The world has started moving fast again. India is probably the fastest growing economy and is likely to stay that way. There is obviously much to excite us. Going by media accounts, administrative affirmations, stock market outlooks and foreign interest, India is the investment destination that no one can afford to neglect.
Yet, as Mark Twain suggested “whenever you find yourself on the side of the majority, it is time to pause and reflect”. We cannot do any justice by complaining, criticising or dismaying — but owe it to contemplate and take stock of expert analysis and real-world situations.
I have often written that — particularly while framing and implementing policy — it is essential to keep eyes fixed, like Arjuna on the bird’s eye in the Mahabharata, on the ultimate goal: generate livelihood opportunities for a million people each month for 10 years.
Creating livelihoods
We need to seriously consider why this “globally highest” growth rate has not shown signs of creating livelihoods anywhere close to this pace. There is now belated anxiety on this front, but only insightful minds can judge how much arises from political expediency. The signs of changing basic characterisations of employment no matter how well deserved create uncertainties or doubts — or even expectations — which are best avoided.
A much stronger investment cycle to supplement consumption-led growth is required to create a sustainable basis for livelihood. And, equally important, pull people up from under-employment and mere sustenance.
Therefore one needs to assess whether all this calls for much more cohesive policy, certainty and economic freedom than today. If so, such messaging from enterprise must be relentless.
Ease of business
Has the Prime Minister’s assertion of India being the most open economy in the world for investment been proven in earnest and does it correspond with hard facts? A large potential market, and ease of doing business, are necessary but not sufficient conditions to invest. Every class of investor must feel he is in an environment where the greatest risk is business risk.
Analysts and various economic participants seem to be more frequently flagging regulatory and disruptive risks. These need to be assessed alongside available speed of judicial resolution. The breadth and speed of disruptive reform is a useful tool, but whether it is balanced with mundane issues like “survival” across select sectors could be investigated.
Many changes have been made to the tax structures. There is a great zeal for ending tax evasion. An honest economic participant needs to gauge if we have reached a mature stage in balancing revenue appetite with principal-based taxation. Or if tactics to treat tax offences on par and as grave as economic offences will or will not have widespread ramifications, especially as some of these remedies become irreversible.
The introduction of laws and procedures to deal with insolvency and resolution of stress are path breaking. The initial speed of decision taking has been appreciable, though it was intended to be faster. Success can only be measured in time. But what requires reflection is whether the overall combination of all laws and procedures have created hindrances to financial decision-making.
For example, could the system tilt towards bankruptcy because no one wishes to take a difficult decision regarding resolution? Some senior bankers have been known to articulate this position; but even if this could do something for banking balance sheets, I am not sure what impact it would have at a broader level in the national ecosystem.
When something goes wrong, the natural tendency seems to be to assign blame and fiddle with concepts that — in global experience — are not disturbed except in extreme circumstances.
For example, experimenting with the concepts of limited liability or confusing business decision outcomes with malafide can have very peculiar or even unexpected long-term outcomes.
It is occasionally tempting to play to the gallery. But, does the gallery have maturity or is it invested enough to grasp the key ramifications? These are matters on which professionals, entrepreneurs or indeed even large corporations must make specific judgment calls as to the way forward.
Stifling regulation
The Indian formula to fixing issues usually has the default mode of writing more laws, regulations and punishments. One cannot still be sure that the achievement is anything beyond amplifying an atmosphere of suspicion and mistrust. We perhaps learn little from experience because usually one ends up looking at the “what” and forgetting the “why”. A race begins to capture, berate and punish, which takes precedence over fixing things.
Lastly, there have been a number of commentaries on how top lines of companies have (finally) shown some movement north. But the movements of bottom lines have not been that exciting. Much of the stock market has been driven by Indian money (which RBI is still counting) that has gone into the banking system, rather than by sheer performance economics.
Global geopolitics (read: China and the West) and indifferent domestic competitiveness can both encourage increased onslaughts of goods and services in both Indian and export markets.
So if this is the situation with a growth of over 7 per cent that the IMF lauds, a close look may be called for on future cash flows. If cash flows are weak, we could be looking at another cycle of stress and new investment proposals may also be held back.
To some observers recent writings on the economic landscape — except those custom written to excite specific audiences — may seem to rotate around similar issues. That may well be since soft issues are essential components of decision-making and feel-good; without these any impulse to hire or invest falls flat.
There is no question as to the need to participate deeply and forcefully in the economic growth and revival of enterprises and citizens at large. To this same end I paraphrase the Christian singer John Fischer who, while asking listeners to be part of God’s plan, sang “look all around you and see what is real; hear what is true and be sure what you feel”.