FM bats for Land Bill, calls it key to India's progress

Q: We shy away from holding corporate India accountable for strategic misadventures and we have got plenty of examples?

Seth: I completely agree. In fact the context in which I wrote those lines about failure was that America is far more forgiving on failure because they believe in moving on. Here the stigmatisation which is associated with failure endures, it lingers, a recent case in point is Vijay Mallya. So, all his businesses will now be indexed to how he manages one airline which then obviously crash landed, but the reality is that there were brands that the man built which have now kind of been obliterated, whether it is right or wrong is another matter, A.

B, Indian society is very unforgiving qua failure. How many parents have you heard who actually go out in the society and say, my son has just failed his exam or my son couldn’t get this job or my son has lost out on this or he is still unmarried or something like that. Unmarried is just in a matter of speaking. So, there are these issues about corporate India.

Q: I don’t want to get down to specific examples but do you believe that in India we have sort of shied away from holding corporate CEOs responsible and accountable. You do that with the government, you will have reams of paper and the press going after the government, but we don’t to do that when it comes to corporate India. There is this sort of glorification of failure even when it comes to corporate India and you seem to be sort of talking about that in the book as well?

Seth: You have made a very important point. I generally believe that the accountability of CEOs in India to shareholders is far less than it is in other developed economies and the finance minister is absolutely right, but Mr Jaitley says when you need the government then you cling on to the government. Often CEOs or industry turns towards government for hand me downs or saving them but these are the reality, so that needs to change. The fact that you have got a Black Money Bill which has now come in or is going to take effect, the fact that you have got a government that is cracking the whip on what I would call illegal, unethical behaviour are good signs, we have got to become more accountable.

You cannot have CEOs not going to jail whereas ministers or parliamentarians or whoever spending long years in jail and I am a great believer if you have made a mistake and if that mistake is willful and intentional you need to be punished. You either need to be punished by being dismissed from the role that you occupy or you need to be punished in a more punitive manner, either economically or by being sent to jail.  

Q: You wanted to come in on that?

Jaitley: Government’s are always accountable, politicians as a class are accountable. In fact we are accountable everyday to the media, we are accountable to parliament, we are accountable to the voters; we can be kicked out of power. Corporate India is also accountable because if they fail then they exit the market. There is no place for failure. These are among the more accountable institutions. The least accountable institutions are first the media, and a very close second are the judges.

Q: I was quite certain that I would get that pecking order but let me continue with that conversation because I don’t want to make this a 'Tu Tu Main Main' between the media and the government but let me get back to Suhel's book and in the book he says the one quality most great CEOs possess is the ability to insulate and isolate. They insulate themselves from a skeptical world that often comes in the way of their grand plan and they isolate themselves from the chatter of a world that perhaps doesn’t know as much they do. I would imagine it applies to politicians and leaders in the government as well. Let me ask you this in the context of what is currently happening as far as the Land Bill is concerned. Your own allies oppose your version of the land ordinance, the opposition is united in opposing the land ordinance in its current avatar, in the rarest of rare cases we have actually seen parliament being prorogue and you have made this a decision of your government to prorogue this Budget session of parliament so that you can re-promulgate the land ordinance. Is this in that sense if I could call it your nuclear moment? Manmohan Singh was willing to giveaway political capital, give away his position of power at that point in time for the Nuclear Bill, the UPA was willing to do that for Multi-brand Retail Policy. Is the land ordinance your nuclear moment if I could call it that?

Jaitley: That is a comparison which may not be exactly be correct.

Q: Just in terms of numbers, you don’t have the problem that they do.

Jaitley: The nuclear deal was just a one-off policy. The Land Bill is going to determine a very large part of the progress India makes in particularly certain areas and I am not going to start with industry.

For instance in the 2013 Bill, I have repeatedly said this that it is a Bill which is hostile to the interest of rural India. There are 300 million people in rural India who are landless. Dr. Ambedkar used to say that their best guarantee is going to be as far as the dalits are concerned, that you have industrialisation in that region. So, you prevent industrial corridors coming up in rural areas, there is going to be no jobs for these 300 million people.

