India celebrates its sixty-first year of Independence. The mood is somewhat sombre. India at sicty was about breaking barriers in new records but this year India grapples with political volatility, heightened terrorism, crippling inflation and global market turmoil.

Are we ready to take on the immediate challenges and are we poised to capture our true potential?

Former President of CII Sunil Munjal, the Joint Managing Director of Bharti Enterprises Akhil Gupta, the Country Managing Partner of Ernst and Young Rajiv Memani from Bangalore, the Chairman and Managing Director of Biocon Kiran Mazumdar Shaw and from Chennai Former President of the CII, R Seshasayee discussed in detail the business imperatives that India must employ for further progress. 

The discussion reveals that India is clearly poised for an economic slowdown. The government needs to focus on some non-productive expenditures too. Better administration and better governance hold the key to India's progress, the discussion panelists feel.

Excerpts from the exclusive discussion:

Q: Are we approaching the danger zone at this point in time given the fact that inflation is at a 16-year high; we have seen tighter monetary measures coming in - we are possibly going to see more action from the Reserve Bank of India (RBI), more intervention from the Reserve Bank of India, global market turmoil continues, the credit crisis, the credit squeeze continues, are we approaching the danger zone?

Munjal: I clearly think so. I think we are clearly poised for a slowdown and I also expect this not to be a very short-term slowdown. I would imagine anywhere between 18 months to as long as 30-months is a possibility. So clearly all of us in business need to learn to tighten our belts and look internally while we also want to request the government to look at additional fiscal measures as well right now not just monetary measures.

Q: We have seen some fiscal sops coming by way of duty cuts etc. but you are saying more intervention is needed?

Munjal: More is required and also government needs to focus in some of its own non-productive expenditure right now especially using subsidies in more areas than required. That’s a serious concern right now.

Q: How much has the mood really changed because a year ago there were record FII inflows, record FDI inflows, record number of M&A deals, and today we are not really talking about the highs we are talking about how much lower are we actually going to go? How much is the mood in the sentiment has really changed?

Akhil Gupta: I think there are some problems very clearly but a lot of them are global problems. My feeling is that in the short-term or a long-term I don’t think we have serious problems. As Sunil Munjal said in 18 months to 30 months, we may see a bit of a slowdown but the fact remains if India doesn’t grow at 9% and it grows at 8%, heavens may not fall. 

Q: Are we too euphoric in 2007 are we too pessimistic in 2008?

Gupta: I don’t think they were too euphoric in 2007. Right now, I think we are little bit pessimistic but I am sure that will sort out but in the short-term to my mind, the big problem and this is one and the serious problem is a feeling of chaos and disorder which we see all around us. They are just talking outside it takes three-hours to get from airport to Noida. You look at the filth, the garbage, the debris on the roads you look at cows on the roads.

Q: So, infrastructure?

Gupta: To me this is not infrastructure. We are getting money for infrastructure the economy will be okay this is indiscipline. I guess it is administration, it is governance because for you and me - we live in this city and people who live in Bangalore and Bombay and elsewhere. This is irritating, this is frustrating and we feel angry. But the fact is people who come from outside.

Q: So your number one domestic concern at this point would be lack of governance?

Gupta: Absolutely. This is not only domestic; the fact is people who come here find it disgusting and I guess it is about time we all admit it.

Q: It is impacting investor confidence?

Gupta: It will because if people don’t like to come to this place my feeling is over the long-term, they are not going to let their money be in this place. So it needs to be tackled.

Q: The number one domestic hurdle at this point in time - we have listed several of them during the course you have been speaking with international clients, you have been observing what is happening in other emerging market economies. How much is sentiment being dented and the number one biggest domestic hurdle- let’s not talk about global turmoil, the number one domestic hurdle?

Memani: In the long-term or in the next 12-15 months; so in the context of your short-term question - not the next three-four months. But I am saying if you look at next year, I think the biggest challenge this growth has been led to large extent by investment growth. For the first time you are seeing actually a slowdown in the capital goods growth. So when we talk about 8% and are we are being pessimistic; I think 7.5% to 8% is achievable. But if you look at the last three months data on capital goods, the next year will be when you will be seeing 5-6%.

Q: Capital goods have declined significantly - it is just about 6% now.

Memani: So the government, from an impetus standpoint, will have to find ways in which they can unlock areas for strong capital investment growth, which has to be in the area of infrastructure.

Q: Equity issuance, debt borrowing - you are actually expecting a significant slowdown from where we are currently?

Memani: The equity issuance being practically absent in the last 6-9 months, the only capital class that is active is private equity. Apart from that, frankly there has been no equity issuance that’s happened. That’s really linked to global markets and how the perform. But that should come into being maybe from the next quarter because this entire year if we actually see, in the last seven months, there is nothing that has happened.

Q: Nothing much that has happened in the last 7-8 months - how optimistic are you or is there now a more a sense of pessimism with regards to where we are headed possibly in the next 12-15 months?

Mazumdar Shaw: I think there has been a perceptible slowdown and I think as you just mentioned the euphoria has died down. But having said that, I think, India has a unique opportunity to position itself against this backdrop of global recession because I think there are a lot of interesting trends which India can actually cash in on, capitalize on and that’s what we should be addressing today. But then I agree with Akhil Gupta. What we are not doing is addressing these challenges and these opportunities in a strategic way. It is ad hoc, it is chaotic - we are not planning for growth, we are not planning for the reforms and implementation of these reforms.

Q: What about politics and how much of an issue are we actually seeing on account of parties and politics? We have seen that happen - we have seen that play out in India; we have seen it changed the regulations in India, parties and politics how much of that is issued to your mind at this point?

Shaw: I think that’s a serious issue in this country, I think we have all seen this at very close quarters over the last six-months both at a State level and at a center - you look at the whole nuclear deal and how the whole parties and politics played out it was really very disturbing for us in business to see the way people were approaching it and at this state level we have seen the same. People today are not really addressing national interest or even state level interest. We must do something about approaching the economic agenda in a unified way.

Q: We have just heard Kiran Mazumdar Shaw in Bangalore saying that parties and politics is possibly the number one concern at this point in time and the fact that we are ignoring national interest, as a businessmen your single priority that the government must focus on?

R Seshasayee: I would like to look at the kind of lessons that the short-term developments are holding for us and at a global level, I would say that we have two very significant lessons coming out of the last few months of developments.

A part of the reason for the commodity flare up, the issue relating to inflation; global inflation and so on is because India and China are coming into the market with huge gluttonous demand for commodities and energy and the single message that holds out is that if we are as a late comer getting on to this theatre of development; we got to give a much bigger ticket for growth. Our energy costs are going to be much higher, our steel and construction costs are going to be much higher than what others have paid for in terms of development and that is a very serious lesson that we have to learn, which only means that we have got to get somehow much more productive we have got to learn to get far more efficient. I think this bad patch has given us a wake up call on that. That’s one very big global lesson.

The second global lesson, I think is a fact that there is a huge amount of money sloshing around speculatively going into commodity markets the stock markets energy and we need to figure out how you are going to cope with this kind of thing from developing countries perspective. These two are major lessons from the development.

Q: Very quickly if you can wrap up that point?

Seshasayee: You asked me about this politics and that’s a very important point. We have been taking for granted that somehow economic development can go on in this country and it can go on in a different lane as compared to the political lane and simply it is not going to happen. We need to get the unity of this country; we need to get the interest of this country coming ahead for all our politicians. Otherwise we can dream but it is not going to happen. 

For complete discussion, watch video...