds didn't change: child labour and the use of ecologically unfriendly dyes were pretty rampant in India. So, wasn’t this a good opportunity to eradicate two evils?
As NGOs and policy-makers heatedly argued the merits and demerits of what was a no-brainer, the bigger manufacturers saw value in conforming to the stipulations of their buyers and, literally, cleaned up their act. The industry’s export promotion council introduced labels like Kaleen and Rugmark to certify companies that had eliminated both practices and the industry went a step further in instituting schools and other facilities for children. Today, independent agencies like the UN have confirmed the beneficial impact of this clean-up, at least in the organised sector of the industry.
It is possible that strong encouragement for this reform came from the fact that India was facing the end of preferential export quotas under the Multi Fibre Agreement (albeit that was nine years down the line at the time) when the cheaper markets of China (then in full mercantilist bloom), Vietnam and Bangladesh would emerge as serious competition. Still, the end justifies the motives, so to speak.
Contrast this with the record of the defenders of “national interest”. According to one estimate, India still has 60 million labourers under the age of 14, most of whom work in appalling conditions. It is impossible to accurately estimate the extent to which harmful chemicals are released into the environment, but if the recent court ban on 40 per cent of units operating in Tirupur is any index, the problem is unlikely to be any less than it was 13 years ago.
So perhaps, despite all its self-interest, domestic industry does occasionally deserve a hearing from the political leadership and its criticisms taken in a constructive spirit. Even if no one wants to listen to the US President.