The Hindu Business Line : `The age of Indian MNC has finally dawned' — Mr N. Srinivasan, Director-General Designate, CII

There are examples of Indian companies already donning the mantle of an MNC. Companies which have operations around the world; the Aditya Birla group is an example. Ranbaxy is a great example of an Indian MNC. You are going to see in the manufacturing side southern companies such as Sundram Fasteners, and the TVS group reaching out to rest of the world.

Mr N. Srinivasan will take over as Director-General of the Confederation of Indian Industry in June. A new government will be in place by then at the Centre. A metallurgical engineer, Mr Srinivasan has been with various industry associations, starting with the Indian Lead Zinc Information Centre. He joined the CII in 1974 and was with the Automotive Component Manufacturers' Association for about five years before re-joining the CII in 1994. Talking to Business Line, the CII Director-GeneralDesignate spelt out what, according to him, should be the agenda for the new government and answered questions on a range of trade and economic issues. He feels infrastructure has to be the top priority for the new government.

Excerpts from the interview:

What do you think should be the new government's agenda?

The Government's agenda has to be in four principal areas. And, underlying all these is the fifth area. The first is to carry out strong and progressive reforms on agriculture. We are an agro-based country where 60 per cent of our people are in agriculture. A number of things need to be done to deregulate agriculture, to make it the backbone of our continued economic growth and development.

The second area is education, particularly primary education. I believe the government of the day has to focus on making primary education worthwhile and bring down the dropout rate. Without getting your basic building blocks ready, you cannot have meaningful higher education.

Third is improving the health-care systems. This is a fundamental need of our country with a young population. Good quality primary health care well delivered in a public-private partnership mode with industry playing a massive role is important.

The fourth area is water. It is a fundamental need of society — clean drinking water, water for irrigation, water for the entire lifeline of our economy.

What you need to make all these four happen is good quality infrastructure. Infrastructure, which ensures connectivity; reduces transaction costs; facilitates becoming more productive; and which gives opportunities for agriculturists, industrialists and civil society to find markets conveniently in India and around the world. We need to have a policy and an infrastructure framework which would make India a quality integrated market.

There are still many barriers to movement, free markets... VAT (value added tax) is a typical example of the initiatives that you need to take; octroi and other barriers that you continue to face need to be dismantled. I think this Centre-States formula for sales tax has to be addressed through VAT.

But no Government is willing to talk about agriculture reforms. What do you think can be done?

There is synchronicity between the CII and the Government on ensuring that the interests of the farmers are protected, indeed, enhanced. We are suggesting different ways of doing it. We need not go by the earlier model of the kind of subsidies we have provided, but re-target them; give them different kinds of support. We have done a survey; bulk of the farmers are willing to pay a reasonable price for electricity, if supplied in a reliable manner than opt for free power which is never available. The other thing we can do is make the farmer more productive by having decentralised power generation systems at the village level. He does not have to depend on the grid.

We are in total agreement with the Government that being an agricultural country, the interests of the farmers must be uppermost, but we are saying let us look at how best this interest can be maintained. We believe a new paradigm can be adopted.

That is why we are in sync with the Government even on WTO issues vis-à-vis agriculture. We are saying do not jeopardise the Indian farming community by opening up borders indiscriminately unless the developed world also gives considerably through its own measures on agriculture subsidies. I do not see a dichotomy. We are only suggesting a difference in approach.

Do you think there is that kind of willingness on the part of the Government?

Absolutely. Both at the national level and at the States. The Union and the State governments are keen to look at developmental issues, because they see development as an important building base for their own political future. There is no conflict between good economics and good politics. Also, regardless of the political affiliation in the country, there is a broad consensus on reforms.

You talk of a broad consensus on reforms. But even constituent parties of the Government at the Centre oppose reforms in their own States. Where, then, is the consensus?

This is the reality of our vibrant democratic structure. It brings with it some of these apparent paradoxes where a party's government in a State may be all for reforms and the same outfit may oppose reforms in a particular sector at the Centre. It is political rhetoric which is now taking the upperhand. But as the polity matures — and this is happening very fast — I see that scenario changing. Everything is becoming much more positive and you will see less and less of these conflicts that you refer to. How would you rate the NDA Government's performance?

You have to look at the issue of reforms in perspective. We started as a closed economy and we are about 13 years into the reforms programme. It is early days to pass judgment on whether we have done enough or whether we could have done more. What I would say is that the trends are extremely encouraging.

I would give a lot of credit to the Congress(I) for doing some path-breaking things during the Narasimha Rao era and what the NDA Government is to accelerate many of these reforms front. I think it is a win-win situation.

On which areas would you like to see the new government speed up action?

I would say infrastructure is priority No 1, infrastructure is priority No2 and infrastructure is priority No 3. All the pieces of the puzzle are in place. We need good quality infrastructure for people to start to deliver. Industry, for example, is on a great wicket. It has got self-confidence. Manufacturing has rediscovered itself. The services sector is growing apace. Markets are there, they are opening up. What you need is the enabling environment of infrastructure. If any government is aligned towards infrastructure improvement, I think you have got your act together.

What about labour reforms, agriculture, social safety net? Labour reforms appear to be a non-starter...

