Moneycontrol
Oct 09, 2012 12:32 PM IST | Source: CNBC-TV18

What does India need to do to achieve 9% growth?

When we talk about reforms, we often simplistically box them into FDI-related reforms. While those are important, are they really game changers?

When we talk about reforms, we often simplistically box them into FDI-related reforms. While those are important, are they really game changers?

If India does need big bang reforms; it needs reforms in administration, governance, judiciary and policies. But how much of time and bandwidth is given to such reforms?

The question is why don’t we get our act together? Why do we get to a point when the Prime Minister has to come out and say that desperate times call for desperate measures? How did we get to desperate times in the first place? We got to desperate times in the first place because we didn’t address systemic issues that have been staring us in the face for years now.

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To give the example of diesel subsidy, we made a bit hue and cry about the fact that the government has hiked diesel prices by Rs 5 per litre. For over a decade now, we have had committee after committee from BK Chaturvedi to Kirit Parikh, which was the latest committee, Kaushik Basu the former Chief Economic advisor giving you long-term solutions for what you need to do as far as your oil subsidies are concerned. Successive government after government have failed to take that on and failed to make any of those changes.

So we have come back to reactive policy and a short-term quick fix solution. Is that the idea of reforms?

CNBC-TV18’s panel consisting Arun Maira , Member, Planning Commission, Manish Tewari, Spokesperson, AICC, Rajiv Bajaj, MD, Bajaj Auto, N Chandrasekaran, MD & CEO, TCS and Sanjiv Goenka, Chairman, RP Sanjiv Goenka Group discuss what  India needs to do to get to 9-10 per cent growth.

Below is the verbatim transcript of the entire discussion

Q: You are an outsider who is now part of this system. Do you think big bang reforms are the only way forward? How would you really define reforms for India at this point?

Maira: We need to have reforms along two tracks. One of the tracks is the set of reforms that started in 1991, which was about opening the country up to investments from outside and inviting more competition in the industry. But the other track on which we need progress much more is the one that you mentioned.

I want split reforms to do with management and governance into two. One is coordination or implementation, getting things done. We must make decisions stick. As the finance minister said recently, there seems to be no final decision in the country. A group meets, decides and then someone raises an objection and is not yet final. But the other track is very important; that is the track on which we get governance reforms and reforms in which people are really affected.

First, we must have more reforms that enable small enterprises to grow in different forms all over the country. They will create self employment, enterprises, ownership; that is when we create inclusive growth rather than inclusion by giving handouts and subsidies.

Secondly, we must get to more devolution and local management. We are trying too much to say that from the centre we can manage our states and states can manage every village or every city from the top down. It is not going to work. We are too large and too diverse; the agenda will be too large. We have to implement the 73rd and 74th amendments not just in letter but in the spirit of making the organisations and people capable of managing themselves.

The third comes to business again. We have to get a model of distributed production and distribution in terms of where stuff is available. Centralised production models, whether it is power or anything, will not answer our problems. We need to have a network model of enterprise both in government as well as in business. Reforms around those three tracks will create inclusive growth and sustainable.

People will see their own incomes rising themselves, being included in the governance of what they are living with or whatever they are managing. If you don’t have trust in institutions, which are failing, trust in the government as well as trust in the business, which is what is holding up the process of reforms.

Therefore, track two is more necessary than ever before. If we don’t have track two reforms, track one reform will not proceed.

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Q: In terms of the track two, how many times have we heard about the government putting together a single window clearance for infrastructure? How many times have we heard the government talk about the planning commission will become the nodal commission that will talk to each ministry and sort out bottle necks and hurdles that will get infrastructure off the ground? What is the point in having another National Infrastructure Advisory Board, which the prime minister will now look after?

Maira: The finance minister did make the right point by just setting up a committee and saying, ‘you are responsible, the country matters to you all, get together and take a decision is a necessary step.’

But it is not sufficient because the allocation of business in government, gives the ministry and ministers under the constitution, certain final responsibilities and rights. If this group takes a decision and one ministry, let us say, the environmental ministry feels that it is really going to damage the environment, they are actually duty bound to say that it cannot allow this decision to proceed.

