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Required: a new form of governance for a new economy

Unlimited vistas Our industry has turned the corner, and there is a sense of accomplishment in the air, a new confidence. Yet, what has been...

Unlimited vistas

Our industry has turned the corner, and there is a sense of accomplishment in the air, a new confidence. Yet, what has been accomplished is just a beginning, a mere glimpse of what is possible. In agriculture — organic farming, medicinal plants, floriculture, diversification into high value and high nutrition vegetables. Ever new services — product design, architectural work, research by our law graduates for foreign law firms, chartered accountancy services, remote medical diagnosis: in a word, to look beyond call-centres and the like. Sectors like education and health — they contain both: some of our dire needs as well as unlimited opportunity.

In a recent presentation, Dr Naresh Trehan, the saviour of thousands, has shown that even to come up to the rudiments of ‘‘health for all’’ would require an investment in the coming decade of Rs 1 to 1.4 lakh crores, and that almost 80 per cent of this would have to come from the private sector. Once that order of investment is enabled, our pressing needs would of course be met, but in addition about nine million jobs would get created, directly and indirectly.

Such prospects call for two keys — each of them is well honed by now, both are ones that we need to shield from the vicissitudes of political life and the inertia of administrative regimes. One is responsive policies: the changes that have been successively brought about in licensing regimes in the telecom sector and the way they have helped the sector are a ready example of what responsive policy regimes can contribute. The other limb is concrete public-private partnership. Again we have a ready example at hand: Government has set up 39 Software Technology Parks; an IT entrepreneur can walk in and begin operations straightway, he can ‘‘plug and play’’, as they say — all the infrastructure he requires is available at the flip of a switch; as a result firms operating out of these parks account for 80 per cent of IT exports today. The sectors that are opening up require this kind of partnership to be multiplied manifold.

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Pune has already become an important centre for high-end software, and basic sciences. It has a rich intellectual tradition and resources. For such reasons, Pune is well positioned to leap ahead in, for instance, biotechnology and bioinformatics. But setting up the necessary infrastructure would require an outlay of around Rs 300 crores.

Similarly, the Government’s Semiconductor Complex at Mohali, Punjab has by its own efforts developed capacity to work at 0.8-micron level. But the new fields — nanotechnology, new materials — require fabrication at levels of 0.1 micron and thereabout. The fab for this kind of work requires an outlay of Rs 500 to 600 crores. If things are left solely to private entrepreneurs, such projects may not get established at all. If things are taken up by Government alone, governmental culture will infect operations.

Public-private collaboration is the obvious answer. (Incidentally, should governments be enabling such frontier projects or running hotels?) There are five additional areas on which concerted thinking as well as more purposive action is required.


An essential element of the infrastructure for enterprise is the set of incentives and penalties that the State and society provide. What is the activity they reward? What is it that they punish? When the finances of the State come to depend on lotteries or sales of liquor — as they have in the case of several of our States — conditions will get created willy-nilly that will entice citizens into gambling and drinking; and these are the industries that will come up.

Similarly, our licensing systems had fomented a special kind of enterprise — manipulating the apparatus of the State. Are these the kinds of enterprise that we should encourage our industries to acquire or the skills and wherewithal to meet the real needs of our people — of health, sanitation, clean water bodies, Tax regimes, governmental expenditures, subsidies, and of course each regulation should be examined from this point of view. Are our tax/ expenditure structures spurring a shift from fossil fuels to renewable forms of energy, or are they fomenting ever-greater use of the former? Second, it is an essential responsibility of the State — especially in a society like ours that has so little by way of research — to anticipate and prepare.

What is going to be the impact — on which industries concentrated in which region — of events that are round the corner? Everyone hails SAFTA. What effect will free inflow of garments from Bangladesh have on which units in which cities? Closer economic relations with ASEAN, with China will provide vast opportunities, true. But they will also entail substantial adjustments. Textile quotas go, the zero duty regime for electronics breaks out in just a few months. Are our units well enough prepared?


Several of the swings in stock markets, the steep rise in steel prices in the last six months and the way they have pushed steel-using units in Punjab to the wall — such events remind us that liberalisation must not become an alibi for my going to sleep on my watch. Even from the point of view of the purist-marketeer, there is a utilitarian reason for the State to anticipate and prepare. Were the steel-using units to close down in Punjab, as many of them are today on the verge of doing, to continue the last example, and a lakh or two workers were to be thrown out of job, a reaction would be triggered that will damage the general process of Reform.

