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Economy Dec 8, 2012

Even Ratan Tata has given up on the UPA govt

By Venky Vembu

A conservative, it's been famously said, is a liberal who's been mugged. That definition makes Ratan Tata the newest member of the conservative club, who has been compelled to change his liberal worldview owing to the royal mugging that even he has been subjected to in recent times.

Earlier this year, when there was a chorus of criticism over the impact that the UPA government's 'policy paralysis' - and, in particular, Prime Minister Manmohan Singh's singular lack of leadership - was having on the economy and the larger India story, Tata rushed to Singh's defence.

In a public message (here), Tata faulted the Opposition, the media, some (unspecified) private citizens - "and even some members of the ruling party" - for their criticism of Manmohan Singh over the slowdown in the economy and for other failings in governance standards.

That criticism was, of course, born of the wholesale despair that was widely shared over the government's mismanagement of the economy and the avalanche of corruption scandals that it was embroiled in. If the criticism was directed at Singh, there was compelling reason to do so. For one thing, there is evidence to establish that Singh knew of the mischief that was afoot in the 2G scam case - and chose to look the other way; additionally, the CoalGate scam happened under his direct watch in the Coal Ministry; and as an acclaimed economist, he should have taken course correction to avert the crisis to the economy from the runaway spending and succession of populist schemes that ended up stoking inflation and cramping growth.

But today, Tata himself has taken to warning the government that its inaction is driving investment away from India.AFP

This was the reason that even corporate titans like NR Narayana Murthy and Azim Premji, among others, had given voice to their sense of disillusionment with the government. Premji had then said that India was "working without a leader", which situation, if left unchanged, could pull India down for years.

It was at that time that Tata took a contrarian line and intervened on behalf of the government and Manmohan Singh.

But today, Tata himself has taken to warning the government that its inaction is driving investment away from India and compelling even him to seek growth in overseas markets rather than India. In an interview to the Financial Times, Tata said that the Tata group, from which he retires this month, would look to other emerging markets for expansion.

"You may have the prime minister's office saying one thing and maybe one of the ministers having a different view. That doesn't happen in most countries," Tata told the FT. "You wouldn't have aseven-or eight-year wait to get clearance for a steel plant."

Tata noted that his group had suffered a succession of investment setbacks in India in recent years, largely owing to the government's inability to make decisions. He noted that various government agencies oftentimes had "almost contradictory" interpretations of the law, or about what ought to be done. Such contradictory interpretations had "driven investors away" in many countries, he said.

In such a context, Tata, said, companies and groups like his own were tempted to look away from home and around the world for opportunities for growth. "You start looking for geographies where you can make a difference," he noted.

But Tata, it appears, is coming late to the 'Quit India' movement among Indian business houses. As far back as in July, an Assocham survey indicated that a majority of Indian corporates were looking to investing overseas in view of the factors at home - such as the policy paralysis, high inflation - that drove them away. Over 85 per cent of the survey respondents said that bureaucrats were delaying the decision-making process due to the fear of corruption scandals, Assocham had said at that time.

Tata's criticism of the government today pretty much reflects the range of views about the UPA government and of Manmohan Singh that the media, the Opposition and others had given voice - except that he himself had at that time clambered aboard a pedestal and lectured them on why they were wrong.

Today, his own business interests have been, by his own admission, impeded by policy paralysis, which is why he too is speaking out - and looking to invest in greener pastures abroad. Unlike a lot of others who have to grin and bear with fortitude the afflications of a slow-growth, high-inflation economy that erodes wealth, Tata and others like him have the option of moving their money and investments overseas.

Money talks - and, on occasion, walks. And if, as in this case it's Tata money and it's waking up late to the effect of the policy paralysis, it my not even pause to wave "Tata, bye-bye" on the way out...

by Venky Vembu

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