Secondly, rural infrastructure — our farmer today if you have seen the plight of the farmer in the month of March particularly when you had unseasonal rains, you had drought last year, you need irrigation facilities. The 2013 law says no land for irrigation, no land for rural roads, no land rural electrification and therefore if you are going to change the face of that part of India — the industrialists sitting here if they need land for industry you will probably buy agricultural land and try and get it converted. For those who run the large real estate companies will buy agricultural land, start building major townships. They can take care of themselves but it is this area where you need rural infrastructure, where you need irrigation, where you need industrialisation in those rural areas for which you need land and therefore it is an important moment for India.

Now I don’t think it is in that sense as far as the government is concerned both in terms of a majority in the lower house, a majority in both houses taken together, we have a comfortable figure and therefore we are just going about straightaway the constitutional way when there is a conflict over a particular law how is that law to be passed? And we firmly believe that it is a law which is going to help India and therefore those changes are required as far as the Land Acquisition Bill is concerned.

Q: I don't want to get into the merits of each of the clauses that the ordinance has put forward. I think it was Anand Mahindra and Sunil Mittal both in their stories in your book Suhel have spoken about taking people along. You were talking about the process and in terms of the process because your government also believes now in fostering and nurturing a federal structure, would it not have been correct then to get state chief ministers onboard now that there is significant opposition to your version of the ordinance to have a conversation on what would be acceptable to them and then let state governments decide. I know on some clauses like the social impact assessment you have said that states can decide. However, shouldn’t the process have been more consultative?

Jaitley: On two counts you are probably not well informed. A, before we embarked upon this exercise we called every state government and every state government unanimously said we want a change to the 2013 law. Chief Ministers of Congress and UPA governments – Maharashtra, for example, wrote letters to the Centre to amend this law. Chief Minister of Haryana – then UPA, refused to accept the central law – the four time compensation and offered much less. So, we went through the exercise of building consensus, unanimously the Chief Ministers said so.

Notwithstanding that we have put a provision that it is for the state government to decide whether to notify these parts or not. So, we leave it to the state government. So, if Bihar chief minister says I don’t need land for irrigation in my state so be it but he can’t stop Maharashtra. So, real federalism is completely the opposite of what you think it is and which is that one state can’t prevent another from enacting a law. India is not merely cooperative federalism, India is also competitive federalism. A state which doesn’t want to move further can’t prevent a more progressive state from moving further. 

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Q: Anand Mahindra in one of his book as success mantras for success says “If you want to lead a large, complex and multi-business organization, you have to know when and how to let go, and empower others. Empowerment is the algebraic outcome of curiosity and humility.” How good are Indian CEOs, Indian promoters at giving up control?

Seth: Slowly they are. They are giving up management control for sure. In our stories of CEOs or owners or promoters actually hiring professionals to run their companies, Anand talks about it, look at Anand’s structure. It is completely a federal structure. He is for all practical purposes the executive chairman but he has CEOs running those business. And Rakesh is here, Mr KP Singh is here. They all have their CEOs running their businesses.

So I don’t think we are still in that time warp where the promoter wants to call the shots. Yes, there is more accountability in this relationship now which wasn’t there earlier and this whole thing about family retainers being elevated to positions of CEO just because the owner trusts them that period is also over. So we are seeing that significant change.

Having said that, many professional mangers in this country have also stuck on to their jobs without shareholder accountability. They continue to remain much like every season’s Christmas tree.

Q: Let us talk about this in the context of government. How hard is it to empower, how hard is it to let go. The criticism of the previous government was that there was no centralisation, everyone was doing their own thing. The criticism of your government is that there is too much centralisation and there is one power centre that is driving everything?

Jaitley: The previous government had a lot of centralisation but outside the government.

Q: So you accept that there is power centre that is dictating what every ministry and what every minister ought to do?

Jaitley: In any parliamentary democracy a Prime Minister is the natural leader of the government. A Cabinet functions around the Prime Minister. Ministers hold office at the pleasure of the Prime Minister, he has to have confidence in them. And therefore to have a strong political leader as a Prime Minister is a strength of democracy, it is not a weakness. In fact the weakness of democracy is that you have a Prime Minister who is like a CEO, but the board of directors sit outside the government. Now that kind of system we have experimented for ten years and it didn’t work.