So for certain size of projects or types of projects or programmes, where allocation of business will have to be changed, and this body will have to be given the final power, it will be very necessary. Secondly, every company has a board, some boards function well and some don’t. All the boards have similar powers under the law. Those boards in which the conduct of discussion and decision making is such that you can hear contrary opinions and in the interest of corporation take a decision and get an agreement, they produce results. Just putting a lot of people together in the board and the Chairman says, ‘sometimes I don’t like the way the discussion is going, I shall make the decision.’ There will be a reaction afterwards from that function or that division, which says, ‘we don’t think it was the best decision.’ They will sabotage it in some way. This is another thing that we need to learn - how do you conduct and come to a useful decision.

Q: The Prime Minister said,“...we are in a desperate situation and desperate times call for desperate measures”, how did we get to this point? We are suddenly comparing ourselves to Greece and other European economies who are seeking a bailout. We were a country that was growing at over 9 per cent till last year. Suddenly, we are talking about not wanting to go down the Greece route, from policy paralysis to not taking even the most basic decisions. Isn’t it because we have had a government that was inactive that we find ourselves in a place that we are today?

Tewari: I think India really needs to be contextualized and put the Prime Minister’s statement in perspective.

In 2008, we witnessed possibly the biggest global economic meltdown after the great depression of the 1930s. The arbitrage derivatives leverage driven greed completely demolished the new liberal economic model. Therefore, when the government came in in 2009, there were naysayers, there were people who were advocating caution, there were people who were advocating circumspection and there was genuine apprehension as to whether this was the correct way forward. It took a little while for things to settle down though of course, it is still not settled Europe.

Q: It has taken you three years to settle down for a government in a second tenure?

Tewari: It has not taken us three years to settle down, I think it has taken the global economy time to reconcile to the crisis and try and map away forward. As we speak, that still has not happened in the case of Europe nor has it happened in the case of the US, which is reeling under USD 14 trillion deficit.

It has not happened in the case of a lot of other producing economies, which are tanking because the consuming economies have gone down. Therefore, India is not isolated from the global context. Under those circumstances, you paused, you introspected and then you said that yes, you have consolidated and you must go ahead with the second wave of reforms and that is where you are.

That is why the point which Mr Maira was making was absolutely correct. When you look at India, you do not look at India as a monolithic entity, there are parts of India which live in 19th century and there are parts of India, which live in the 22nd century. As a government, when you have to address this diversity, there is no one size fits all. Therefore, you require different techniques and different instrumentalities of intervention, which address specific issues. That is why over the past eight years, the biggest thing which the UPA government has done is it has built a rights base entitlement structure whereby information, education, food and employment is guaranteed by the law.

You may accuse us that we should have done something in 2009, which we have done in 2012. On one side, while we are trying to stimulate growth, on the other side, we are also taking care of equity because if that equity is not taken care of, you will have a situation whereby those people are going to steamroll all the growth that you are trying to get out of the system.

Q: What are your opening remarks on this issue?

Bajaj: We have to do our job whether the economy is in form, out of form or in reform. So the point I am trying to make is beyond a point, it is not the prerogative of the manager to think too much about reform. We do not work on the system, we work in the system, and whatever be the system, we have to produce the best results relative to competition. While we can always make a case for big bang reforms, there is a lot we can do ourselves. As Mahatma Gandhi said, we must be the change we want to see in the world. So let us start with each one of us, the reforms will come in time.

Chandrasekaran: We need to ask ourselves a question, if India has a huge potential, how do we make it an exciting place so that we can realize that potential? That does not require once in a while big bang action, it requires basic things, it requires a culture. To Mr Bajaj’s point, growth is a culture, we need to fundamentally believe that we have to grow. India is probably the only country which has the opportunity to play a 20-20 game.

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Q: What do you think can be done in order for us to have a more certain and more consistent growth culture as Mr Chandrasekaran was talking about?

