Industrialist Jamshyd Godrej,member of the group (which included Deepak Parekh and others) that sent a letter to the government and political leaders about governance deficit,policy paralysis and other issues about 10 months ago,says that politics is superseding economy. In an interview to George Mathew and Sandeep Singh,Godrej spoke about the rising cost of doing business,importance of taking fast decisions and delay in the second phase of reforms. Excerpts:
You were part of the group that sent a letter to the government and leaders about the policy paralysis. Is the situation showing any signs of improvement?
It has raised the awareness. Just because you sent a letter doesnt mean things will change over-night. Governments make decisions based on political situation in the country. This (the letter) is telling everybody that if we want to grow rapidly,we need a change in the governance. If were not going to have a change in governance,we wont be able to show a high growth. If decision-making is not fast,you know what happens. Businesses dont take decisions. If I want to invest and find theres a problem,I will wait to see… and if everybody does that no investment takes place. Its not that the government doesnt know about it.
Is there any sort of urgency in the way the government is pushing for a change in the way things are handled?
They are seeing urgency. Theres a shift in the sense that in any election today,its the rural areas that are important. See the effort that has gone in from the government side into the rural areas…. employment guarantee scheme and all sorts of schemes. Why are they doing it? … thats where the votes are. If the government wants to come back into power,thats what they have to do. Lots of problems that we talk about,especially on the industrial front,wont affect that many people.
Do you think politics is superseding economy?
It is. You live in a political economy. All democracies live in political economies. Under the circumstances,the government takes the right decision based on their political perspective.
Whats the biggest concern in the corporate sector now?
When you raise expectations,they all talk about … everyone in the government talks about second phase of reforms. It keeps getting delayed all the time. But expectations have built up. But people say nothing is happening. Therere lot of issues… with projects,financing,the ability to move goods overseas. You have to see it in the holistic way.
Is that the reason why corporates are investing more abroad than in India?
I dont think you can link these two issues. People will definitely invest outside basically because theres an opportunity there. You will see much more Indian investment going abroad because companies recognised theres an opportunity in markets outside India. Most of these opportunities are in developing markets than in developed ones.
Are you concerned about the fall in growth?
Even a 7 per cent growth in todays global context is very good. I dont think we should be particularly worried about growth. To get 7 per cent growth even with high interest rates and inflation is not that difficult. Consumption has grown significantly and income levels have gone up. I think whats worrying is structural issues like infrastructure,availability of power,road,ports etc. If all that gets delayed,the cost of doing business will go up.
Is cost of doing business rising?
Of course its rising. You have high interest rates,inflation and theres a policy paralysis,then the cost of doing business goes up.
Whats the solution to bring prices down?
If you dont increase the supply side,inflation wont come down. Demand for food items has increased but supply has not. The answer to that is how quickly can we add capacity. The government needs to encourage supply-side and infrastructure.
We saw the inflation-interest rate phenomenon hitting the country in 2006. Five years down the line,the same story seems to be repeating…
Every year when we are not doing what needs to be done,everything keeps accumulating. After five years you find that theres a huge gap. The answer to that is the government has to facilitate investment a lot more. That doesnt necessarily mean giving sops or incentives. Its creating the right environment and opportunities.