Corporate Jun 13, 2012
This is a whining and finger-pointing season for the economy. And there's no need to blame it all on Standard & Poor's free downgrade threat. The pessimism has been around for a while, but has gathered steam now.
Among the latest groups to join the hand - wringing brigade are businessmen. Both the optimists and the pessimists among them are whining - for opposite reasons. The former are probably seeking to curry favour with a spineless government by saying the S&P doesn't know its oats, while the latter are moaning about the invertebrates who are currently running the government.
Take this remark from Wipro Chairman Azim Premji. "We are working without a leader as a country," he said. His fellow IT rival, NR Narayana Murthy of Infosys, lamented the fact "that over the last three-four months, India's image seems to have suffered. As an Indian I feel very sad that we have come to this state."
Dear Mr Premji, Dear Mr Murthy. We all know what a lousy government we have. We need not hold a brief for it. But is the lack of leadership only at the political level or also at the business level? If lack of governance is spoiling India's image, does business have to worsen it by breast-beating? Is business totally helpless when it comes to improving India's image?
Even worse was the response of Assocham President Rajkumar Dhoot. He launched a tirade against S&P's assessment of the economy's prospects and claimed emerging economies were their "whipping boys." Even while conceding that we need to "put our own house in order" he tried to blast the rating agencies' poor track record on Lehman Brothers and even the American economy's downgrade last year. The dollar has only gone from strength to strength since the downgrade.
Clearly, Dhoot's underlying message is ignore the messenger if you can't shoot him. The S&P's past rating mistakes are not the problem; the handling of the Indian economy is. And the government needs no hand-holding or soothing noises from Mr Dhoot to get its act right.
If, as Dhoot says, the Indian economy has inherent strengths, it is business's job to tap those strengths by showing the government how. Trying to save the government from embarrassment is neither here nor there.
Whinging by businessmen does not work with this government at all - as we saw in the case of two open letters addressed by HDFC Chairman Deepak Parekh and a group of business and non-business leaders in January and October last year. Addressed simply to "our leaders", the letters lamented the disruption in legislatures, the unreasonable approach of the civil society movement against corruption led by Anna Hazare, and business' own tendency to indulge in "crony capitalism."
While backing Manmohan Singh's statement "that economic progress must not be hijacked by internal dissensions," it flagged off issues in four critical areas - the growing governance deficit, galloping corruption, the urgent need to distinguish between dissent and disruption, and environmental challenges.
That nothing came of this sob story should tell businessmen one thing: it is time for them to take leadership in their own areas of competence. It is time to recognise that the Indian story is about Indians taking their future into their own hands despite the government.
There are at least five things businessmen can do individually and collectively to lift the gloom and provide the leadership that politicians are unable to.
One, they must start investing. The centre may be comatose, but the states are vibrant. The sum of the parts in the India story is currently greater than the whole. States such as Gujarat, Tamil Nadu, Bihar, UP, Punjab, Madhya Pradesh, Rajasthan, and Chhattisgarh - and possibly Kerala and Karnataka, too - are open for business. Business should stop looking at the centre and turn to the states for action. Since state politicians carry a lot of political clout, they will actually be able to move things in Delhi too.
Two, they must get their own act together and clean it up. What purpose does it serve if only a few businessmen rail against crony capitalism while the rest do not? If all businessmen can agree to jointly address the issue together, only then can it be addressed. Businessmen need to know that the spectacular failure of UPA-2 is really their failure: would a Raja have been able to tweak telecom policy without their lobbying prowess? Would the various mining and other scams have been possible without their own greed? Before cribbing about government inaction, businessmen need to look into the mirror and reboot their own consciences first.
Three, if India Inc bands together and insists on electoral reform, the politicians will fall in line. Politicians are messing up because businessmen seek individual favours instead of lobbying for business as a whole. Little wonder, politicians make money from every transaction based on the need for election funding. India needs state funding of elections to reduce big ticket corruption. If business unitedly seeks changes in election funding, politicians will have to listen.
Deepak Parekh put the cart before the horse. His first letter in January 2011 was addressed to the wrong persons: he should have sent it to his fellow-businessmen, got them to sign on for a minimum programme of action, and then followed it up with the second letter. It makes no sense to excoriate politicians for fighting among themselves when business are unable to unite on any issue.
Four, business now has to take greater responsibility for what happens in society. A major reason for the UPA's big stumbles relates to social sector spending that India simply cannot afford. This is why the budget deficits are going out of control. The huge amounts spent on NREGA, loan waivers and freebies are ostensibly motivated by the right idea - of helping the poor - but most of the money will be wasted since governments simply cannot handle tasks of such complexity.
Business needs to get into private-public partnerships in social spending as much as it needs to do the same in infrastructure or other areas. Governments are just big bureaucracies and they are incapable of delivering worthwhile social outcomes without private sector competencies. For example, the Right to Education Act covers private schools, but leaves out the 90 percent of state-run schools from reform and progress. How will addressing 7-10 percent of private schools help us promote educational inclusiveness? What will prompt change is private sector commitment to improving the 90 percent of state schools where no one wants to send their children.
Five, business should voluntarily begin affirmative action programmes in their companies. This is already happening for cost reasons in places like retailing, where the underclass is being recruited in large numbers, but even mainline businesses must seek diversity by mentoring and developing talent among the Dalits, and OBCs and minority communities so as the reduce the class and caste biases in current manufacturing and services companies. This is not something for which they need government help.
Business harps about merit, but ends up promoting non-merit by restricting hiring to a small pool of talent in the IITs and IIMs. This is lazy and self-defeating for it actually pushes up business costs. Consider the high prices they are paying to the IIM-IIT recruits, when they could be recruiting from a larger and cheaper pool by long-term investments in diversity and skill-building. It is true that many ordinary graduates are unemployable, but isn't it in business's interest to invest in them and make them employable?
To be sure, there are many more things businesses can do, but these are places to begin.
If businessmen can focus on what they can do instead of what they can't, India will revive. It is time for business to lead, and not lament.
More From R Jagannathan.