The lament of India – from Jawahar Lal Nehru to Nirmala Sitharaman — has not changed after 70 years. The Corporates did not listen to Nehru and are not listening to Sitharaman. The Reserve Bank of India routinely manages repo rate, inflation and loses forex, but the private sector rolls in profits. High or low the rupee, industry changes are not commensurate.
Nehru had then offered to the private majors to help India become a giant with investment in building the power, steel and every conceivable sector as he was preparing for the first five-year-plan. The lack of response led to creation of large industrial state-owned enterprises. It was a compulsion for the government of a newly-independent country. As the public sector raised standards, the private in 1960s sent their many sick industries to be nursed by the government and then with good health reclaim it. It was a mistake to do that and nationalise the sick textile mills.
Now for the eight years, even after liberal assistance, loans and other amenities, at a summit on September 13, Finance Minister Nirmala Sitharaman called upon Indian industrialists to invest in the country: “Is it like Hanuman? You don’t believe in your own capacity, in your own strength and there has to be someone standing next to you and say you are Hanuman, do it?”
Will this Hanuman wake up? They do not. The government is the holy cow. Many opportunities were given after 1991 liberalisation, it ended in enormous stock scams — Harshad Mehta to UTI, LIC, Ketan Parekh and what not. The Joint Parliamentary Committee (JPC) probe testifies it. After Lehman 2007 world collapse, which had virtually escaped India, the private 50 top companies denuded the banks with the government incentivisation programmes. But for clever re-engineering by the NDA government and then Finance Minister Arun Jaitley the collapse of the banking sector was inevitable.
The private sector does not learn. They told Nehru that enterprises like power were risky and was the responsibility of the government. They are still not listening but their old instincts, weary of high standards of quality and employee care rattled them. They through machinations grab the public sector giants. JRD Tata had proposed an offer in 1947 to the Indian government to have 49 per cent stakes in Air India, which worked out in 1953. But again through a long machination since 2005, in which a Central minister played significant role by denying gainful routes from the AI, among the fewest profit making airlines, was driven to losses and handed over for a song. The PSUs are no bad at business, it proved.
And, today the country is crying hoarse over current account deficit, sinking jobs, unexportable products, India is a net importer of oil but private companies sell oil spud in the country abroad for high profits. What have they done all these 70 years to make quality products to be acceptable by global consumers? Madam Sitharaman, the personal kitty-oriented profits for manipulations are more lucrative for them than acting like a Hanuman. If the rupee is falling it is because they do not stand up to challenges and always blamed the government and efficient Navratnas, even many that they acquired. An audit is called for assessing how the companies they took over are functioning.
They raised the bogey that the government should not be in the business and the private do not contribute to it except taking over efficiently managed government enterprises. The rupee is tumbling for them and the Indians are trying to help the supine Hanuman.
In the process, the government remains in stress and does new experimentations. And those in business even at high 7 per cent consumer or 12 to 15 per cent wholesale inflation make high profits and curse, who else but the same government which cares for it. Today, the rupee depreciates for the failure of the business class and with it rises external and fiscal deficit as well as domestic inflation.
The Finance Minister asked the Indian industry why it was hesitant to invest: “We will do everything to get the industry to invest here. I want to hear from India Inc what’s stopping you? No, Madam, they would not. Recently, rightfully you stopped the sale of Central Electronics Ltd. May be once again it is time to rethink and strengthen the enterprises that are in government command. She has listed corporate tax cut to changing the labour laws to suit hire and fire to raise their investment capacity.
She forgot that over $82 billion forex was lost to keep the rupee stable in nine months and lost large sums in giving incentives. The private profits soared. Exports did not pick up because their goods cannot compete. Also because of them wages were suppressed and the demand in the market was lost long before the pandemic, in 2017. Studies say that pandemic caused a 47 per cent decline in the average seasonally adjusted per capita real household income in April 2020 compared to February 2020.
This slowdown in structural growth was caused largely by declining household savings rate and low agricultural growth. The industry cleverly caters to the government’s slogans but they will invest only for their own returns and not for the ‘rashtra’ (nation).
The rashtra needs to depend on statistics from the government institutions. Now the private even with not so high quality of data are being relied on. The government bodies give the signal for corrections, the private sensationalise. The concern of the government for the small firms, traders, agricultural sectors and working class needs to be reflected and not challenged by data that is difficult to confirm. Indian official data is internationally recognised.
There is a balance of payment problem. Also there is need for ease of doing business. The GST needs simplification. But all the same the poor man needs his vehicle to be saved from seizure because of auto lobby manipulation. The increased money circulation be utilised to let the informal sector grow and target drastically changing the model of exports basket, a difficult but essential effort.
So the Finance Minister would do better not to rely on industry. She has to invigorate the cache of public sector, implement the PSU model of wages everywhere to boost consumer demand, and make the private sector professionally compete for a future India. Also she can forget for some time stabilising the rupee. A competitive industry producing products at proper prices would help the domestic economy as well as capture the world market. — INFA
