Opinion Manmohan Singh gave India Inc the freedom and confidence. Today, there is fear

While the pandemic may have contributed to the slowdown, it does not fully account for the overall lacklustre private investment under Modi. During Singh’s tenure, there was an equally devastating global financial crisis. Private sector investment grew at an annual rate of 22 per cent under Manmohan Singh, while it collapsed to 9 per cent under Modi. In fact, it reached an all-time high of 17 per cent of GDP in 2007-08 just before the 2008 financial crisis, while the highest level of private investment under Modi was only 13 per cent. Whichever way one looks at the data, it is evident that the private sector did not exude the same confidence to invest during Modi’s tenure as it did during Singh’s.

It is not that the Modi government did not try to woo private investment. It slashed corporate tax rates from 30 per cent to 22 per cent in September 2019, just hours before he left for America to host a ‘Ab ki baar Trump sarkar’ rally. The cost of this huge corporate tax cut was borne by the middle-class and the poor through income taxes and high GST. For the first time in India’s history, middle-class citizens paid more income taxes to the government than corporates in Modi’s tenure. Despite this huge tax bonanza for corporates, the private sector did not show confidence and increase its investment in India’s economy.

Finance Minister Nirmala Sitharaman has made at least a dozen exhortations to corporate India to invest. It ranged from coaxing to cajoling to veiled threats to fervent pleas. In September 2022, she even mocked the private sector saying, “I want to hear from the Indian Inc. (sic) What is stopping you from investing? Are you Hanuman that you don’t know your own strength? Do you need someone standing next to you to constantly remind you?” The government’s desperation at the lack of private sector investment was blatant.

Yet, industrialists were happy to comply with orders to praise the PM on social media, give 120 marks out of 100 for every budget and even donate some of the money saved from reduced tax rates to the BJP, but were dogmatic in their refusal to take risks and increase investment. The disconnect between rhetorical support and real investment by corporate India seems driven by the larger climate of fear, doubt and uncertainty perpetuated under Modi. While tax rates may have come down under the current regime, business leaders live in fear and doubt. When industrialists are implicitly coerced to sell their business or when they are nudged to set up factories in specific states or when they are deprived the right to make unfettered business decisions, it is only natural that their appetite for risk will be diminished and hence investments restrained.In this atmosphere, business leaders have responded the way anyone would in an autocratic and uncertain environment – performing loyalty in public while hedging their bets in private.

Under Manmohan Singh, business leaders were neither fearful nor needed to be gushing with praise for the government. In 2012, industrialist Rahul Bajaj publicly told Singh, “We do not have the confidence that you will act.” Yet, or, because of this freedom, private investment boomed. Singh presided over a liberal regime where businesses were free to criticise policy, advocate without fear, and trust that tax notices or enforcement actions will not be weaponised politically. That freedom bred confidence, and confidence bred investment.

Manmohan Singh warned exactly of this in a 2019 article, ‘The fountainhead of India’s economic malaise’. He wrote, “There is a palpable climate of fear and distrust in our society today. Mutual trust and self-confidence are the bedrock of social transactions that foster economic growth. This perilous state of fear, distrust and lack of confidence will impede investment and growth”. He understood acutely that only if you give industry the freedom to criticise and provide feedback on economic policy, will they have the confidence to invest and expand. Between 2004 to 2014, the Indian industry had the confidence and gumption to take risks, invest and grow in the full knowledge that they would not be vilified, coerced or punished unfairly. Up until 1995, private sector investment hovered around 5 per cent of GDP. Manmohan Singh changed the course of India’s economic history by raising private investment to 10 per cent, first as finance minister and then to 14 per cent as Prime Minister. No one has done more for India’s private sector than Manmohan Singh.

Manmohan Singh’s 93rd birthday on September 26, may not elicit gushing praise and wishes on social media from India’s business leaders — perhaps more out of fear. He never sought applause anyway. But I suspect corporate honchos may paraphrase and mutter Simon and Garfunkel in silent breath – “Where have you gone, Dr. Saab? Our nation turns its lonely eyes to you. We love you more than you will ever know”.

The writer is Chairman, All India Professionals’ Congress