India’s progress has been, thus far, held back by three lacks.
Lack of trust with the business community
Lack of respect by Government for money
Lack of vision for the future
Business Community: Historically Government has distrusted the business community, initially imposing licensing restrictions which enriched those who could ‘obtain’ the license whilst punishing consumers with shoddy products and long waiting lines. Then the growth of companies was stunted with laws such as MRTP and Urban Land Ceiling Act, making them globally uncompetitive. Not to forget the insane 97% maximum income tax rate which encouraged dishonesty. Each time a scam occurred, a new law was introduced to seek to prevent it, instead of better enforcement of existing laws. Consequently we have far too many laws and very little enforcement of them.
In Fortune 500 global list India has 7 companies, the largest being Reliance Industries (# 96). China has 124 companies, the largest being Sinopec (#2). Chinese leader Deng Xiaoping famously stated that he cared not if the cat was black or white so long as it caught mice. In India, political affiliations matter, sometimes more than business acumen. This has allowed China’s GDP to grow to 5X India’s GDP; in the ‘60s we were equal.
It is only recently that the Government has opened up defence production to domestic industry and has stated that its overseas embassies/consulates will work with Indian companies to promote export of defence products. It is time that Government encourages interaction with industry and
Respect for money and for contracts: Once money had value. I recall my grandfather telling me about getting 1 pice/day, which, then, comprised 3 pies. One pie spent on tram fare each way and 1 pie for an afternoon snack or saved. So 1/300th of a rupee got a school kid through the day!
By our stupid policies stunting growth, stunting opportunity and denying entrepreneurial ability from flourishing, money has been debased. Today, several countries have negative interests rates where you pay a bank to deposit your money, more have zero interest rates and almost all have rates that do not cover inflation. Hence, India’s gross savings rate has been falling due to, and now stands at 30.1%.
Banks are being defrauded with ease. Look at the casual manner of recovery and distribution in such frauds. The Nirav Modi scam broke out in Jan 2018. Last week, PNB received $ 3.2m from sale of assets – by a US Chapter 11 trustee, not by the Indian agencies!  Indian agencies are quick to attach assets of defaulters and then lie back taking no action.
In the NSEL case some recoveries have been made by selling assets of defaulters, but the money is lying with ED (Enforcement Directorate) not distributed to victims. Why? Because the perpetrator of the fraud claims the money is ‘benami’ (belonging to someone else) and should be investigated. Hah! The money was invested via brokers appointed by NSEL, who have done due diligence (Pan card, Aadhar card) and it is incredible that, whilst not objecting on the receipt of the money, NSEL/FT is objecting to its distribution to suffering investors.
Our main adversary, China, developed its Vision 2025, in which it sought to attain global supremacy in technologies needed for the 4th Industrial Revolution. It is, today, a leader in 5G telephony, with Huawei filing the most patents.
We must learn from the correct paths followed by others, and correct our wrong decisions.
If we do that, our future is secured and we can hope to quickly recover from the economic ravages of Covid.
The writer is India Head-Finance, Asia, Haymarket. The views are personal