Monday, 14 November 2005

When the capitalists wooed the comrades

Here's something I wrote about in DNA, put off as I was with the way Mukesh Ambani, Swraj Paul and L N Mittal went to pay their respects to the CPI (M).:

Currying favour with the comrades

Monday, October 24, 2005 20:11 IST

When all those business barons descended on AK Gopalan Bhavan (the headquarters of the Communist Party of India-Marxist) were they really, as we have been told, attempting to understand the Left position on various economic policy issues? Or were they merely trying to buy peace with a party that is being seen to increasingly influence - nay, dictate - the economic policy of the United Progressive Alliance (UPA) government?

Going by the past record of corporate India, the latter assumption wouldn't be too far off the mark.

Take the case of the Swatantra Party, the only party to champion the cause of free enterprise at a time when socialism was the dominant ideology. One would have thought the party coffers would have been flush with funds from all the big business houses. Perish the thought. The Swatantra was always strapped for cash. Businessmen did contribute to it; but in dribbles.

The bulk of the funds went to the Congress Party, the party that was driving all those socialist policies. Even the Tata group - among the few business houses that supported the Swatantra openly and wholeheartedly - gave only one-third of its political contribution to the party. The other two-thirds went to the Congress. No wonder, a chronicler of the party's history, Howard Erdman, commented that this was a rich man's party which no rich man was willing to give money to.

Little seems to have changed over the years. As Indira Gandhi steered the country's economic policies further and further to the left, Indian businessmen preferred to operate under the table and shovel funds into party coffers and to individual politicians to get their work done. So much easier, isn't it, to swing a licence here and a permit there than compete fairly.

Businessmen across the world may make noises about being stifled by government interference in the economy, but all of them prefer a situation where they are in a position to tweak policies to their benefit.

Interesting that Mukesh Ambani, in his meeting with CPM heavyweight Sitaram Yechury, should have appreciated the party's stand on certain aspects of globalisation and have commented that there is no need for the country to go in for "mindless foreign investment". It would be interesting to know what Ambani meant by 'mindless'. Something that adversely affects the interests of the Ambani empire, perhaps?

Remember the Bombay Club that came up when the Indian economy was being opened up in 1991? The group lobbied against foreign investment, using the specious argument of the need for a level playing field for Indian businesses. Many of the worthies behind that campaign changed their tune when they realised their businesses could also benefit from globalisation. But the lobbying against competition never ceased.

When the automobile policy was being revised around 2000, many of the foreign car manufacturers who came into India when the sector was opened up in 1994, were at the forefront of lobbying against the import of second-hand cars. The current campaign against foreign direct investment in the retail sector comes as much from organised Indian players as by politicians.

When Arun Jaitley was information and broadcasting minister for a brief period, he used to recount with glee how owners of newspapers which used to carry scathing editorials criticising the government for various restrictions on foreign investment would come to him to lobby against foreign investment in the print media. Take any sector of industry - even those like telecom, which benefited hugely from the liberalisation of the economy - and tales abound of players manipulating government policy to stymie competition or incumbents ganging up against new entrants.

But how sustainable is this, from a business point of view? Wheeling-dealing and lobbying are hardly cost-less transactions. There is a price to be paid - in cash, cheque or some other favour - especially around election time. It definitely won't show on the books of companies, but surely such unrecoverable costs will impact bottomlines in some manner? Wouldn't there be a larger cost to be paid somewhere, by someone?

Also, is it worth it? Business environment keeps changing and today's gain may not be of much use a year later. That time a competitor may be more successful in getting its way on something. Remember, the intense lobbying in the telecom sector in 2002 over WLL and fixed line services was sparked off by new technologies completely transforming the playing field. Sneaky lobbying only vitiates the policy-making environment and has an adverse pass-through impact on the economy as a whole, as inefficient players manage to negotiate preferential treatment and protection for themselves. The country has paid a price for that. Can it continue to do so?

It might be far better for the industry to stand up and take a stand against mindless and short-sighted populism. Let them generate informed public debate and build up awareness on issues. Decisions affecting their operations have an impact on the entire country, and people have a right to be informed. Clearly, it's time to jettison what Minoo Masani called the "cowardly and supine attitude of big business in India."

No comments: