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|April 8, 1998||
The Rediff Business Interview/Tarun Das
'There is nothing wrong if children inherit companies'
What is your attitude towards swadeshi and the new BJP government's economic policies?
(Tarun Das [right] with Rahul Bajaj)I think there is a lot of confusion and misunderstanding about the word swadeshi. To me swadeshi means building a strong India, building a strong economic nation. If you look at the CII speeches in the past years, we have always said that India has the potential to be a strong economic power. We have got great natural and human resources. I think that is my understanding of swadeshi.
At the same time, whatever we Indians do for India, we are not going to do it in isolation, we have to have foreign partnership. We need foreign investment and technology. We should get that across the board in all sectors. And I think that is also the evolving position of the BJP.
I have been maintaining that you cannot say that I want foreign investment here and I don't want it there. What you can do is say that I will give incentives here because infrastructure is my priority, and I will have conditions there -- like export obligations, employment generation, level of technology. We have been doing that, so even in low priority areas like the consumer industry, we should welcome foreign investment.
And you know Indians are not good at consumer industry. We have no culture of running world class consumer sector. Multinationals are here to give us much better support on services, because they have done it all over the world. So we should not have different policies of what I want or what I don't want.
So you want foreign investment in potato chips as well as computer chips?
I want foreign investment, absolutely. But I want it with certain conditions for potato chips. Every country of the world imposes such conditions. We should welcome all types of foreign investment in all sectors of industry. Multinationals work under conditions everywhere, so why don't we state ours?
Isn't swadeshi the rough Indian garb for protectionism which the Indian industry still seeks?
I don't want protection, we are not for it. I think it is a retrograde step to talk about protection. We need competition, internal as well as external. We have been preparing for it since 1991. Many industries have been doing well in spite of external competition and lower tariffs while some industries are not doing well. In many cases, the tariff reduction has been too sharp. We can take care of that. But we should not talk about protection generally because I think that is a wrong policy and a wrong approach.
Let us never go back to the 1940s and 1950s when Indian industry was an infant industry. Now Indian industry has grown up and is an adult industry. Help them become competitive. Give them interest rates which are internationally competitive, not 18 per cent but eight per cent. Give them credit where they require, give them infrastructure support which they require. Remove the disadvantages and the distortions in the import duties.
Do you think that the Indian industry is competitive enough? They too follow the dynastic principles of our politics and don't allow professional top management by keeping a controlling stake.
These are two different issues. First, I believe if Indian industry is given support and the disadvantages removed, it is competitive. The second issue you are raising is ownership and the attitude of the owners.
Companies owned by families are also competitive. You are wrong if you believe otherwise. Look at the TVS group, the Murugappa group in the south, look at many of the Tata companies in the west or the Bajaj Auto or the Kirloskar, they are all competitive. We are competitive in textiles, they are all family owned.
So don't mix competitiveness with ownership. Ownership has nothing to do with competitiveness. Many owners are very enlightened. And while many owners are not driving their organisations to be competitive, the same can be said of many professional managers. So you can't relate competitiveness to ownership.
I don't find anything wrong in children inheriting the ownership of a company because it has happened all over the world and it is happening in India. In due course if they have to grow they will have to dilute their family holding. They will do that as part of their business strategy. To me it is not an issue.
My issue is, are they driving their competitiveness? I think most people are. If you take Kumaramangalam Birla, okay he was in his late 20s or early 30s when he took over his father's Aditya Birla group of companies. But he is driving it strongly to competitiveness.
It has been alleged that the Bombay Club is pushing BJP's swadeshi agenda to keep the non-priority, white good sector safe from foreign competition. At the same time, it is unwilling to step into infrastructure and welcomes foreign investment. Why this double standards?
Of course, the domestic industry is going into the infrastructure. And the classic example is Reliance. Their entire investment is in infrastructure: refineries, power, petrochemicals, all huge and heavy investment areas. The R P Goenka group's Calcutta Electric Supply: transmission lines, towers, its expansions plans. These are Indian companies in infrastructure areas and there companies which are not in the infrastructure sector.
The thinking today is that you should focus. If you are making scooters and motorcycles, make scooters and motorcycles because you know that business. People evolve their business according to their history and their knowledge.
