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K. Ramesh

WEALTH creation — legally and ethically, that is — is an essential objective of any country. It not only benefits the economy but also society as a whole. Recently, the Securities and Exchange Board of India (SEBI) chief, Mr G. N. Bajpai, talked about enhancing investor wealth. In this context, it is worthwhile to introspect why India has failed, vis-à-vis other nations, in wealth generation.

In relative terms, the West in the past had an edge in wealth generation. For instance, anyone who invested $10,000 with Mr Warrant Buffet in the late 1950s would have reaped an after-tax return of $200 million in 2000. Mr Buffet made millionaires of several of his shareholders spread across the US. If these investors could become so wealthy one can well imagine the prosperity of companies in which Mr Buffet invested.

Over the past half a century, the bane of the Indian economy has been the greater focus on wealth transfer rather than on wealth creation. The stock market, in particular, has been witness to turbulent times, with mega scams, vanishing companies, and so on. The aggregate effect of such scams, it is estimated, could have resulted in a diversion of Rs 20,000 crore and a Rs 2,00,000-crore erosion in market capitalisation.

The RBI could do little to bring to book the dubious finance companies which swindled investors of about Rs10,000 crore. And add to this, the non-performing assets and projects totalling Rs 1,20,000 crore pending completion for various reasons, locked up in banks and financial institutions. This mind-boggling transfer of wealth, when added to the progressive siphoning of resources from the various developments programmes of the Government, could have added significantly to India's GDP. This trend has to be arrested and remedied. But what is the root cause of this menace?

While some blame the laws governing the system, others point to the inefficiency of the enforcement mechanism. A few take on the regulators and watchdogs. The rest squarely condemn the bureaucracy, the Government and poor governance. Obviously, there can be no generalisation of the cause(s). But the common factor is the absence of good governance at various levels. In a country where talent is not consciously promoted and the dishonest often go scot-free, the younger generation sees no role models and are, hence, easily misdirected. The following, among others, deserve immediate attention by the Government:

First, the education system, fashioned on the Western model, needs a relook. Universities are generating graduates whose skills are limited merely to memorising and reproducing. However, unlike in the West, the graduates are not guaranteed any jobs. For instance, the mass outflow of engineers from private colleges has resulted in many of them being unemployed and willing to take up jobs totally unrelated to their skills.

Second, if economics is a social science, it has to be tailor-made to the culture of each nation. Here again, we have been blindly aping the West. The globalisation whirlwind is eroding our strong culture, dismantling the joint-family set-up and increasing the appetite for spending, which goes against our savings-oriented mindset. And, more important, like any other vocation, some qualification needs to be prescribed for those entering politics. In addition to academics, criteria such as track record and compliance with laws need to be made mandatory. These alone would ensure professionalism in governance and produce powerful leaders.

Nothing is more potent than the human mind. India's quest for wealth creation lies in properly channelling the abundant human resource. Given the strong cultural background, knowledge base and other resources, the nation can regain its lost glory in the coming decades provided, of course, the fundamental causes for current trauma are addressed.

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