Need to give new govt at least 2-3 years to pull economy out of rut: Venu Srinivasan, TVS Motor chief
Srinivasan says that the Modi government will have to clear the thicket of regulations that have come to surround businesses during the past decade.
What is on top of your mind right now?
In terms of the Budget, everybody is focusing on fiscal deficits and other issues of bitter medicines. But I would like to take a different view.
The Budget has to focus most importantly on job creation. A lot of the petty and violent crimes exploded, it is my hypothesis, as there are no opportunities for educated youth. We desperately need to create 100 million jobs in India.
These jobs cannot come only from the service sector. So I think the focus of the government should be how we can become an export hub like China and create a wave of manufacturing enterprises which provide meaningful employment.
I think it (the Budget) should first signal ease of doing business. So what we really need is transparency and ease of doing business. In terms of ease of doing business, in the last few years there has been a swing to the left.
(Under) the Land Acquisition Act, if you want to pay the farmer a little more compensation that is not an issue, but the rehabilitation rules — that for generations you will keep track of the families and even if you sell the land many years later you will have to keep track of them and compensate them —are regressive and prevent anybody for acquiring land.
So if we need to give a reasonable premium to the farmer for losing his land, please let us do it. If we have to provide some land sops for land losers, so be it. But I don’t think you can have rules which are impossible for anybody to comply with and that would bring manufacturing to a grinding halt.
The second problem in ease of doing business is the multiple inspections and rules that we have to comply with. Everybody thinks reform means hire and fire.
I don't think hire and fire is on my mind. It's the last thing on my mind. But what we need is a simple Factories Act, not drafted in 1947 but in 2015, which should cover aspects about electronic manufacturing and ease of reorganising our factories.
Today every time we move a machine, we sign 40 sheets of ammonia-printed plans. Nowhere in the world do we do it. Flexible times are not possible at all.
And as far as the labour laws are concerned, do we need a multiplicity of acts to deal with what is due to an employee? Can't we have one simple act with one organisation with whom we deal with rather than multiplicity of labour organisations from ESI to PF.
Now ESI, why don't we make them independent, make them a public sector undertaking and let them compete for business. You specify what benefits an employee should be given rather than what money we should pay to ESI which does not provide service.
Then you have Model Standing Orders that govern the behaviour of workmen and management. It is antediluvian. Every seven people can form a union and companies' unions are fighting with each other with managements caught in the middle.
There are a whole lot of reforms that can be done without affecting the security of workmen. I think therefore it needs a complete relook because most of these laws have been passed between the 1940s and the 1970s and they are no longer relevant when you have to compete against China.
Nowhere in the world do you have a company law that allows government to directly intervene and open the books of the company or change managements. This Companies Act was actually imported from America.
There managements don't have equity and they are hijacking companies and therefore to protect a diverse spread of shareholders they brought in rules of independent directors.
Now, if independent directors have more powers than the person who is promoting the company, then why should we promote the company? Then we have the General Anti-Avoidance Rules.
GAAR is again imported in a manner which is not relevant to this country. I think we need to postpone GAAR or scrap it and rethink it as a part of the Direct Taxes Code. Now the DTC that was proposed years ago is again very draconian.
The whole concept of the Companies Law, the DTC is that you cannot trust an Indian. It is based on an adversarial relationship between the regulator and the regulated.
This is no way to go and that is one of the main reasons why entrepreneurial spirits got quenched. Growth came down from 9 per cent to 4 per cent. UPA I got the tailwind of NDA which had set up very good governance standards and everybody was investing in India.
UPA I started undoing it, the results were seen in UPA II. It's not that UPA II undid it; a lot of it was done by UPA I. So then you have environment clearance, wildlife clearance, forest clearance. One ministry has to give three different clearances.
So between the environment ministry, Companies Act and tax codes nobody wants to do business in India. We need to see how people do business and how investments can thrive.
Cut down revenue deficits, but increase fiscal deficits so that further investments on roads, ports, public housing takes place so that people can benefit. I think broadly this is how I would look at the Budget. Make it easy to do business, create jobs and create a new future for young Indians with great aspirations.
Based on what you have seen so far, in a month or so, are you optimistic?
I think it is too early. I think this government has been very careful, very discreet. They have not really made too many statements other than the fact that they have gone around listening to industry for the first time and saying what’s wrong with the government.
They have gone around asking from people what they want to see in the budget. I would wait for the next six months because there is so much to be done. Railways are in a shambles; you have not invested in rolling stock, you have not invested in track replacement.
Now I don't want to get into the bitter medicine. Bitter medicine has to be given in very small doses. But if you do the deregulation and transparent reform, that will get the country going very quickly.
And I think even if you have a fiscal deficit but the revenue deficit comes down you will be signalling to people that India is investing for the future and not borrowing money to spend on personal daily expenditure.
Other than deregulation, what can help the manufacturing sector?
I think we need to have electricity. In Gujarat they have done it, they have shown it can be done — 24 hours, 7 days a week of power supply.
Two, you need stability. Now when you have a Company Law with 377 sections that government can change from time to time with modifications, there cannot be stability. If you have a retrospective taxation, there is no stability. We have had no stability or guarantee of an environment for the last 10 years.
It's time the new government says that this is a stable environment for the next 10 years we will provide you. Then we will have the courage to invest.
