Unfair to expect India Inc to criticize Narendra Modi

By: |
Published: January 3, 2020 4:59:31 PM

Govt policy can kill your business, your assets can be seized, your dues may stay unpaid ... not criticizing govt is a good idea.

narendra modi, pm modi, india inc, india economy, economy newsIf prime minister Modi really wants to make it easy for industry to invest, he needs to stop this discretionary power his government has, not showcase the easily-gamed and irrelevant Ease of Doing Business index of the World Bank. (Reuters)

As the industrial/investment climate gets worse, paradoxically, India Inc is the new villain of the piece. If only, in the manner Rahul Bajaj did with home minister Amit Shah, top industrialists honestly spoke their mind and told the prime minister just how badly he was getting it wrong, the government would have course-corrected a long time ago. As part of this narrative, a former CII president, Naushad Forbes, has a recent article where he blames Indian industry’s habit of seeking favours from the government for this state of supplication (his term); let us, he says, “deal with the government as equals – praising where praise is due, but criticizing when criticism is called for”.

Certainly, even close to 30 years after the Bombay Club days – ironically, Bajaj was a leading spirit of that gathering – sections of India Inc continue to look for favours. Many industrialists have, successfully, petitioned the government to raise import duties – using anti-dumping and other actions as well – on their products; indeed, sections of industry petitioned the government to walk out of RCEP since they were uncomfortable with the import competition this would have resulted in.

But, in a more fundamental sense, the problem is quite different. And that is, that even after three decades of the PV Narasimha Rao-Manmohan Singh reforms, India hasn’t reformed in many critical ways. Reforms are not just about cutting taxes and import duties, they are equally about their irreversibility and the predictability of the downward cuts; the moment there is subjectivity involved, and the possibility that the rates can be hiked, lobbying begins.

Reforms are about easing entry barriers – including for FDI – in as many sectors as possible, but if firms are not allowed to exit, it creates room for lobbying; more important, it ensures that firms have to lobby for what is a natural right. An obvious example that comes to mind is that of Vodafone. When, after years of hostile government policy has driven most telcos to the ground – this newspaper has chronicled this in detail – the Vodafone global CEO said his firm would have no option but to shut its India operations, telecom minister Ravi Shankar Prasad found it easy to condemn this as ‘dictating terms’ to India. Imagine the irony, the firm has invested $30bn in India, is close to losing all of it due to hostile government policy, and a senior minister is upset at the Vodafone chief speaking the truth! More important, when Vodafone Idea does shut shop, will the government allow it to, or will it put all manner of hurdles in the way?; keep in mind that while Airtel bought Tata Tele’s mobile business more than two years ago – when the Tatas wanted out – the government has just approached the Supreme Court to nullify this!

Is asking the government to fix this to be considered asking for a favour or is it just demanding its rights? Another good example is the purchase of Bhushan Power and Essar Steel by JSW and Arcelor Mittal, respectively, in the insolvency courts. These were sales that PSU banks initiated under a mechanism devised by the government; yet, when the sales were nearly complete, JSW found some of Bhushan’s assets were seized by the authorities who were investigating the crimes committed by the previous owners. Both JSW and Arcelor approached the government to ask for a halt to all investigative action and criminal action – including seizing of assets – since they were not responsible for what happened before they bought the firms; pursue the previous owners, don’t take action against the company, they argued.

The question to ask if, were either Sajjan Jindal or Lakshmi Mittal to criticize the government for its poor handing of the economy earlier, would the government have changed the law to put a stop to such action after a firm was sold at the insolvency courts? Chance are it won’t have acted so fast, if at all.

There are countless such examples of firms needing to approach the government, not for favours, but just to correct obvious wrongs; but to get even that done, businessmen can’t afford to take a chance and criticize the government – and this applies as much to the Congress as it does to the BJP. After the Congress levied the retrospective tax, and the BJP did nothing to remove it despite campaigning against it when in the Opposition, it even seized $1.3-1.4bn of assets of Cairn Energy; can the CEO of Cairn Energy afford to talk openly about the government’s breach of faith and still hope to get justice? Keep in mind that even if Cairn wins the arbitration case on the tax, the decision to honour the award and to give Cairn back its money is Narendra Modi’s; and, in cases like Antrix-Devas, despite the government losing the arbitration, the money has not been paid to Devas Multimedia and, in the case of Tata-Docomo where the government was not even a party, it petitioned the court to prevent the Tatas from paying Docomo!

Even if you believe – read https://bit.ly/2MO4QPZ to know how flawed this assumption is – that the government shouldn’t be diluting the demands made on telcos after the Supreme Court’s ruling on telecom AGR revenues, it is surely unfair that while the government is leaning on private sector telcos to pay up, it is quite relaxed about getting various PSUs to pay up even though the amount they have to pay is much higher. Once again, the government has such huge discretion, only someone not too worried about his/her business would openly take it on.

And is it a favour if KM Birla approaches the finance minister to ask for permission to use the GST input credit that is due to him – Rs 35,000 crore for the entire industry – so as to reduce the amount of GST that he has to pay each month? Or take the case of Ajit Gulabchand who is owed a lot more money by the government’s NHAI – not only was he owed the money, when NHAI contested this, the arbitration panels ruled in his favour – than he owes the PSU banks for his Lavasa township project; he hasn’t got his money from NHAI but the banks have taken over Lavasa!

If prime minister Modi really wants to make it easy for industry to invest, he needs to stop this discretionary power his government has, not showcase the easily-gamed and irrelevant Ease of Doing Business index of the World Bank. So let’s praise Rahul Bajaj for his statement to the home minister, but keep in mind he doesn’t run any business now – indeed, one of his two sons, who runs Bajaj Auto, was quick to criticize his father’s statement the very next day! – and be less harsh of businessmen who don’t want a favour, but are just asking for freedom to run their businesses; businessmen who don’t know, even if they agree to opt out, whether they will be allowed to sell their businesses since government permissions are required for this as well.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Market vs Economy: The great divide! Sensex continues to do well while the economy crumbles
2Sustainable Development Goals: India improves its SDG showing, some states are still behind
3Making pregnancy and childbirth safer: A quality mission for maternal healthcare