Two Sundays ago, Prime Minister Narendra Modi went against the accepted political dharma in the country and defended big business. Addressing a gathering of industrialists in Lucknow, Modi claimed that like labourers, farmers and bankers, India Inc. too is a key player in nation-building. Alluding to Mahatma Gandhi, who was publicly associated with big Indian industrialists, he said, “When one’s conscience is clear and intention is noble, you don’t get tainted by standing with anybody."
As an aside, this spirited defence of Indian business by the PM is ironic because for most of the four-year term, they have privately expressed unhappiness with the Modi regime.
Significantly, the PM’s remarks come in the backdrop of a sustained campaign by the Congress alleging that India’s recent purchase of Rafale aircraft from France was not above board. Whether these charges stick or not will only be proven when the nation goes to polls and elects a government next May.
But, at the moment, the PM’s intervention has put the spotlight on how India perceives big business. The economic history of India, replete with scams driven by crony capitalism (captured so well in popular cinema), paints big business as morally deficient. Exactly why politicians mouthing populism and their endless devotion for the economically disenfranchised have chosen to keep discreet their associations with business. And also why so far it has been impossible to be both pro-poor and pro-business.
This lack of a trust quotient in Indian business, according to former chief economic adviser Arvind Subramanian, is cramping public policy. “My hypothesis is that India is affected by stigmatized capitalism, where there is not enough trust in the private sector or in the ability of the state to regulate the private sector. It is making it much more difficult to give the private sector a bigger role. It is easier to give a public or a quasi-public entity a bigger role rather than getting more private sector participation," Subramanian had said in an exit interview published in Mint.
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Given the PM’s immaculate sense of political timing, consummate political instincts and continued sway with the electorate (going by his leadership of the audacious win the Bharatiya Janata Party pulled off in 2014 and subsequent state polls), the moot question is whether his intervention will help speed up a rewrite of the narrative about India Inc. The altered circumstances suggest that this may well be the case.
The phase of crony capitalism was born in an era of controls often dubbed the “licence raj". The ecosystem incentivised or made corruption look that easy. Big-ticket scams that broke at the turn of the millennium is when this unholy relationship came under intense scrutiny, creating a basis for a reset of the ecosystem. Consequently, over the last decade or so, India has steadily moved to embrace a rules-based regime. The much reviled Aadhaar, the unique 12-digit identity number, was among the first few baby steps. In the last four years, it has been turned into key tool to tackle corruption—for instance, linking it to LPG connections nixed 350 million duplicate/fake accounts. Similarly, the raft of anti-black money measures like demonetisation, law against benami properties and of course the introduction of the goods and services tax (which created a national market and also an audit trail for the entire supply chain) have started creating a new ecosystem for doing business.
It is also a fact that this regime is probably the most business-friendly in modern India. And as the PM placed on record, its support has been overt. In fact, finance minister Arun Jaitley had said as much in March 2015, “I have always believed that there is hollow argument in this country that you are either on the side of the poor or on the side of the industry. I am on both sides. If I do not earn from industry, then how will I provide services for the poor."
Now, to walk the talk.
Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics. His Twitter handle is @capitalcalculus.