Industry chambers are normally cautious about criticising the government but current Ficci President and Chairman and Managing Director of Marico Harsh Mariwala has been forthright in his observation that policy paralysis was impacting the government. There was a problem of trust between the government and the corporate sector, he said earlier this week. In this interview with M Saraswathy and Arijit Barman, he explains his misgivings. Edited excerpts:
The schism between India Inc and the government is widening. Why is industry feeling so let down? Has the government stopped doing what it should be doing to govern?
To some extent, a degree of complacency has set in. Irrespective of what happens globally, we will continue to grow at six to seven per cent. That’s still high compared to many countries. But for the last five years, we have consistently seen eight per cent- plus growth levels. So our aspirations have gone up. So now should we see this round of global slowdown as an opportunity or as a threat? If you believe in the domestic consumption story – and I very strongly still do – then I would seize on this chance to march ahead. But due to scams, indecision and raids and several other reasons, there has been an erosion of trust.
But is the government alone responsible for all the scams? Shouldn’t India Inc also do a bit of introspection?
Of course, to some extent, India Inc is also to be blamed. There were some industrialists or business houses that did gain some unfair advantage. It takes two hands to clap. Both the government and industry need to work together to bring that trust factor back.
What should industry do in this context?
It is important that as industrialists, we have to be ethical. We need to look after all our stakeholders, not just our shareholders. So we have to look at issues like inclusiveness in a much wider perspective. Unless our own companies become model organisations, the trust deficit will continue. Fingers will be pointed at industry — that we are here to make a quick buck. There is a need to bring in a fair degree of awareness among corporations to improve on various fronts like inclusiveness and sustainability. We need that critical mass.
Is this unique to India? Conscious capitalism is much discussed in the West as well.
Most of the industrial companies are owned by promoters with large shareholdings. And that’s why wealth creation has been a key focus. And this has increased dramatically in recent times. But it’s the responsibility of the promoters not to flaunt the wealth that they have accumulated, but to look at it from a trusteeship angle. There is CSR [corporate social responsibility], but there should also be aggressive personal social responsibility. I am trying to divide between a corporation and an individual promoter. What am I doing? Is it enough? Like a Warren Buffett, we also have an Azim Premji, but we need more examples of this personal social responsibility in a higher magnitude. Compared to India, it’s actually a much more recent phenomenon in the West. Look at the Tatas or the Birlas. They have been doing this for generations. But newer promoters will have to be more careful. The moment you flaunt your wealth, the trust deficit widens.
That’s a well-meaning but controversial thought. Even Deepak Parekh and Ashok Ganguly have written about the nexus between politicians and babus and corporations…
There will never be a situation in which everything will be hunky-dory. But the government should also ask: does it really need to be running airlines and then get bombarded by the Comptroller and Auditor General (CAG)? Or should it be making good policies? Is it creating value? Somewhere, the government has to say, what is sound for the country is sound for the party too and me. It’s the same for companies. Even the opposition parties should undergo that mindset change. Then we won’t be opposing good reforms to score a victory in elections.
True, the political opposition, too, has been irresponsible.
But there are many areas in which you don’t need to involve the opposition. Take mining or in appointing police heads. If you have the right systems and processes, then you don’t need any discretionary powers. There’s the Ashok Chawla committee report on allocation of natural resources. It’s been six months since the report was submitted. Why aren’t we acting on it? Beyond a point, the Lok Pal can only treat the effects and not the root cause of corruption. It’s only an alternate judiciary and ombudsman mechanism. We need much larger political reforms. Many of these critical reforms in resources allocation or the judiciary can be done by the government alone. Or take the whole issue of simplifying rules to do business. In recent surveys, India is way below many of its peers. Focus on these things. Rope in the states where the Congress is in power and use them as test cases to set examples.
But the Direct Taxes Code (DTC) and Goods and Services Tax (GST) are stuck purely due to politics. Can industry also engage with states and play a catalyst?
We are already playing that role. I went to Gujarat myself. We had our last four National Executive Committee Meetings in those four states … Tamil Nadu, Gujarat, Karnataka and Maharashtra. Most of their fears are unfounded. We have been taking it up with the states to cooperate about GST. There is huge resistance. It is a combination of genuine concerns and some not-so-genuine ones.
In the short term, what should the government and regulators do to improve the mood and investment sentiment?
Well, the Reserve Bank should cut interest rates and the government should clear projects that are stuck for months — this list is long. They are stuck at different ministries, departments, due to environmental issues, coal linkages, land acquisition and so on. Then, closely monitor and coordinate with states so that project closures take place on time. Improve the power situation that is having a ripple effect across industry. Finally, use the Budget to change the overall mood. In the mid-nineties, we would have “Big Bang Budgets. We need one now as well.
Pending Bills – like pension and retail – need to get cleared. And important tax reforms like GST and DTC where I know the government hands are tied.
Do you think that the expectations of people are higher because this was supposed to be the dream team?
Expectations have definitely been higher. But also complacency has set in. We have to think out of the box, otherwise the social sector reforms will not happen. Instead of increasing the pie, the government is concentrating more on dividing the pie. Increase it first and then divide.
Where do you think the government is lagging?
As I said, complacency about our true potential and opportunity still exists in India. Also, managing opposition and even their allies in Parliament. Also, there needs to be a higher degree of action orientation from the government in terms of implementation and execution. We have had enough think tanks. We now need action tanks.
But many of these issues have been there in the past. What has changed now?
A lot of negative news has been impacting the mood and the global meltdown added to it. This is a cumulative effect of high level of expectations from India and abroad. We are falling below our collective aspirations. And then it’s been a combination of events in the last few months — the 2G scam, Lok Pal controvery, mining and resources scam, people not getting bail, high inflation and interest costs.
Has it become more difficult to do business now in India?
Not really for companies like us. But it’s true for large projects that require government permissions. In core sectors like infrastructure, power and mining, the delays have been much longer than the past. Then the repeated increase in interest rates. That’s been very detrimental.
The other grouse the government has is that industry only seeks tax breaks and does not focus on increasing productivity.
Beyond a point, I don’t think we should ask for too many tax breaks. I made a comment to the industry minister recently that the tax rates are reasonable. But there are certain issues that need some encouragement. We may explore investment allowance, for sometime. Also I told the minister, can you give boost to R&D? Also, there are a lot of procedural issues like transfer pricing and other areas that need simplification. The tax base can also go up as a result of that.
Isn’t it much simpler to take businesses out to global markets?
I don’t agree. Business should be considered from an opportunistic point of view. I am not saying that we should be either India-centric or foreign-centric. What are the opportunities, what are the business models and how do you leverage those opportunities is important. The India story is still intact. It’s still a market we know. Overseas, it may be easier to get permission, but there could be a host of other issues of which you may be completely unaware, such as cultural, regulatory or even political risks.