Goenka: Quite honestly, I think we need to move away from the politics of opposition; opposing for the sake of opposing is wrong. One must oppose if you fundamentally oppose a thought. We need a reformation of the mindset, we need to get away from a situation where the government needs to microregulate everything to a situation where the government controls things at a macro level.

From one of being regulation oriented to one of being facilitation oriented. But having said that, I think there are enough examples of companies, which have performed. There are enough examples of companies, which have grown and there are enough examples of companies, which will continue to grow. Yes, we may have certain demands and desires but it is not as if the industry is not and will not grow.

Q: I think it comes back to the basic question – is there an idea for India? The 12th Plan has articulated what we would like to see as far as the India story is concerned. But what comes of it year after year, plan after plan is that the idea of India remains only on paper. How do you ensure that that idea of India is actually translated into reality?

Maira: We have devised an India backbone implementation network corresponding to TQM. We wish to make available tools that we have located where results are coming, how they are coming. People did something after all – can we distill the essence of what they did, convert it into a tool, into a process and let people start in their own places. It is a one point plan – learn to implement and get it done.

Q: In terms of education, for instance, we cannot decide whether we want to in education to be for profit so that we can sort out the supply demand constraints that this country is faced with or we want to continue to constrain the education sector so that people are lining up outside schools and collages. People have nowhere to go and are being forced to look for education outside of India. This has been something that the government promised they would find a solution to, and yet, session after session, we haven’t even seen the bill being moved in parliament yet. We have no discussion on between various arms or the government; the human resource department sees it one way, the planning commission sees it another way. This is education we are talking about. Cannot we at least agree on the basics?

Tewari: What we are expecting is that the central government, by a diktat, will be able to fix everything. Let’s not forget education is in the concurrent list. A large part of education is administered by the states.

Q: I agree with you but the point that I was trying to make is that what stops the Centre from providing the enabling legislation. The land acquisition bill, for instance, again the states have the right to decide what they want to do, you are giving the states enabling legislation, you are giving them a model legislation, the standing committee made some recommendations, you acceded to some of them, you did accede to some. You have been able to push forward with a bill that most states weren’t in agreement with. But you have shown the courage because you believe that this will serve the purpose of India in the long-term. What stops you from doing that on other crucial issues?

Tewari: We have already done it on the other crucial issues because we have already done it on various aspects of education and health. Let me tell you on the land acquisition bill, this is not something which is rocket science or a state secret, but within government itself, there were very deep divisions as to how do you approach it. On each of these questions, which you are trying to actually untie knotted knots, you will have to go about it very slowly and deliberately.

In India, legislation does not come with an expiry date, that after 25 years, it automatically gets repealed. Here once you legislate, you seem to legislate for centuries. The land acquisition bill was put into place in 1894, we are in 2012. Therefore, when you are crafting legislation, you have to be extremely careful about what you do. There is a certain argument of expediency and a certain argument of urgency. But then, in that expediency or urgency, if you are going to end up hurting vital interest, which you will not be able to amend given that you have a fragmented polity, you need to be very careful.

Q: It may not come with an expiry date, but there has to be a cut off. There are people who suffer on account of decisions not being taken. We can continue to say we want consultative processes to take place, we want wide-spread consultation, but consultation that goes over decades?

Maira: I am not saying wide-spread. There are some things which are like enabling decisions. They sound big, that’s big ticket reforms if you want to call it. We are saying that a million little things, which if they get done, we will get the results that we wish to have. When you said even about the multi-brand retail, it is coming to the point where ultimately, the states will have to do something.

Bajaj: However simplistic it sounds, at the end of the day, all our problems are self created. Nobody has come from outside and created them for us. If there is one thing I tell myself all the time, it is that we must know how to draw a line between growth and greed because we all have a legitimate desire or a right to grow. But when we cross the line between growth and greed, it is when organisations and individuals lose sight of who they are, in their pursuit of reckless growth that they diffuse themselves and that’s the beginning of the end. As long as we know who we are, we stay focus, and as long as we focus more on excellence than on scale, I think we will be alright.

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