New Delhi: Chairman of TVS Motor Co. Ltd Venu Srinivasan takes charge as the new president of business lobby Confederation of Indian Industry, or CII, at a time when the Indian economy is sailing into rough weather. In an interview, the Chennai businessman says India could be close to a 1991-style economic crisis, even as he calls for more reforms, well-targeted infrastructure spending and decentralization. Edited excerpts:
What are the top items on your agenda?
We want the economy to stabilize. I think revival is at least a year away. We must make sure that we don’t slip in our rates of growth from the current 5%. The international economies have been stabilized by a huge pumping of funds; hopefully Prime Minister (Manmohan Singh) will be able to persuade America and Europe to put some more money into their economies because they ultimately take (or are buyers of) our exports and if their economies don’t stabilize, exports will never pick up and (economic growth in India) won’t pick up.
Critical time: CII president Venu Srinivasan. Rajkumar / Mint
Second, infrastructure. Infrastructure is a huge bottleneck. No significant power projects have really emerged. And we’re in a power-shortage situation at a time of low growth. What happens if manufacturing picks up? Where’s the power going to come from?
Also, our road-building speeds have come down dramatically. Then, there’s not been a massive new port created with good road-rail linkages.
The government would argue it had done a lot more for social sector spending that should justify overlooking the bugbears you have...
Social sector spending is, unfortunately, not tracked. Money is spent. Nobody knows where it goes. Do you know by taluk by how much literacy has improved? Do you know how many of the people finishing high school can read or write properly? Similarly, no one knows about medical delivery.
Unfortunately, very little of social sector spending actually reaches (the beneficiaries).
When you’re invited for the pre-budget meeting with the next government, what will be your advice?
(In the) last five years, we had huge economic growth. This was a very good time to cut back on subsidies. But we kept increasing subsidies that have gone through the roof. Subsidies is one area where you have to cut down. If you don’t do that you will come to a crisis like you did in (prime minister) Chandrashekhar’s period (in 1991), when you couldn’t pay for your oil imports. The country realized that people are not going to lend to you.
At that time we were a much smaller economy. You will have to do surgery (in) much more painful conditions. This time if rating agencies put you in the negative and there’s a social crisis, I’m not sure you can handle it the way you did last time. Government is going to find one day that it’s broke if this continues.
You make it sound we are more critically placed today than 1991...
I think there’s more of a crisis. Because our global linkages are much greater now. Our dependence on global financing is much greater now...our trade is much greater. Today, the global market has a greater ability to punish a market it is not confident about by pulling money out and creating a crisis.
Are there any state level reforms that you’d like to see done?
Let me refer to Tamil Nadu, a state I know very well. First is decentralization. There’s no decentralization from the state to the panchayat level. For example, 30 years ago, for whatever reason, all the district school boards were moved to Chennai. So now everyone comes to Chennai to get a transfer. You should go back and let the district and taluk appoint its own teachers who can only be transferred within the district.
In industry, you have 56 rules that make inspectors visit companies; we calculated six in Thailand. Agriculture has been neglected in the 20 years that reforms have taken place. Nothing has been done for irrigation.
Most of the things you describe do not make for a biting-the-bullet situation. It’s not as if the government needs to rub someone the wrong way in order to implement these reforms...
Yes, after the first level of reforms and the flush of growth that came with it, everyone said everything that needed to be done has been done and we don’t need to do anything else. It is indifference.
As you say, it is not about courage. Just indifference. Most of the things we do are NGO (or non-government organization) work.
Just like the communists don’t like you (CII) very much, there are also liberals in the country who don’t like you. You seem to be taken in so much by the economic changes in Gujarat that you gloss over the human rights violations (2002 Godhra riots) there. As CII, how do you justify something like that?
That’s not a fair comment. CII did take a postion when events (in Gujarat) took place. At the same time, there’s a huge lesson for the country in the way they (the Narendra Modi government) have reformed electricity, agriculture, transparency and governance. This is better than any other state.
They have set the standard for the rest of the country to follow best practices and in many ways they are the best practice... Even if there is PR gloss to it you cannot deny that the state looks and feels different. When I talk to my Gujarat dealers, they say we’re the best state to be in. At the CII we’d like to learn from this.