You must understand why labour reforms are perceived to be a non-starter. The key issue we have to grapple with is that we do not have a social security net. Labour reforms in its absence are going to create social unease and disturbance of a totally different magnitude. What we need to do is not take the developed countries' model of hire-and-fire; they can do it because they have a huge social security net. We have to do things differently. We have to put various kinds of security systems in place.

Even in this situation, the government has not come in the way of a consensual right sizing of corporations and companies, where labour union(s) and managements have agreed to downsize in the larger interest of the survival of the unit.

VAT seems to have been given a quiet burial. No State is talking about it, at the national level too there is nothing happening. And, there is lot of division among industry and trade...

We are concerned that it has not moved. This is clearly an item on our agenda for taking up at both the Central and State levels. We have a task force on VAT, which is working steadily. We are interacting with various State governments because we see ourselves playing a catalytic role in bringing the Centre and the States together through a good formula and adopt VAT.

VAT is not going to be implemented over night. It needs a lot of preparation. That is why I keep saying that we need to create a new climate for dialogue for development in this country.

People have to set aside their personal prejudices and the baggage they may be carrying, and say "what do we need to do for the development of the country regardless of what our political ideology and affiliations are."

I am hoping that at least in the next six months, there would be something more productive to announce so that by next fiscal it can be positioned.

What is the CII's take on the growth rate?

This fiscal it could be 7.8-8 per cent. I do not think it is at all an unreliable estimate. We have done our sums right. We have seen how each element of GDP — agriculture, manufacturing and services — has been doing and we are confident of 8 per cent.

What is important is the challenge of sustaining it. Because 8 per cent growth rate is huge by any standards. That is why I insist on talking about infrastructure. Unless you have a strong, world-class infrastructure you are not going to be able to generate growth.

The biggest difficulty would be on the energy front. Lot more investments have to come into power. You are going to have a lot more need for decentralised local power generation systems.

What is the most important lesson that has been learnt from the recent disinvestment of government undertakings?

I would say the single biggest lesson is where there is a will to do what is right for the country, for the economy, there is a way to do it. There will be questions, there will be detractors, but once the disinvestment process is done transparently, I think it is a positive for the country. I believe it sets the tone for much more efficient and stronger disinvestment in the coming months.

There is now this new-found confidence in the manufacturing sector when people have actually started talking of Indian MNCs. What more needs to be done to speed up this?

I am quite confident that the age of the Indian MNC has finally dawned. There are examples of Indian companies already donning that mantle. Companies which have operations around the world; the Aditya Birla group is an example. Ranbaxy is a great example of an Indian MNC. You are going to see in the manufacturing side southern companies such as Sundram Fasteners, and the TVS group reaching out to rest of the world and having operations around the world. The age of the Indian MNC has arrived. Today we have a few. I believe in the next five years, you can expect at least 100 Indian companies that can be described as MNCs in the true sense of the term. It is a lot of hard work. But that hard work is being done now.

Three years ago this kind of feeling was not there. People were still worried about what China would do to them. When and how did this change come about?

I can only describe it a sort of an analogous manner. You come to a canal and you find that the bridge has broken down. But you have to get to the other side. Sometimes what you do is you hesitate and start wondering, "I am finished, now what am I going to do." But you can also say, "no, there is no choice.

Let me go back a few steps and sprint and jump across. I must have that confidence in me". So, they will sprint and they are able to jump across. That is the kind of situation the Indian industry is in. Initially, they were worried, concerned and complaining. Then there is a mindset change, "I think I can do it". And I am beginning to see that change. They are beginning to believe in themselves. The sense of self-belief is now percolating down Indian industry.

What does the Government need do to spur this process of creating more MNCs?

I keep saying create an environment where efficiency and productivity become almost natural. Reduce transaction costs and make life for the corporates hassle-free. The Government's role has to be that of a facilitator. The Government need not and should not be taking making decisions, as it used to do in the past, on behalf of the industry. The Government has to be a regulatory only to set the framework, but most important, it has to be the facilitator.

Industry is divided on the benefits of FTAs, especially the one with Thailand and particularly the automobile industry...

It was. At the time of signing the FTA our tariffs for the auto component manufacturing inputs were still high.

The January announcements, pre-Budget announcements, and the interim Budget have addressed many of those concerns. So, auto component or auto industry, what it was saying, "we have nothing against FTAs. We welcome FTAs, but in doing so also get your internal reforms right". That is the message. And, I think FTAs are a good two-way street. As barriers come down it is good to be able to do free trade. Our FTA with Sri Lanka is a typical example of a success story. We started hesitatingly; there were some hiccups.

But once we got our rules of origin, the reservations on what kind of products can be sold, when the framework became tighter, things are moving well.

Indian companies will now see opportunities to set up shop. I think sometimes that impetus, that impulse to take risks this is where Government comes in. This is the facilitation role of government. Do not give sops, but address the genuine concerns of industry. Industry wants an environment where it can be as productive as its counterparts in highly developed economies. Then we are ready to take on the world. They do not want crutches.

What do you think will happen at the WTO?

I think the talks to put the Doha development agenda on the track that will happen. Again lot of work is going on behind the scenes. I think it is a matter of a few months' delay. Also, the US elections. And, 2004 is a unique year 73 countries have gone for national elections... Each has to pay attention to domestic issues, people's concerns. So it slows the process somewhat. But I am optimistic.