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India Inc is dead, long live India Inc

September 7, 2010

As civil society expands its role, at the expense of the state, will the move towards more inclusivity result in a transition from India Incorporated to India Inclusive.

IS INDIA Inc dead? Is Niyamgiri the Trafalgar and Plassey of India Inc, the battlefield which marks its decisive defeat and signals the demise of the very concept of India Inc?

The idea of close collaboration between corporations and the government was most famously put into practice by Japan, and epitomised by the epithet Japan Inc. The government worked closely with industry right from the stage of policy formulation, and ensured all possible support to help its growth. As Japan boomed (till the 1990s), recovering rapidly from its war-time devastation, the ‘Japanese miracle’ evoked awe and admiration. Korea and countries in Southeast Asia, in particular, considered what they could emulate, and many followed the Japan Inc model of government-industry collaboration.

The close links with the private sector degenerated, in some cases, into crony capitalism. An example of this was the Philippines, under President Marcos. Another was Indonesia, in the era of President Suharto: probably — despite (or because of?) the high-profile US economic advisers — the most extreme example of crony capitalism. In the US, very strong links bind the private sector and the administration, and the influence of the former on governmental policies is well known. The government has no hesitation in unabashedly batting for its companies, and US ambassadors are known to quite directly pressurise local governments to favour American companies.

India, in contrast, was decidedly coy — particularly till a few years ago — in pushing the interests of its companies for orders abroad. The ethos, certainly till 1991, was based on the traditional distrust of business. For almost five decades after independence, government and business sat — literally and figuratively — on opposite sides of the table. Business looked at government as being a hindrance, putting obstacles in its growth path; it saw bureaucrats as control freaks, and politicians as either corrupt or pompously righteous.

On the other hand, government saw business (and businessmen) as being unethical, untrustworthy, greedy, and willing to bend — even break — the rules. As a result, no bureaucrat or minister was willing to be seen hobnobbing with industry folk. Their involvement with any event related to an individual company was rare, and publicly-known discussions between them on government policies was out of question.

This public stance camouflaged dealings (in private, of course) with select individuals — often, it seems, for a consideration. Stringent government controls (the socalled ‘permit-licence Raj’) provided much scope for patronage and favours, and certain industrial groups exploited this to the hilt. There was, thus, a tight link between government and business — but limited only to a few select individuals on either side. The opening-up of the economy, through the ‘big bang’ liberalisation of 1991, began to change all this.

Driven by sectors like information technology, where a new breed — middle-class techno-entrepreneurs with strong ethical values — stepped in, a new and positive image of businessmen evolved in the public perception. This metamorphosis was aided by the professionalisation of management in many companies and the large number of professionally managed MNCs. This made it completely acceptable for officials and political leaders to engage visibly and actively with the business world.

THIS transformation has gained momentum over the last two decades. In fact, the pendulum had swung so far in the last few years that India Inc had practically become a reality. Major industry associations developed great clout, with easy access to top policymakers and a role in shaping policy. The concept of private-public partnership (PPP) has been widely adopted and is now a standard paradigm for projects in many sectors.

The reversal of traditional antagonism, though welcome, has now been replaced by collaboration — collusion? — between government and business. Many wonder whether crony capitalism is beginning to take root and — despite liberalisation — are we once again beginning to see decisions aimed at benefiting one company or specific business house? Is the government interfering in inter-company disputes only to favour one side? These and similar questions are doing the rounds: many undoubtedly based on rumour, hypothesis and motivated ill-will, but some based on facts.

It is in this context that Niyamgiri marks a watershed. Permission to mine the land held sacred by the Dongria Kondh tribe was readily given by the state. Ineffectual presentation of the case led to a reaffirmation of this permission by the Supreme Court. The collusion by the state in granting approvals — or turning a blind eye — despite serious violations of forest and environmental laws by the same company (and others, in various states) reinforces the perception of callous governments, riding roughshod over the rights and sensitivities of local communities, and willing to acquiesce in violation of laws, only to favour business. Some leaders try to turn this into an either-or argument: development and jobs versus environment. Others — learning from Gujarat — wrap themselves in the flag and position opponents as being antistate or even anti-national.

In the light of abdication by the state of its duty to look after the interests of the people, and its succumbing completely to the ‘market’, it was left to civil society to fight the battle against India Inc. They succeeded, in the case of Vedanta, in first getting some foreign ethical investors to divest their holdings and then continued to mount pressure locally. Due credit must go to the central ministry of environment — which, better late than never, finally stepped in — and to the Congress party leadership. Niyamgiri may be a single swallow and may not mark the onset of summer; yet, there are signs of a reorientation in approach, at least in the Congress party. This may, then, well be the beginning of the end for India Inc.

As the move to more inclusivity takes place, implying a bigger role for civil society and a diminution in the power of both government and business, can one hope for a transition from one form of India Inc to another, from India Incorporated to India Inclusive? Is it time to say India Inc(orporated) is dead, long live India Inc(lusive)?

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