The third sphere in which, while great advance has been registered, things have far from settled down is Regulation. Conventions are still to form. Case law is still to build up. The precise contours of the role of Regulators have yet to be accepted. Within the Executive, the doubt is often aired, ‘‘Are we not creating a super-Government? Are we not giving them too much power? After all, who are they? Till yesterday, he was a Secretary. Just because today he has been given a job as a ‘‘Regulator’’, does he automatically become that much wiser than Government?’’

As for legislators, I myself experienced at first hand how tenuous conviction is on the matter. In January 2003, TRAI had published indicative tariffs as it is mandated to do. BSNL and MTNL had crafted packages that took good care of the interests of rural areas, senior citizens etc. At the same time, their packages would have given stiff competition to private cellular operators. But the cry went up, ‘‘Extortionate…TRAI is in the grip of private cellular operators…’’ I explained that what TRAI had announced were just indicative ceilings. Operators could devise packages cheaper than these, as indeed BSNL and MTNL had done. The shouting became even shriller. I then pointed to the law — Section 12 of the law that you have passed gives TRAI the exclusive power to prescribe the package, I said. ‘‘So what?,’’ they demanded. ‘‘We have passed the law. We can change it. You bring an amendment, we will pass it.’’

Regulators and others too have yet to think some questions through. What kind of persons will be appointed to such bodies? Recall the observations of Supreme Court judges in regard to persons who had been proposed as members of the Competition Commission. Similarly, in what detail would such regulatory bodies want to regulate affairs?

Fourth, there is that blackhole — our enforcement machinery. Why will enterprise not be channelled into suborning officers and ministers when no one is ever brought to book? Readers will be astonished to learn that over three hundred and sixty cases of the Department of Telecom, BSNL and MTNL alone are lying with CBI and other agencies! Passing stiffer and stiffer laws has become a substitute for enforcing them. Another arena is suggested by a success. In some instances, Government has not been able to carry through its announcements — announcements that, if implemented, would have spurred enterprise across the board.


An instance is the announcement that Government equity in banks will be brought down to 33 per cent. In such instances, Government has opened the sector to competition. The results have been dramatic. People have acquired wider choice. Institutions that remained in Government control have been spurred to improve their operations. To the extent they that haven’t done so, people have voted with their account books. As a result, services in the sector have improved even though the original intent of Government could not be seen through. That improvement shows a way.

Consider Reforms in labour laws. They are a deterrent to investment. They are blocking the creation of more jobs. Every commentator focuses on these, and highlights them as proof that Reforms are not proceeding apace. And yet, what with fractured Parliaments, reforming the laws remains beyond our reach. In such situations we should look for ways to create apertures. Once Special Economic Zones are created, for instance, and they work to, let us say, Southeast Asian labour laws, people will themselves see that workers in these areas are not worse off, that in fact they are earning more as the firms are doing better. That demonstration will facilitate reform of labour laws in general.


Similarly, one could devolve greater power to states to amend such laws. The more progressive states, the ones in which governments have clearer majorities will institute the necessary reforms, and thus facilitate change elsewhere.

Media and academia

Few groups can help as much in all this as the media and our academics. What kind of an economy should we aim to be 20 years from now? What are the five technologies in which we should aim to leapfrog? What technologies are liable to break out in a sector, and how should our entrepreneurs prepare for them? What will the consequences be of the rate at which the water table is falling? Of the use of chemical fertilisers and pesticides? We have come to look upon larger and larger production of automobiles as an index of growth. But is that the route to solving the transport needs of a country as overcrowded as ours?


Even though such issues stare us in the face, little systematic work is being done on them. Such work as has been done, has not filtered into the consciousness of even the average reader of newspapers.

On the other side so much more could be done to focus attention on the good work that is going on in almost every part of the country. That way we would build confidence. We would offer people models to emulate.

But neither the work on issues nor accounts of good work will amount to much if we do them as if we were engaged in a high-school debate. One article ‘‘for the motion’’, one editorial ‘‘for the motion’’, and in the adjacent space another ‘‘against the motion’’. To most issues, there aren’t two sides. Our job is to research the matter deeply enough to come to definite conclusions. And to present them without circumlocution, to document them in detail, to argue our conclusions vigorously. And if tomorrow new evidence suggests that we were wrong, to acknowledge that in public. As unambiguously, and with as much vigour.


The author is Union Minister for Communication, Disinvestment and Information Technology. This article is based on his address at the 10th Anniversary of Business Line

PART I- Charge of the Indian brigade

PART II- From socialist rags to competitive riches

First published on: 04-04-2004 at 00:00 IST
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