Updated: February 24, 2021 8:57:48 am
In March 1984, I was called for an admission interview by IIM Calcutta. The interview panel included a gentleman from SCOPE — the Standing Conference of Public Enterprises. Seeing that I was a final-year college student studying economics, he asked me a question: What did I think the strategy of the government should be for industrial growth? I thought for a second or two and said that it was pretty clear to me that future growth in industry in India should be led by the private sector and the government should encourage the private sector as a central part of its strategy.
This answer from a 20-year-old surprised the gentleman and he asked me why the private sector should be so important. My answer was simple — India is a capital scarce-country and the private sector is the best allocator of capital in the economy. A scarce resource should be given to that sector that will deliver the most benefit from its usage, be it in terms of growth or return on capital employed. What ensued was a longish interaction at the end of which we agreed to disagree. He simply could not understand why someone should give so much importance to the private sector.
This was during the high noon of the “Licence Permit Raj”. Everything was the state’s business. The right connections could get you big opportunities. Businessmen in those days were in a peculiar situation. Politicians routinely abused them in public, but happily met them in private. The intelligentsia viewed wealth creators pejoratively. Business meant unethical practices and evading taxes. Profit was a bad word and wealth was evil, even if it had been obtained through legitimate means and you were paying all your taxes.
The discourse that began around the mid-1950s and peaked in the 1970s and ‘80s was at odds with India’s ethos of respecting wealth creators. It had been possible to be in business and be regarded as patriotic before 1947. Mahatma Gandhi’s Congress worked closely with big business. Sardar Patel was unapologetic about his linkages with wealth creators. Sadly, after their withdrawal from the socio-political space, things changed.
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India’s successes in many fields in the last three decades are linked to the private sector. If you look at the industries that have created growth, jobs, buzz and hope in the last three decades, the vast majority have been driven by private enterprise — airlines, banks, telecom, insurance, IT services, IT-enabled services, internet companies and others.
Given the history of the private sector being regarded with ambivalence and mistrust, when in his recent speech in Parliament the Prime Minister openly acknowledged the contribution and role of the private sector as an important engine of growth and employment in India, I was pleasantly surprised or — dare I say — even astounded.
He didn’t merely extol the virtues of wealth creation, he actually eulogised wealth creators. His logic was simple: If you don’t create wealth you cannot distribute it. The creation of wealth is essential for growth, employment and the reduction of poverty. It took 73 years after Independence for a Prime Minister of this nation to acknowledge these facts openly — a gutsy move and a big departure from the past. And it wasn’t just said behind closed doors to an industry association delegation. It was said on the floor of Parliament and is now a matter of parliamentary record and the official position of the government.
This augurs well for government policy and future economic reforms in India. The engine of growth in the economy is being recognised as such. Now, it is perfectly kosher for the government to do all it can to encourage it.
India has been making commendable strides in the “Ease of Doing Business”. It is easier to start a business in India than it was a decade ago. Some areas need work, but a government willing to listen gives a good head start to solving those problems.
In my interactions with students and budding entrepreneurs, I see a new wave of innovation and enterprise in young India. We seem to have broken the shackles of a chained belief that business is bad. The success of the Mudra Yojana and Start-up India are living testimony to this fact. And that India is daring to look at sectors we were otherwise hesitant to — space, defence, aeronautics. Work on faceless tax assessment and PLI schemes are moves that have received encouraging responses far and wide. The India stack has revolutionised the fintech sector. The digital health stack will likely do the same for healthtech.
Post the open support from the Prime Minister, it is also up to the private sector to respond — grow your business, pursue excellence, follow the law of the land and pay your taxes. Many are doing all of these already but those who are not should reflect on this. Become good corporate citizens of India, else the public narrative might slip back into mistrust of the private sector. Our actions today inspire the upcoming generation of entrepreneurs as well. They will be the strong foundations of atmanirbharta, a word that is presently capturing the nation’s imagination.
The recent Union budget has made clear the intent of this government to pursue economic reform and go for growth — whether it is the willingness to live with a higher fiscal deficit or to aggressively pursue divestment of public sector enterprises. Large spending on infrastructure is good news too.
The Prime Minister’s speech has further raised expectations that more reform is around the corner and that is good.
This article first appeared in the print edition on February 23, 2021 under the title ‘Respect wealth creators’. The writer is co-founder Info Edge India Ltd. (naukri.com)
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