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May 25, 1998


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Rediff Business Interview/R C Bhargava

'The nuclear blasts give the impression of a stable government'

R C Bhargava He has been called a Japanese stooge and he knows it very well. But with the sheer force of his argument, R C Bhargava, former managing director of Maruti, India's best-known car company, drives home the fact that the car company is more Japanese than an Indian public sector.

In an exclusive interview to Rajesh Ramachandran about the forthcoming Budget, Bhargava feels the nuclear blasts were good for the Indian economy. This, he says, will lend political stability to the country and a sense of security for the investors. He also dwelt at length on how Maruti is different from other PSUs and how the Japanese work culture has produced amazing results.

As a technocrat how do you view the economic slow down? What are the reasons?

There are a number of reasons which have culminated in a considerable slow down of demand of products and services across the economy. The slowdown is not because industry cannot manufacture more or capacities don't exist or raw material is not available. Nothing of that kind. It is just that people are not buying goods, they are not buying services, they are not making investments. New issues have declined to a small percentage of what it was three years ago.

The whole economic situation is one where most of the people in the country are not willing to spend money and not willing to invest. The money is there, the banks are flush with it. People are today not putting money into shares because they have had bad experiences in the market in the past. They are not putting money into property because the demand for property and the rents have come down. People are just putting money into more secure instruments like bonds and fixed deposits.

What are the budgetary measures that need to be taken to get the economy back on to the rails?

The fundamental remedy is to stimulate the market. The finance minister will and must address himself to the question of how to once again create confidence amongst people. They should feel the urge to buy and invest. Investment must start again. A lot of demand is generated from investments. If you set up a factory, you have to have buildings, you have to hire people, you build your infrastructure, you create jobs and spending power.

One of the factors which has led to the present situation is the political factor. And the general impression that all is not well with the politics of the country -- stable governments and such things. People invest money when they are feeling good, when they are optimistic of their future. If they feel uncomfortable, insecure, and unsure about what might happen, they stop spending. People will put save their money for future use. A person will say, 'I don't need a bigger fridge, car, or a colour television right now. I will do with what I have. Let me see what the future has in store for me.'

The same thing happens to the investor. He doesn't know what's going to happen to the industry in future: 'I put money into this industry which I borrowed from elsewhere so if I don't make profits I am sunk for ever, so let me wait.' The impression is that we have a fragmented political situation in India and no government can stay for long. That the government can't even govern because of the pulls and pressures of the different segments of the government. This was a major factor in the past.

I think there is a good possibility that as a consequence of these nuclear explosions, the common man now will start feeling that this government is going to stay. Many people now think that there is a wave of support and popularity for the BJP, and therefore the BJP can afford to take a stronger political position vis-a-vis its partners and do what is required, what is good for the economy. That might probably exist for couple of months at least. So if this BJP government capitalises on this popular support and take decisions which are required to revive the economy once again, it would have its impact on the economy.

You know many hard decisions have been deferred in the last two years and more. Not by the BJP but by the previous governments, because nobody was sure of the political situation. The P V Narasimha Rao government had a thin majority, the United Front government was worse perhaps in terms of stability. So decisions were postponed. Now I hope the BJP today, recognising its popularity and political strength, will take decisions that need to be taken.

The nuclear explosions are part of an overall scheme for national security. But to ensure long-term national security you should have a strong economic base. What I am trying to say is that the military strength -- bombs, missiles and such things -- cannot give to the country's people the ability to live their lives, protect their culture, do things their way unless they have economic strength.

So it is even more necessary today, having taken this major step, to complement it with other steps in the domestic sector. If we move in the direction of a strong economy, nobody can impose any kind of sanctions that will affect India's economy. A strong economy and a strong military is what creates a global power.

R C Bhargava interview, continues

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