Controls on industry led to cronyism amongst industrialists. It was very much alive when I joined government in 1991. Decontrol had more or less removed it from the finance ministry by the time I left; I was no longer bothered by streams of industrialists seeking one favour or another. That was true only of the finance ministry; commerce ministry kept and developed its controls, and no doubt continued to receive benefactors. This column was published in Business Standard of 4 March 2003.
POWER AND PROPITIATION
I have often observed that our industrialists abase
themselves before politicians. I have watched bootlicking at close quarters in
the government. At that time it had some economic rationale, for so much power
was vested in the government. In my thirty years’ career till 1990 I met only
one industrialist who never did it (there must have been others, but I did not
come to know them). It was MM. He never went near a politician, never paid one,
and never asked one for a favour. I was astonished when he told me this, and
asked him how he got away with it. He said that he had decided not to expand,
so he did not need licences, and did not have to lobby or pay for one. I asked
him whether he had not been asked for a bribe. He said yes; before a certain
general election in the 1970s he got a message from the Top Industrialist (TI)
that his quota was Rs x. He told the TI that he had no black money; the TI
asked him to explain that to the Minister-Collector (MC). He went to Delhi and
met the MC, and told him that he had no black money could not pay. The MC said
to him, “Mr MM, there must be some mistake. I have never asked you for money,”
and escorted him to his car.
When I joined the government, it
was still powerful, and abasement before politicians still made sense even if
it was mercenary. But we tried to change that by abolishing controls. When I
joined the government in 1991, the corridors of North Block were still full of
supplicants. They did not come to see the finance minister or finance
secretary; they came to see a joint secretary with the grand title of
Controller of Capital Issues. They waited outside his room and sweated in their
suits. For they needed his permission to be able to issue shares. We abolished
his post, we abolished the even grander Director General of Technical
Development, we abolished industrial licensing, and we began the process of
emasculating the customs and Chief Controller of Imports and Exports – though
he reappeared under the even grander name of Director General of Trade
Development. We began the process of dismantling arbitrary state power; and we
did make a difference. When I left the government, I had deep doubts about
whether we had achieved anything, and I used to ask people whether we had made
a difference. One of the most cheering replies I received was from an
industrialist (let us call him DP to distinguish him from MM). He said, “You
restored our self-respect”. The worst of licence raj was not the prostration
before venal politicians. It was that it was virtually impossible to do
business without breaking some rule or other. Some industrialists were caught
breaking rules; others were reported as having broken rules because they did
not propitiate the bureaucrats. As a result, industrialists generally figured
in the press as criminals; that was the public’s impression of them. Today,
news of industrialists’ illegal acts has virtually disappeared from the press,
because the laws they could not avoid breaking are gone. Instead, they appear as
heros, romantic characters, experts on the budget. This is one of the
differences made by the reforms.
They have also made
self-abasement unnecessary. But old habits die hard. Watch them swarm around
ministers invited to contrived occasions. Anu Aga, Rahul Bajaj, and Jamshyd
Godrej stand out because they are so few; amongst the thousands of Indian
industrialists, they were the only ones who dared criticize the Gujarat
government for its promotion of crimes against Muslims. What they said was
nothing revolutionary; essentially, they reminded Narendra Modi that it was his
duty as chief minister of a democratic government to maintain law and order and
protect citizens irrespective of their religion. I have just been to Gujarat,
and met industrialists who do not like this message. They belittle the outrage
that happened in Gujarat, and are happy to share the plate with Narendra Modi
and his government.
They are wrong, and so are the
sycophants in FICCI and many other trade associations. Every industrialist
tries to make his own bargain with the powers that be. Some no doubt succeed,
but thousands get nowhere near the seat of power. That is why the chief
minister of a northern state can collect Rs 300 million from sugar millowners
on the excuse of stopping farmers from attacking them for cane dues – a duty he
or she should be performing as part of her or his job. That is why the chief
minister of another northern state collects 10 per cent of the investment in
every industrial plant that comes up in his state. One was foolish enough to
understate his investment. So the CM said to his courtier, “Give him Rs y
million; we will take a half share in his plant.”
This extortion can be stopped,
but only by industrialists themselves, and only if they combine. They must combine,
not in the way they do in FICCI and other trade associations, not to hold
office and get close to politicians, but to ask for and get policies that
benefit industry as a whole.
And what would they be? They
would be policies that all industrialists can agree on. Hence they would be
policies that are neutral between industries, occupations, firms, regions. They
would be transparent policies, known and comprehensible to all. They would be
stable policies, which would not change from one budget to the next. In other
words, they would be policies akin to those that Vijay Kelkar espoused.
That is why I found Jaswant
Singh’s budget unsatisfactory. It was a bagful of special favours for one
industry or another. One only had to look at the collection to know whom the
favours would benefit, where the BJP’s benefactors and supporters were, who had
asked for those favours. I entitled my comment on the budget “Shrimp larvae
welcome the budget.” Some took this as a reference to themselves. Far be it
from me to compare industrialists to larvae; the finance minister had actually
reduced the import duty on feed given to larvae. But one can imagine the
political process behind the concession. Shrimp farmers on Andhra’s east coast
would approach an Andhra politician, who would put in a discreet word to the
Prime Minister, whose word is law for the finance minister.
Delicensing and decontrol gave
freedom to industrialists which they have failed to use; they continue to make
private deals the old way. Those deals work against the interests of industry
as a whole. In this sense, industrialists are responsible for India’s poor
industrial record. To come out of it, they must unite to seek better
administration. If they do, they will back Kelkar, not Jaswant Singh. They will
back Anu Aga, not Narendra Modi.
