THEY were supposed to be the brightest and the best products of the finest that India has to show by way of technical prowess, and shining examples of what industry, perseverance and innovation can achieve in a globally important sunrise industry. Our information technology professionals put India into the cutting-edge sector of the world economy; they even helped make the earth flat, in the super-adulatory but illusory description of the Roaring Nineties.
IT rookies were considered rainmakers, who would produce miracles through unstoppable 20 to 30 per cent growth year after year. Why, some business analysts even thought computer software would become a new paradigm, where development could be achieved while bypassing the traditional route of industrialisation and broad-based services.
This magic wand would allow India to raise standards of living across the board without addressing the peoples elementary needs, including health care, education and nutrition, leave alone redistribution of assets. This might be the Great Shortcut our rulers have always craved.
Going by the mystique around them, our IT professionals personified the virtues of honesty, commitment, self-confidence, an adventurous spirit and loyalty to their companies, clients and shareholders. They could do no wrong. They were the best grooms on the marriage market. They were everybodys favourites. They deserved all the pampering the industry got tax exemptions, land at concessional rates, and low-cost connectivity.
The Satyam scandal has shattered the dream. We have a scam, where the amount stolen going by promoter-chairman B. Ramalinga Raju is two and a half times higher in absolute terms than that was lost in the Enron scandal. Involved here is every trick in the scamsters book: forging bank certificates, inflating expenses, spiriting away assets, and browbeating senior executives.
It defies credulity to believe that over seven years Ramalinga Raju did not take large sums out of Satyam to buy real estate and other assets, influence business contracts, and bribe politicians and bureaucrats in return for favours. According to officials in the Ministry of Corporate Affairs, his family floated more than 100 companies, 23 of them branded with the Maytas name alone.
Underlying the Satyam swindle is the failure of all supervisory bodies, including PriceWaterhouseCoopers (PwC), the statutory auditor, independent directors, and Securities and Exchange Board of India (SEBI). Irregularities were reported in PwCs handling of Satyam accounts in 2001, but there was no investigation. Similarly, complaints filed with SEBI were not pursued. PwC, which has audited Satyams accounts since 1991, should have faced punitive action from the Institute of Chartered Accountants of India (ICAI). The ICAIs disciplinary council met, but failed to act.
Satyams independent directors acted largely as rubberstamps. When the board met in mid-December to approve the scandalous proposal to invest $1.6 billion in Maytas, it ignored the elephant in the living room: the conflict of interest in buying a company floated by the promoters family in an unrelated business.
Even worse was SEBIs approval for Satyams foul transactions, including the Maytas deal. Other authorities also ignored complaints about illegal land allocations to Satyam group companies in different cities, in violation of their master plans.
A major reason for these gross failures of supervision and regulation is the naive belief that in order to create a favourable investment climate, state agencies must sincerely trust entrepreneurs, and it must be generally assumed that corporations tell the truth unless proved otherwise. This makes nonsense of all considerations of prudence and precaution, including rigorous verification of accounts and tough investigation into grey areas. It also ignores the specific context in which the IT industry has recently evolved. This is marked by fierce competition in the low-value-added, largely repetitive software development business. Not every IT company is an Infosys, which reportedly looks for challenging assignments in high-end businesses. Although it was the IT industrys Number Four, Satyam had 690 clients, most of them small. The average firm is smaller and faces bigger challenges.
Under tight conditions, there is an increased temptation to look for shortcuts such as artificially boosting company ratings by employing more people than necessary, paying bribes to win contracts, and moneymaking through funds diversion and speculative investments.
What is true of Satyam may be true of many other IT companies. The World Bank has blacklisted two well-known firms, besides Satyam, for making improper payments (read, open bribes or favours like stock options). This, plausibly, could be the tip of the iceberg. Official agencies have failed to discover irregularities or subject IT corporate activities to scrutiny on the assumption that they are, must be, all in order; it would be counterproductive to rock the boat. This has promoted lack of accountability and impunity, and encouraged IT entrepreneurs to assume that they are immune from critical scrutiny. Coupled with the celebration of the Greed Creed in our media and social discourse, and the neoliberal doctrine that there must be no limits on incomes, profits and wealth, this culture of impunity makes for a deadly cocktail.
Following the older Friedman (Milton), many of our businessmen have convinced themselves that their only corporate social responsibility is to make profits. And following the younger or lesser Friedman (Thomas), they tell themselves that the world is flat: it is only natural that their consumption should match that of the elites in the industrial North. So they must make money by any means.
There is an even stronger reason to suppose that Satyam is not a one-off case or exception. A major feature of the swindle is its connection with land and political leaders under different regimes. Some of the biggest concessions and doleouts handed over to corporations in India concern natural resources and the infrastructure, including land, hydrocarbons, minerals, water, airwaves and spectrum within the telecommunications band.
This is the site of a particularly odious intersection or collusion between greedy businessmen and politicians sold on the neoliberal model. That is where some of the greatest scams are to be found. This warrants deep and serious investigation by an impartial commission, which must open up natural-resources contracts signed over the past two decades.
Impunity for businessmen in the so-called New Economy closely follows actual practice in brick-and-mortar companies, where patently irrational deregulation has aggravated corruption and corporate malfeasance, which have long been rampant.
My off-the-record conversations with corporate executives over a number of years suggest, as do many highly credible independent accounts, that a substantial proportion of promoters in many businesses in India routinely milk their companies by inflating project costs (and siphoning off the difference), appointing buying and selling agents who will give them a cut, fudging input costs and product prices, misrepresenting contents to duck duties and value added tax, under- or over-invoicing imports and exports, and by systematically evading taxes. The gutting of the composite textile-mill industry is a terrible instance of this. Indian businessmen have stashed away billions of dollars in bank accounts abroad. According to a recent report attributed to the Swiss Banking Association, the estimated amount is an astronomical $1,456 billion, higher than the deposits from all other countries put together.
Criminality has long been an integral part of business in India. And the general ethos of the business community has got increasingly debased over the past couple of decades. The introduction of neoliberal policies has done nothing to change this.
Indeed, as Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry holds liberalisation has not produced a new type of entrepreneur espousing good corporate governance and honesty as the norm. Actually, the reverse is true increased opportunities and a significant effect of political influence and public policy on the creation of wealth have created more greed and far too many corporates walking the narrow line between right and wrong This is the ugly side of economic liberalisation.
The dominant culture of our corporate nabobs has contempt for democracy and regards profiteering as its right to be respected by the state. The campaign by industrialists such as Ratan Tata, Anil Ambani and Sunil Mittal for making Narendra Modi Indias Prime Minister is a consequence of this culture. They love Narendra Modi because he is a ruthless administrator dedicated to promoting business interests no matter what the social cost. He offers businessmen terms that no other Chief Minister does.
In the Nano case, for instance, he has given the Tatas a Rs.9,500-crore loan at 0.1 per cent for a project investment of Rs.4,000 crore, besides stamp-duty waiver, cheap land and dedicated water and power supply. This will subsidise the Nano by an estimated 60 per cent. Guaranteed such superprofits, our businessmen can erase Narendra Modis role in the 2002 communal pogrom and its cover-up. All that matters to them is efficiency read, centralised, authoritarian decision-making, which favours them. After all, Italys businessmen too admired Mussolini because he made the trains run on time. German industrialists adored Adolf Hitler for building autobahns and the industrial infrastructure even though he conducted the Holocaust.
This speaks of abysmal moral degradation and fascination for a pathological politics totally opposed to a civilised democratic ethos. An elite so deeply implicated in shielding criminality and communalism forfeits its right to leadership.
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