These are just two or three.
There are others also. I think you can add a zero to it. I will say there are 20 to 30. There is a lot of resource required, lot of finance required, so the companies who are already in the infrastructure are the ones who will grow in this sector. Reliance is going to be a major player in the infrastructure in this country: it will be in power, roads, ports, telecom, petrochemicals, and refineries. Similarly with the RPG group in the east and there are groups in the south like SPIC, all of whom are in the infrastructure areas.
So if you look around, you can see, companies who are focused in this sector who will be giants. I think the numbers are adequate. What they need is cheap finance, they need cheap imports, they need to be competitive so that they become global players.
It has been alleged that the chambers of commerce and industry had approached the party which is going to be in power to lobby for the finance portfolio to be given to Jaswant Singh. Did you meet Vajpayee and Jaswant Singh on the eve of the swearing in?
Never. We have never been to anybody to canvass for anybody. This is wrong information and we would not do that. CII is comfortable with whoever is there in the different ministries. We meet Jaswant Singh once a month, and have been doing so for the last five years. We have been meeting (L K) Advani, (Prime Minister A B) Vajpayee, and others. We have been meeting (A B) Bardhan and (H S) Surjeet, Indrajit Gupta and Pranab Mukherjee, Sharad Pawar and everybody. We meet all political leaders across the board, right through. If you see our annual sessions you would find political leaders from all parties speaking there.
So your meeting with Jaswant Singh was a regular monthly meeting?
Yeah. We met him and discussed the economy. We briefed him about the economic situation. We also met other political leaders but we did not go to canvass for anybody. It was a regular meeting which we had with him.
Is liberalisation succeeding? Do you envisage an economic breakdown and huge retrenchment of workers?
We need to move as a country on many fronts. The government's development expenditure has to increase. We have to move on the front of reducing revenue expenditure, privatising public sector, supporting Indian industry, getting more and more foreign investment into the country. Red tapism has to end and administrative reforms should be quicker. There should be a balance between excise and customs duty so that there is a proportion of manufacture and value addition within the country.
Obviously we have not been able to move concurrently on all fronts. We are also new to deregulation and liberalisation given that up to 1991, India had a closed, highly regulated, controlled economy. In the first seven years we have gone down the road and done well. We have moved ahead from a $ 1 billion foreign exchange reserve situation to $ 27 billion situation. We have never had seven per cent GDP growth before which we had for three years in this period. So we have seen the benefits of these policies, now we need to make sure that they move forward.
I am confident that there is a much greater awareness, realisation and knowledge in the government, in academia, in industry, about all these issues now. We are also learning from the mistakes. It is like an individual learning the mistakes. The government or the country is also learning about how to develop its own strategy. I think very confidently as we go ahead we would address these policy imbalances.
I feel the present five per cent growth will go back to six per cent in 1998-99, and seven per cent in 1999-2000. And we will stay at seven per cent for the next 10 years.
There will not be any retrenchment. How can we have a huge retrenchment? We don't have social security. We can't sack millions of people, we can't put them out of jobs. And we are totally against an exit policy.
There is a strong feeling that it has been a rich man's economic liberalisation. Do you agree that there has been hardly any trickle down effect of the reforms in the last seven years?
I don't agree with that. You just go to the shops and you go all over the place and there is a new huge consumer spending. There are people with money where they have no money. New jobs have been created, new skills have been created, new purchasing power has been created.
There has been a tremendous trickle down effect. But it hasn't gone down to the bottom yet. But it has gone down to the different levels. But it has gone done to hundreds of thousands of people who didn't have it. Go to the mofussil towns to see how people are buying television sets. How people are moving from bicycle to scooter to a Maruti car. There is a change in the country, all over the country, not only Delhi.
But what about the vast majority, the 40 per cent below the poverty line?
It is coming for them. What is the number one priority for the country? High economic growth, because high economic growth creates jobs and jobs mean earning, earning means purchasing power. And the more jobs we create, more people would get the benefit of the economic growth. That is the way to go. There is no other way. There is only one way: hit seven per cent economic growth, get to eight per cent as soon as you can. And people will get jobs. Then you won't talk about trickle down, it will pour down.
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