Why? They have signalled willingness to relook at the company law. They have signalled they are going to postpone GAAR. And they have signalled they are going to relook at the Factories Act. So they have given a lot of signals.
So the budget is not only going to be about the financial budget and the details, but the budget is also about hope, about the future and the regulatory environment in our country.
So what we would like to see or I would like to see is certainly a signal that where Sebi, the Companies Law or the Land Acquisition Bill or the Factories Acts or entire gamut of labour laws, how it can be made simple, easy to comply and the light touch of the inspection branch.
We have gone back to the 1960s. In fact we are more over-regulated than we were before deregulation. For every sector, we have a regulator and we have a ministry. So ministry says something and the regulator opposes. The regulator agrees and ministry opposes. It is just like Alice in Wonderland!
What about the mood? Do you think it has shifted?
Mood has shifted, business is very confident both in India and aboard. You have seen the amount of money that has come into the stock exchange. All of it is on hope.
It is very important that this flickering lamp of hope is kept alive by signals in the budget, statements in the budget about other reforms, and not cover only the financial budget. This was done in 1992 under Narasimha Rao's leadership when the budget was presented by Manmohan Singh.
I think we need a similar budget which is going to be a roadmap for all regulations and the way government operates. Now that we have a clear leader who is giving the direction, we are very hopeful.
But I do not think we can expect all that has happened in 10 years to be undone in just one year. We have got to give them 2-3 years and it's a step-by-step process. If the country has gone economically into ICU, it’s not going to run an Olympic race in three weeks.
What about yourself? Do you see yourself playing some sort of a role?
I think through CII, through industry colleagues, I would definitely play a role as the chairman of the Visionary Leaders for Manufacturing Programme.
We are also having under that a Village Buddha programme where we want corporates to adopt villages, applying management methodology to create a new resurgence in these villages in terms of microbusinesses, selfemployment and prosperity.
We cannot wait for business to grow, taxes to be collected and trickledown to create prosperity. Again, I am saying don’t give me rules on how I should do CSR. Please leave it to me.
You (government) said spend 2 per cent (of net profit), now leave it to me. You also said it cannot be ad hoc donations to different charities. That is also fine, but don't ask me for milestones.
I take up a village, it takes me 20 years to create a generation in the village which believes in the way we have guided them. So it's an ongoing thing and not clearly project based as they want. They have put rules under CSR which are the dream of a bureaucrat and the nightmare of a businessman.
When it comes to corporate ethics, not everyone is alike. So how do you strike a balance?
This is a very important question. I think governance is needed and there are rules for governance. But in India, where we have a full governance oversight, you cannot then import rules from 20 different countries which are the harshest and then compile to make it super law which prevents any entrepreneur from taking risks. The country will stop.
Because you want to catch one crook, are you going to imprison and shackle one billion people from being entrepreneurs? India has complex laws which are not enforced, so there are no consequences anyway. People who are not honest continue to do what they want to do but it becomes a shackle for very honest large companies.
I think we need to have simple laws but very tough implementation. We just keep on passing laws with no enforcement. So if you are going to pass more complex laws, that is only going to prevent ordinary law-abiding people.
There has to be a balance between permanent and contract labour. Contract labour also needs to get a reasonable salary and everything is about a balance. Dharma is ultimately about balance that is equitable. So neither is there equity nor is it easy for honest and law-abiding businessmen to run their business.
In this sort of a scenario, what do you think Narendra Modi brings?
I think he brings hope that what he has done in Gujarat, he can do in the country. Gujarat is the state with the lowest corruption, lowest social violence in any state, lowest crime rate of any state and the best infrastructure of any state.
So he has been able to do that by single-minded drive. I think he is the most hard-working and highest-energy person we have seen in public leadership.
Therefore, the hope is that he will be able to bring that energy and that hard work to bear on the whole of India and create the same kind of new India. Today India has a great deal of hope.
Do you think it is possible to replicate Gujarat’s results for the entire country?
The challenges are different. He has more influence and less direct authority. But yet, for lots of things the states depend on the centre. So they do have levers and switches with which they can encourage and urge state governments to follow more liberal policies.
Every chief minister ultimately wants employment and prosperity on which he can plant his flag and stand for the next election. Now I think it can be done. After all Narasimha Rao did it with a minority government, Vajpayee did it with quite a wide coalition from George Fernandes to DMK.
The great PMs we had in this country, Narasimha Rao was one of them and Vajpayee was one of them. I am sure that Modi will be one of them. The ball that was set rolling by Rao was carried forward even further by Vajpayee and country did benefit greatly from that.
The quality of living that we all today enjoy, the kind of products we can buy, the kind of services we can get is all because of what happened between 1992 and 2005. But in the last 10 years, unfortunately, we just set the clock back.
How does one ensure a balance between economic growth and inclusivity?
I think somewhere the deep linkage between growth and inclusivity was forgotten. Without growth, how can you be inclusive?
Because, if there is no growth, inclusive growth is stillborn. They neglected growth and thought inclusiveness would come by having a woman director on a board, having new company law bill, having a new land acquisition bill.
So the whole thing did not work. But I think when you go to Gujarat there is growth and there is inclusivity. So I think growth is a primary requirement for inclusivity. But inclusive growth is necessary for maintaining the social fabric.