In The Spotlight
CII and the art of economic growth
Financial Express Article, 04/2012, Ganesh Natarajan
The Confederation of Indian Industry’s annual meeting which starred the who’s who of government and industry had all the makings of a Bollywood potboiler! There was a debating society of parliamentarians Tharoor, Yechuri, Prasad and Singh that took the fine art of sarcasm and repartee to new levels but did not rain any new intelligence on the five hundred strong audience of business chiefs. It was amusing though not surprising to find that all the politicians from the treasury benches mouthed the party line and appeared almost startled at the extent of concern expressed at the economic quicksand the country is wallowing in. Leaders of the opposition could hardly conceal their glee at “watching the enemy commit suicide” as one worthy leader quipped!
As one takes stock of the year gone by, credit must be given to some of our well-meaning ministers for a few achievements and many new policy announcements. The National Manufacturing Policy with the creation of NIMZs, the multiple Education bills and the vocational education framework that are in play and the real progress in addressing skills are all signs of progress. However the track record of implementation of UPA-2 has been hardly creditable with many bills stuck in the quicksand of internal and external contradictions and the recent budget failing to enthuse both domestic and international investors and analysts. The admission of a state of political paralysis by one of the economic advisors to the Government and the suggestion that we would have to wait for 2014 to see any big ticket reforms can hardly provide much succor to over a billion Indians who are waiting to see a better future now that we know what it is to grow over eight percent, albeit for just a couple of years!
As Nandan Nilekani rightly pointed out, the country today spends over 300,000 crores in subsidies and other handouts. The role that initiatives like the UID or Adhaar can play in ensuring that finance and supplies flows to the right person at the right time has to be appreciated by the powers that be to eliminate major waste in the economy . Many other non-political steps – the Direct Tax Code, faster e-Government implementation to eliminate friction points between the Government and the citizens and well thought out PPP initiatives in Healthcare and Skills can also be accelerated to get some real results in the near term.
The IT industry has been hurt as well – by acts of commission that global software players are concerned about and acts of omission which smaller firms particularly product entrepreneurs fret about. As one of our most successful entrepreneurs has written in a recent hard hitting piece, the Government of Philippines must be thanking their Indian counterparts for the disillusionment of many IT CEOs which is resulting in the industry in that country growing faster than India. India has the potential to accelerate the growth of Software and Business Services exports to over three hundred billion dollars by 2020 if the right steps are taken to support and expand the sector. Clarity on transfer pricing and taxation, elimination or minimization of MAT on SEZs, special knowledge eco-system creation in Tier 3 locations and tax and investment support to entrepreneurs creating valuable intellectual property from this country – the list can go on!
The results of the last quarter of the financial year FY 12 has been a mixed back. While most us have continued to grow our top lines though there have been some vagaries in the bottom line on a quarter to quarter basis, the results and more important the future commentary of some of the large firms have sent a few shivers down the spine of industry watchers and even prompted a rather unusual “open letter” from an analyst to one industry leader questioning the future directions of the firm. It is becoming clear that the next few quarters will not follow a predictable trend for the industry as a whole but the good stories will emanate from companies who are less defendant on Financial Services have a robust dual shore model and are able to have a wide enough portfolio to “farm” existing clients as well as “hunt” new deals!
And for a final thought, the near paralysis we are witnessing in the theater of political economics could not be better captured than the answer giving to a former public sector CEO who mentioned various reasons why his firm could not progress in the last few years. “The Government is seized of the problem” he was told! Will the nation itself have to get a collective seizure before an oxygen tank becomes visible to breathe life into the economy? These are interesting times, for the Government, the CII and all of us! There is a need for all of us to stay positive and defend the country vigorously in all international forums but it would be good to see some real steps towards progress in this financial year!