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Nitin Pai: In defence of lobbying

It's an inevitable element of the global business scene, so India should enable the industry to function within the law

Nitin Pai 

A famous Indian politician was searching for an issue that could energise his party cadre and move the masses. A group of businessmen produced a report on “making India self-contained in her supply” of a particular commodity. It had arguments on the rationale for consumption of the commodity — why it was necessary and why the poor needed it more than the rich. One of the politician’s close associates forwarded the report to the party leadership across the country, while his personal secretary echoed the report’s arguments in an op-ed article the subsequent week.

The politician embraced the cause and triggered a historic agitation, the basis of which – partly at least – was the output of corporate lobbying. The politician was Mohandas Karamchand Gandhi, the industry group was the Federation of Indian Chambers of Commerce and Industry (Ficci) and the commodity common salt. The historic event in question, of course, is the Salt Satyagraha.

It would be hazardous to suggest that a Ficci monograph singularly triggered Gandhi’s famous march to Dandi. It would, however, be equally hazardous to discount the importance of lobbying on national politics then, as indeed in contemporary times.

The current debate over corporate lobbying conflates two separate issues: one, the legitimate persuasion of politicians on the merits of certain policy measures and two, the illegal activity of bribery in pursuit of this goal. The latter is wrong. The former is necessary. We might be in the throes of moral panic, but we should not mix up the two.

Lobbying is inevitable in a modern representative democracy: the more rules you make, the more complex the economy, and more the need for “specialists” to intermediate between citizens, companies and the state. That’s why we have lawyers who help individuals and firms navigate the legal system. That’s why we have chartered accountants to interpret the arcana of tax laws. These intermediaries play an important economic role by specialising in such matters, and saving you and I the trouble of mastering law and the tax code when all we want is to go about our business.

Lobbying serves a similar function. It is far more efficient for businesses to hire public affairs specialists and lobbyists rather than involve the management in the byzantine world of Indian politics. If we consider lawyers and chartered accountants as legitimate professionals, why not lobbyists?

One argument against mainstreaming lobbying is that lobbyists risk making democracy a plaything of the rich. Those with deeper pockets will get to unduly influence government policies. This is reasonable in and of itself. However, isn’t it true that richer people can afford better lawyers and bend justice in their favour? Isn’t it true that richer people have smarter accountants who can find ingenious ways to pay less tax? More importantly, isn’t it the case that richer people already influence government policies, but in opaque, shady, dubious or wholly illegal ways? Those who doubt this can contact Kejriwal for details.

Hey wait! What about the Niira Radia controversy? Doesn’t that connect shady corporate lobbying to corruption? Yes, it does. However, that controversy arose in a country where lobbying is not only unregulated but perceived by many as a dubious activity. Had lobbying been recognised as a legitimate profession, bound by its own norms and governed by a set of rules – like law and accountancy – we might have been spared some of the scandal.

This is, in fact, a good time to have a public debate over lobbying. Before 1991, most companies would line up outside government offices as supplicants pleading for licences, quotas and permits. After 1991 and until the exposure of big-corruption scandals of 2010, canny businessmen sought to create legislative loopholes that would allow them to squeeze through, but keep their competitors out. This approach is becoming untenable.

Economic growth, globalisation, the Right to Information, urbanisation and the penetration of social media have all changed the nature of India’s corporations and the government’s engagement with each other. Businesses that try to create and exploit loopholes have a greater chance of being exposed, with the attendant loss to reputation and valuation. Like their counterparts in mature democracies, Indian businesses will have to engage in public affairs in cleaner, more professional, and transparent ways.

This can only happen if we allow the lobbying industry to function within the law. It is far better to regulate it rather than drive it underground. Indian democracy will be better served by placing the lobbying industry in a regulatory environment that requires companies to declare their lobbying activities and expenses, lobbying firms to disclose their activities and lobbyists to adhere to professional codes of practice. This is what the US does. It’s not a silver bullet, but certainly an improvement over hypocritically persisting with a sanctimonious moral blindfold and pretending to be surprised that odious things happen in our country.


The author is founder and fellow of the Takshashila Institution, an independent public policy think tank

First Published: Thu, December 13 2012. 00:54 IST