The Hindu Business Line : The language of economic change

There is a shift in how the media, Indian and foreign, perceives India. But some are caught in a time warp, blaming the licence-control raj of the past. They must be reminded how the government's planning process helped build an industrial base and a degree of entrepreneurship that prepared everyone for the liberation when it came. The government needs to be engaged, led, and shown a better way of achieving the same objectives, and not just criticised, and called names.

The recent performance of the Indian economy has attracted a lot of deserved attention. A slew of articles has appeared in business magazines about the growth rates that the economy is achieving and the dynamism of the companies in not just the software sector but also manufacturing and in services.

Western journalists writing about India have reached a take-off stage. After focusing on China for so long, on everything from its growth rates, challenges faced by US companies moving there, potential market size, places where jobs are moving, and so on, India has entered their radars and getting tagged along with China. India and China have now become twins in their minds.

Most of the articles about India begin with a standard introduction about the conditions before the boom. And, of course, that involves describing how closed the economy was and how restrictive the regulations were. Previously it was a `Soviet-style' economy, and now it is free to flourish. Perhaps the writers are hoping, through their comparisons, that it will become an `American-style' economy.

The previous leadership in the country was `Soviet-inspired' and Nehru comes in for his due share of blame for being a `Fabian socialist.' I wonder if one of the news agencies sent out a template on what to write in the first three paragraphs .

Economy unshackled?

Now, of course, everything is `opening' up. In addition, the terms `reform' and `liberalisation' have a liberating ring to them. You can imagine people being chained to what they were doing before, now breaking lose. What a relief! One author calls it `an economy unshackled.'

However, not everything is hunky-dory. Every time a policy comes up for review or there is delay in the implementation, the alarm bells go off. Is the government not serious about reform, they wonder. Every time action is taken against a Western company, it becomes a `test case' for whether the government is serious about reform. Enron was one such test case, the mantle then moved to insurance companies and now its Wal-Mart's turn.

The Western bug has caught the Indian writers too; for them it has become fashionable to decry the achievements of the Indian economy before reforms and liberalisation happened.

After all, the worse off you can show the past, the better off the appears the present. Turnaround managers will always tell you how bad things were when they got there. `If I knew the true state at that time, I wouldn't have joined' is sure to get you praise for the little improvement you have managed during your stint.

Similarly, arguing that the economy was in a bad shape before will help credit all the improvement to the efforts of liberalisation. It helps that the economy was in really bad shape just before the reforms were initiated.

Unfair criticism

The government, of course, has to take the brunt of criticism. There is no denying that the government's role was indeed all-pervading. There can be few other free societies where entrepreneurs were punished for producing more than they promised.

The Directorate-General of Technical Development (DVTD) managed to fall to that dizzying depth; it kept a tight leash to ensure the under-developed status. The licences and permits needed for every economic activity and the armies of bureaucrats hired to distrust the people were indeed large.

Now, suddenly, we have borrowed the language of the libertarians. We want the government to get out of the way. Its role is just to maintain law and order and provide Defence; our industries will take care of everything else. That is certainly uplifting to read for the level of confidence it displays.

Even while we beat the government for its past performance, should we not give it some credit? I walked into the office of a friend in Bangalore who runs a successful call centre for clients overseas. In a previous incarnation, he was a successful granite miner and exporter. His present hi-tech venture seemed far-fetched, given his previous training and expertise. I asked him how he got into it. It turns out that he had attended a course conducted by the Karnataka Government about running such operations and it included information and instruction on the technical aspects. He just followed those instructions and was in business!

While we are on the subject of software, it must be said that most old timers in the industry acknowledge their gratitude to George Fernandes. While he was a Central minister, enforcing the FERA regulations, he took a firm stand against IBM, which did not want to dilute its equity and preferred to exit.

The vacuum in the computer industry that resulted from its departure was filled with a rush of fresh entrants that gave rise to several of our computer giants who got an opportunity to test the waters without having to fear the long shadow of Big Blue. Welcome to the law of unintended consequences!

The positive steps

One magazine article says of India that `its entrepreneurs (were) chained down by the world's most bureaucratic bureaucracy.' True. But what about the crores of rupees that various State governments offered budding entrepreneurs at a time when you could not find a single venture capitalist in an air-conditioned office?

The industry promotion corporations were prepared to back technocrats and dreamers with a combination of loans and grants and filled many of our industrial estates with industrialists who started their businesses with less than five per cent down. While the large private sector companies were cornering the licences, the reservation of items allowed the small entrepreneur to get a foothold in manufacturing, thanks to the very same bureaucracy.

What about the enormous economic cost incurred by the state in its oft-criticised effort at spreading out public sector industries in the country, placing them in various States, and then giving preferences to local ancillaries? And offering incentives for `backward' areas that have helped a more balanced geographical growth than one sees in other developing nations. These became the seeds for large industrial areas of today.

Don't get me wrong. I still shake from fear of the time a DGTD officer berated me because my employer had not adhered to some downright dumb regulations that the officer was employed to enforce.

The World Competitiveness Report's comparisons of the kind of obstructions to doing business that the Central government places before its people compared to even more backward countries makes enterprise building a challenge that deserves a Nobel.

But the government needs to be engaged, led, and shown a better way of achieving the same objectives, and not just criticised, and called names.

Just as our children respond better to positive reinforcement, the government also needs to be congratulated for the many things they got right in the past.

The new template handed out to foreign writers about the Indian economy needs a new paragraph on how the government's planning process helped build an industrial base and a degree of entrepreneurship in the country that prepared everyone for the liberation when it came.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)

More Stories on : Economy | American Periscope

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
New roadmap for free float

Controlling growth of disparity

The language of economic change

Roadmap for efficient service delivery

Ministry for ZPG

WTO shackles on national policy

Retaining customers and employees

Vacant Govt posts

LIC's performance