What has liberalisation achieved?
Certain things have been done to help industry. Licensing has gone, or almost gone, though it's still around in some key sectors. Imports have been liberalised and tariffs have been brought down—good things that very badly needed to be done.
Are there any fundamental oversights?
Yes, the overemphasis on industry. We tend to forget almost a third of our workforce and more than that of our population is agro-dependent. If India has to grow, it can't be without agriculture getting the kind of priority industry is getting.
In the last 15 years, industrial production went up 150 per cent. But agricultural production is up just 60 per cent, along with a fourfold price rise. Surely something's wrong, nobody's too bothered. Not the World Bank, I think. Frankly, in many ways the Bank speaks for the rich. They have a surplus. They won't give it away to those who starve. They do destroy food. They try the damnedest to maintain high prices. They want cheap labour, new markets. Their emphasis is on industry. That's the pity of it.
Infrastructure, both physical and social, has been neglected. We talk about roads, energy, telecommunications, which is all fine. What about health and education? The poor-rich divide has increased. The rich have become very, very rich. And nobody cares to look where the poor are—probably worse off in the long term.
And inflation, is it time to breathe easy?
We keep getting these inflation management figures every day, we keep getting delighted every week. I think it's largely suppressed inflation. Our agriculture policy is pro-inflation. When it's the Government's stated objective to have a support price, there's already a vested interest. Look at land and housing. We have enshrined land prices through section 37(I) of the Income Tax Act. If you buy below the market price, you may end up not buying at all. The Government will step in and buy. Inflation is built into the supply of land.
The cost of money has gone up. How can you talk single digits when there's such huge cost-push inflation coming in from imports and the falling rupee? Plus, you have to make many public sector companies viable. Everything you take—the capital, the people, land, agricultural products, imports—has cost-push factors.
What about fiscal deficit?
That I think is a grossly overstated worry. I don't think an underdeveloped country on a fast growth trajectory can avoid a fiscal deficit. You have to borrow from the future to give to the future what you believe it needs. It's different in the West, where the rate of growth is much lower. I don't think what's good for General Motors, is good for America, is good for the rest of the world. I don't know where this figure of 5 per cent of 5.5 per cent (fiscal deficit as percentage of GDP) comes from. It's suddenly a sacred number in Indian economic folklore.
What ails us on the industry front?
How can you have rapid growth when the basics are affected? The capital markets are in disarray. So one basic requirement of industrial growth, of quality improvement, productivity, restructuring and so on, is money which is hard to get and is very expensive.
The other thing is people. The cost of people is going up dramatically. Most of the damage is being done by foreign companies. Labour legislation has not been dealt with. You have capital in short supply, people getting expensive and no changes in labour legislations—I'm not saying people should be exploited but I don't think managements should be exploited either by entrenched labour unions wielding the kind of power they sometimes do.
So two vital ingredients for growth aren't there—a result of overemphasis on foreign investment. It is important, but it should be channelled into key sectors where there's a genuine shortage that can't be met by Indian industry. Maybe, the technology sector.
Competition is necessary. It must happen in a controlled manner because the kind of investment made by Indian industry, often in a reckless and foolish manner, results in high costs. That doesn't mean you throw it away. You upgrade it, make it more productive and don't jeopardise it. And the kind of things that could happen soon could seriously jeopardise industry as we know it. I'm not pleading for immortality in the corporate sector. Business houses may go under, individual companies, brands, undertakings, product lines may vanish. But one has to bring about a change without jeorpardising the many valuable things we created on the ground. But I don't see a way out.
Are we talking level playing fields?
I've been suffering working under a disadvantage, my hands fractured, legs fractured fighting the Government. I wish I was 20 years younger. When I started working, I had to visit Delhi three times to persuade the director general of tourism that the room rates of Taj Mahal hotel in Bombay needed to be hiked from Rs 57 to Rs 63. That's the way we spent all our working lives. I'm not asking for a level playing field, I'm asking for an advantage. Working at a competitive disadvantage, we have inherited industrial sectors weighed down by the costs of the past. Take our main competitor, HMT. They paid huge duties on imported equipment, much more than us. And they had so many people forced upon them—it was considered the public sector's duty to employ, whether there was work or not. They're the inheritors of a political legacy. You need to do something about that before you bring in Citizen, Seiko or the Japanese.
And agriculture? What's the crux of the problem?
You can't change things till you abandon romantic notions of the independent farmer tilling his soil. Fact of the matter is, he works enormously hard but will always be marginal, sub-marginal, small, on the brink of poverty unless he has the benefits of capital. Combine his hard work with capital, technology, with the economy's skills, and you'll see a huge difference.
The corporatisation of agriculture will boost productivity, and perhaps morality too. It's been a long time since the Prime Minister spoke, about his vision, his government's vision, about where we're going, how we're going, what we're going for. And he sees no evil, hears no evil, speaks very little too and doesn't act at all. Not that he isn't a fine man. In many ways he's the best man we've had. But maybe he needs to introspect and change from time to time.
The unfinished agenda...
The social sector is where money needs to be spent. It will be a huge mistake to make huge cuts again. We must look at the cost-push factors and be less concerned about the demand pool, the money supply, the fiscal deficit. A lot of what we read about liberalisation having faltered is what India sees in the eyes of foreigners. And they are so vocal, publish so much, have so much access to media which chases them in any case so much. But please, we are talking India. About removing the shackles from Indian industry, commerce, agriculture, so that we take them forward.
Any anecdotes from personal experience?
I believe we, Titan and Timex, really call the shots in the watch industry. We're doing things that will change the jewellery industry. But does the Government think it necessary to talk to me? No. When I send them a tome on smuggling, I get an acknowledgement from some clerk down the line. Not a damn thing more.
When I'm trying to build a brand in Europe, it means huge outgo of money. It's not like exports, 25 per cent in the EFC account and all that. You've got to put the money upfront, in brand-building. And how much support does one get? Very little, and it's dwindling: where I got 180 days' credit, I'll now get 90 days' credit.
In fact, one is harassed by officials who come up with the most idiotic interpretations of the law. And then make you feel guilty. I've been fighting the revenue authorities for two years after we got a concessional rate of duty. Their interpretation is if you do use a part in a watch, you get a concessional rate. But if you reject it because it's unusable—and there will always be rejections in any manufacturing process—you pay the full duty! Can you believe it? This is madness. We've wasted thousands of man hours tackling this.
