Lakshman has become the president of the Associated Chambers of Commerce and Industry at a time when the economy is looking ragged and political developments are overshadowing everything else.But a pragmatic and optimistic Lakshman explains to Pranjal Sharma what went wrong and what should be done to revive the economy. He also accepts that the corporate sector has to bear part of the blame for the mess in the primary markets and feels that the companies have learnt that fooling the investor does not pay in the long run.* How do you see the fall in the rupee? What will be the overall impact on the industry?This is such an esoteric subject, that it is difficult for any one to take a hard position on it. I'm not saying this because I want to duck the issue, but it is a very tricky subject. The intervention of RBI has gone on for the last two and a half years trying to keep the rupee parity at around Rs 36 to the dollar. I have had discussion with the previous Governor of the RBI on who always felt that the 35/36 level is the right value of the rupee. He felt that we should not import inflation. Fertilisers and petroleum are imported and consumed by the common man. And we just can't afford to hit the common man. I have believed in a stable rupee, with limited interventions from time to time.For the exporters it is good news, but those importing will see a rise in costs. This will be passed on the consumers. But our database is so bad that we cannot immediately gauge the impact of the fall of rupee.* We are heading for a new Government. Do you think the foreign competition issue will become important again?I think this is a dead issue. I don't think any Government can afford to open up this issue about foreign investment. It is clearly established now that India is an open market. There is some red tape and infrastructure problems. Today the whole world is looking at India.I don't know whether the Indian industry liked it in the initial stages, but I think we've learnt to live to with it. Frankly no Government can afford to revert the policy. In fact the new Government can help by pushing the next phase of reforms.* What are the three most important reforms you want done?First is the widening and deepening of financial sector reforms. There is no sophisticated currency market, capital convertibility and such issues. Our agricultural sector need to be overhauled. Decontrol of agricultural commodity exports, corporatisation of agriculture, land reforms. The final big reforms is deregulating our labour market. I'm not advocating an exit policy. All I'm saying is can there be flexibility in prospective employment. Let the past bury its dead. Prospectively, the employer should have the flexibility about the newly recruited workforce. The small and medium companies need flexibility. If the Government thinks that our unemployment problems will be solved by MNCs, they are sadly mistaken. MNCs will bring capital intensive technology while we need labour intensive technology.* The causes of industrial slowdown are many. Would you agree that the Indian industry's inability to cope with an competitive environment is one of them? Has the Indian industry been able to restructure itself by taking measures such as cutting costs and improving quality? * If you are saying that the Indian consumer has been shifting from Indian products to US and German, then it is incorrect. The imports have not been rising but contracting.But to comment on your later question on whether Indian industry has refocused itself on quality and strong consumer orientation, I would say not enough. I think we are moving towards it. In my industry which is auto components there is a strong emphasis on quality.* The markets have not been buoyant and the investors are disillusioned with the companies. Shouldn't the corporate world take some of the blame for the situation?Yes, I think when the private sector got the freedom to access the market on nearly their terms, some of us went overboard. There was also some very poor quality of market intermediation. The quality of issues were not good too. It is a combination of all these things.I think the industry has learnt its lessons. Many of the merchant bankers have learnt their lessons. We might see some overpricing in the future, but it will not be the norm.