Q: But what are the perils of too much centralisation?

Jaitley: No, too much centralisation was 1975 where you almost had a Cabinet system because of presidential system or a monarchic system. That is not the system that you have today.

Q: Sunil Mittal as one his mantra says, you need to get the right people at the right stage of organisational evolution. If I could ask you this in the context of government and how government functions, the council of ministers cannot be a meritocracy because of political compulsions, I don’t think anybody lives under the illusion of that but is there no space for deep specialist to actually work with the government? The hope was that the Niti Aayog would fulfill that responsibility or that role. I am not commenting on who is in the Niti Aayog or not but my question is, is there no space for specialists to work with the government specially in this phase of execution where we need to look at what happens to education 10-20 years down the line, what happens to skills 20 years down the line, you need an out of the box approach, you need a new way of thinking and that doesn’t seem to be the case even as far as your government is concerned.

Jaitley: You need specialists, you can have specialists from within the civil service, you can have specialists in bodies like the Niti Aayog, you can have it in other advisory bodies, people who advise government but then as far as the Cabinet is concerned you have to have elected people. Therefore in the name of specialists the unelected really cannot run a system, unelected can only advise the government, they can guide the government. Every government has its own kind of people – friends, admirers, advisors, insiders, outsiders who are all around the government.

Q: Can there not be an institutional mechanism as opposed to friends and advisors?

Jaitley: That is not the system that you have in India where you can have an unelected person as a part of the government. A government must necessarily have an elected person.

Q: If I can quote to you the outgoing CEO of Vodafone who recently did an interview with me and he said very often the Indian government makes policies that are not in the best interest of the sector or even in the best interest of the country and that seems to be a problem that we are faced with sector after sector. It is in that context that I asked you my question.

Jaitley: I think that is an extreme statement because irrespective of the government in power, governments can go wrong but consciously no government would act in what in its own wisdom is something not in the interest of the country. Government can go wrong, companies go wrong. Therefore, I don’t think this whole trial system of a particular decision, exploring new fields can really be considered as governments deciding wrongly on a deliberate basis itself. After all, within the government there is a settled system where a lot of consultations take place, there is a lot of accountability that the governments have, there is a lot of discussion in the parliament, outside the parliament, in the media that takes place which finally culminates into a decision.

Q: Another question that I want to ask you and through the course of the stories that we have read in the book, this tendency of the government to micro manage. You can fly to a certain area, you will have to fill a number of seats if you have to fly to a certain area and only then we will allow you to fly international. You can open a store in a certain area, you will be able to store Swedish meat balls or not store Swedish meat balls. I mean this is 2015, you want to tell corporates where to spend their money, how to spend their money, what to spend to spend their money in the garb of corporate social responsibility?

Jaitley: Let me take you on to the first illustration that you gave. This is 2015 and therefore in 2015 taking your example every area should be connected and therefore if somebody looks only at India and the large size of Indian population, one sixth of the world population wants to enter India and say I want to make India my hub so that I get the Indian flag and I fly all over the world. But then I am not interested in flying to Srinagar, I am not interested in flying to Manipur, I am not interested in flying to some other remote place; Sikkim. And therefore these are areas that you must connect yourself to.

Any prudent government, any responsible government, any elected government and any government which responds to the people will have to then think of Manipur, will have to think how Agartala is to be connected and will have to think about 20 other factors. It is only the unelected, and here I refer to your earlier question, who would think that commercially it is prudent only to fly to New York and not to Agartala. But then India in 2015 remains a complex puzzle and therefore to relate to that complexity of India you must actually relate to the ground realities of India. So the policy is not as absurd as the expert may point it out.

Q: No but my point to you is that you can very clearly articulate and say, well if you choose to do this you can fly, but if the government believes that this should not be policy. 5/20 should stay or not stay, be clear about that. Why impinge on a commercial decision because you want regional connectivity?

Jaitley: You impinge on commercial decisions because the commercial growth of the country and the economic growth of the country, the investment of the country also must have an equity behind it. You can’t have a situation – now look at this statement that our government keeps repeating. Just draw a line through the middle of India. Bulk of the economic activity is to the west of India and not to the east of India. You have some of the richest states to the east of India, look at Jharkhand, Orissa, to some extent even West Bengal. These are all states which have a huge amount of natural resource, mineral, coal and surprisingly your economic activity is only to the west of India and to the east of India you have much higher levels of poverty and therefore would it not be prudent then to tie your commercial decisions with this consideration of social equity that yes, we will allow you to mine provided you set up an industry there so that the east of India develops. We will allow them to mine there provided the entire money coming from that mineral auction goes to those eastern states, that is a part of any responsible governance.

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Q: Do corporates see it that way, do they see this as responsible governance, do they see this as micromanagement? In the 30 interviews that you have done with some of the largest business houses in the country, some of the tallest business leaders in the country what do they have to say?

Seth: There are two sides to the coin there and let’s be brutally honest. Corporate India also indulges in economic conveniences, what is convenient for them at that time of the day is what’s palatable and that is true for all sectors, all classes of society. The Finance Minister in his comment on connectivity is right because and the airlines and that is what we are referring to or the logistics companies need to recognise that. For instance do you know that the per capita income in the north-east of India is by far the highest in terms of a cluster but people don’t know it? If you ask people in Delhi about Arunachal Pradesh, they won’t have a clue.

So, there is connectivity that is needed, that is essential and that connectivity to my mind will and needs to be done in what I would call the curative period of any economy. Look at what happened with British Airways before it was privatized, it was mandated even though at that time there was a lot of trouble in Ireland, it was mandated to fly and I was on the global advisory board at that time and we saw all the comments that were coming up so, connectivity is essential. Yes, there is going to be pain but then there is a lot of pleasure which a lot of corporates then don’t want to talk about.

Q: So you are saying there is no micro-management and corporate India does not believe or gets its way around it?

Seth: I am not saying this because the Finance Minister is here…

Q: I was beginning to wonder.

Seth: We have this disparity in view of a black and white and we have forgotten that there are more than 50 shades of grey.

Q: No, we won’t know if there are 50 shades of grey, they have ensured that we can’t see 50 shades of grey.

Seth: There is micro-management in every realm of our lives. You must be micro-managing your husband or whoever you are with or Ryan’s micromanaging Manek or Manek’s micromanaging – so I don’t think that we should look at it from that perspective. The critical area of examination is, are we forcing corporates to do things that are uneconomical? Are we forcing corporates to do things that will impact their shareholders because ultimately companies are accountable to no one but shareholders if they are following due process of law and governments also understand the value that shareholders have and must derive so it is pretty equitable if you ask me.

Q: Let me ask you this in terms of misplaced priorities. Suhel was talking about 50 shades of grey, I am drawing parallels here between government functioning and corporations because very often corporations also have misplaced priorities in terms of the strategic decisions that they make and very often governments also have misplaced priorities in terms of the decisions that they take. Is this in the current context when you actually have an agrarian crisis, when you actually have trouble across the north and the western parts of India in the farms to talk about banning beef, to talk about Marathi cinema being made mandatory in cinema halls in Maharashtra, does it not reek off a sense of misplaced priorities?

Jaitley: I am given to understand this was a decision taken some 10 years ago. It is only that news channels realised it yesterday when somebody reaffirmed it. Therefore your own ignorance can’t refer to it as a priority. In a state if because of their own language people had a priority, Tamil Nadu may have its own, West Bengal may have its own, if Maharashtra took a decision 10 years ago when some other government was in power it is just that the minister reaffirmed it yesterday.

Q: You don’t think that this is a case of misplaced priorities?

Jaitley: I don’t think it is a case of priority because it doesn’t run contrary to any other economic priority or decision making that the government has. It doesn’t affect my functions as far as management of the economy is concerned. It is certainly an occasion for somebody to put it up as a big news item.

Q: At the end of these 30 stories that you have chronicled in your book what is the one thing that gives you hope and what is the one thing that all of these leaders have spoken about in terms of what they would like to see from policy points of view, what they would like to see from a bureaucratic process point of view in terms of India really emerging well and truly as an equitable, fair superpower?

Seth: This book was written over the previous government and this. So, it takes into account both and the recurring theme in almost every corporate leaders mantras or belief statements is, two things, one, an enormous sense of belief in brand India, that India, Indian consumers, the Indian corporate structure, Indian government, we are on a roll. So, there is a lot of optimism that one is seeing. The second which is very interesting which I didn’t expect is there is a huge emphasis on values. You might dismiss it but there is a huge emphasis, in fact Ratan Tata in his chapter talks about – one of his mantras is values more than valuation. So, there is a huge emphasis on the social compact, on the social contract, there is a huge emphasis on giving back. We were talking about this in a different context, philanthropy today is being seen not as just donating money, it is actually being seen as inclusive sustainable and for communities to develop. So, that is a great sign.

Q: Let me end by asking you this and you said it is time now for corporate India to step up and partner work with the government. We have just seen banks been nudged to move on rates and we have seen banks cutting rates as of yesterday. Do you believe now that there is enough juice in the system to see a real turnaround as far as the economy is concerned, do you now see private capex cycles turning around and what gives you hope today as the Finance Minister? Everyone is talking about the policies that you are unveiling, the steps that you are taking, the measures that you are putting forward. But what gives you hope personally today?

Jaitley: There are several factors. The first and most important factor is that in the last few years what was probably a low phase for us as far as the economy is concerned, that is over. Secondly, the kind of decisions which have been taken over the last one year, if I put it in a nutshell opening ourselves entirely for investment, opening newer areas for investment, unleashing ourselves in areas which had come to a standstill and therefore all these decisions from insurance, to defence, to mining, to coal, to this new impetus on infrastructure - particularly a lot of money going into highways, railways. I have today cleared a proposal for both these sectors to have a large investment by way of tax-free bonds which I announced in the Budget and a series of these decisions. They are going to generate a lot of economic activity.

Now, as it is the Indian normal as far as growth is concerned is not four or five percent where any other part of the world would be very excited about it. The second important aspect is that most other competing destinations for investment are facing challenges as difficult situations themselves. So, whether it is Brazil, South Africa or it is Europe, Japan, even the new Chinese normal is no longer nine percent, it is around seven percent and therefore for an economy like India which is currently targeting about eight percent growth rate and eventually targeting a little higher growth rate. In this renewed environment probably the roadmap does indicate that we are going to do much better than what we have in the recent past.

Q: But what gives you the most hope?

Jaitley: Well a series of factors. Indian entrepreneurship is of a very high level and therefore if we can provide that environment to the Indian entrepreneur they are going to do extremely well. Secondly, the government is committed to a particular road map and therefore just because somebody gets together and says I will block this reform, I am quite willing I have said this repeatedly, let this be an ideological or a parliamentary struggle between reform and obstruction. I have not the least doubt that reform is going to succeed at the end of the day and therefore those who want to be on the side of obstruction can be there but that is not — we have seen it in the last session of parliament despite obstruction I got insurance through, I got mining through, I got coal through and I am quite certain that important challenges like the GST, Companies Act, kind of taxation reforms which we are making, it is not very easy in India to force a situation like the GST in indirect tax or to bring down the direct tax corporate rates down to 25 percent when we are fairly determined to go on that road track.

Q: So let me end by asking you Mr. Jaitley and I will ask Suhel as well, if you were given a chance to do things over again, would you be a lawyer, a politician or an entrepreneur?

Jaitley: I have always wondered which is the best life and I think it is to be a Suhel Seth.

Q: Which category does he fall into?

Jaitley: I don’t know, I don’t think he fits into any of these categories. He wakes up every morning as a very happy man, he spends his day, he is full of life, he makes us enjoy himself. In fact only chapter missing in his book is the mantra of his success because a lot of people wonder what he really does to have achieved this position.

Q: So, that gives us the perfect ending, what is your mantra for success and what exactly do you do?

Seth: I am actually advising the Niti Aayog on nomenclature to change it to the Planning Commission.