India must take its rightful place among the economic powers of the world.
BEFORE 1991, India by and large followed the policy of a mixed economy. During the 1960s, 1970s and 1980s we had a protected economy. However, there was a positive side to this situation. Owing to its policy of import substitution at that time, the nation developed a manufacturing base, unlike certain industries in South Asian countries that were mainly screwdriver technology-driven.
But since we operated in a protected environment till 1991, none of India's industries were truly internationally competitive. Costs were high, quality was low and technology was obsolete. In industry there is only one guru who teaches you to be efficient and that is not a business school but a buzzword called competition. Without competition, industry will perish.
By the early 1970s, the black chapter for Indian industry had begun. And during that decade, hardly any new technology agreements were signed in the private sector.
Indian industry greeted the process of liberalisation started by P.V. Narasimha Rao, Manmohan Singh and P. Chidambaram. Between 1991 and 1994, the pace of liberalisation was so fast that industry was pleasantly surprised. After 1994, the process of liberalisation slowed down considerably owing to political reasons.
Some industrialists did not realise the full implications of liberalisation.
Industry, which had functioned under controls for decades, was suddenly exposed to internal and external competition. The controls were perhaps justified until the end of the 1960s, but subsequently they had begun to have a detrimental effect on industry.
It is in this background that the liberalisation process from 1991 onwards in the areas of trade and industrial policy, taxation, exchange rate reform, and so on, was welcomed. The world too had changed by that time, with Communism and the old economic policies existing only in North Korea and Cuba.
However, after 1994, there were some weaknesses in the policies pursued by both the Narasimha Rao and the Deve Gowda Governments, although the 1997 Budget was outstanding.
Lest I should be misunderstood, let me clarify that we still need a lot more liberalisation. Let the government not privatise defence-related sectors and the railways, as in some countries. But there are over 100 companies in the public sector that can be privatised and disinvestment can take place so that the government's holding drops to less than 50 per cent. But there is no consensus. If the government maintains its more-than-50-per cent ownership, the Comptroller and Auditor-General comes into the picture, which means that bureaucrats and Ministers interfere claiming that they are answerable to Parliament. If the government holding is brought down to below 50 per cent, we would have eliminated this problem, but political expediency rules this out, at least for the moment.
The fiscal deficit for 1996-97 was 5.5 per cent of GDP and we want to bring it down to 4.5 per cent in 1997-98. But we knew for a fact that it was not 5.5 per cent even in 1996-97. If we add the State governments' deficits and the Public Sector Units' deficits, the total would be 9 to 10 per cent. To reduce this deficit, subsidies that do not reach the poor should be eliminated.
Another major problem is our labour policy. Industry does not want to throw workers out of jobs, and one cannot annoy labour and progress. But there must be a flexible policy, one that favours more employment. Today, industry is scared to employ people. Moreover, to improve quality and productivity, there has to be a flexible labour policy and if someone does not work properly, there must be the danger of his losing his job. Another area that needs liberalisation is the financial sector, including insurance, banks, stock markets and financial institutions. If Indian industry is to be competitive, many more reforms are required in these areas.
Now to the so-called Bombay Club. People have been given the wrong impression that the Bombay Club is protectionist and wants the reforms process to be rolled back. Let me clarify that there is no such thing as Bombay Club. As I am perceived to be a spokesperson for this Club, let me make myself clear: I believe that almost all the big Indian companies in future should not become foreign-controlled. Should we not have at least 100 Indian-owned companies in the top 200 companies in the country? Every country in the world, including the developed countries, supports its domestic industries. In India, we are sometimes told that it is industry that is important and not the industrialist. I am not saying that the Indian industrialist should be protected. It is one thing if we all live in one world. But today, there are 185 countries in the United Nations. If an Indian wants to settle, say, in the United States, he or she is not allowed to do so. For that reason, each country has to support not only its industries but its nationals.
In India, we require foreign capital and technology. Certain technologies are in the hands of only a few corporates in the world and these companies will not part with them unless they have a majority stake in the company in India. We should readily offer them this equity, otherwise we will not get the required technology. Similarly, in certain infrastructure projects where the capital required is very large and Indian companies may not be able to raise the required resources, we should welcome the multinational companies.
However, in sectors such as cement, sugar, textiles and steel, there is no reason why we should offer the MNCs above 26 or 40 per cent equity. For instance, Bajaj Auto, which has no foreign equity, is still the leader in the Indian two-wheeler industry.
Let us have a level-playing field with our foreign competitors. We should create some Indian MNCs. Companies such as Pepsi Cola, Coca Cola and Ford Motors are welcome. But can you call a Pepsi or a Coca Cola an Indian MNC? If Coke exports from India, that's good. But it is far more prestigious that we export a Tata, Godrej or Bajaj product.
Most countries, whether developing or developed, continue to be very conscious of the need to support local industries. A great majority of top companies in Japan are Japanese and in South Korea it is the Korean chaebols.
We need foreign technology and capital. We also want to be a respected member of the international community. I am also conscious that we cannot, without adequate reason, flout the regulations of the World Trade Organisation. This, however, does not mean that we do not argue for and, if necessary, fight for our interests.
Nowadays, we are constantly reminded about the interests of the consumers. No one can argue against this. Companies that do not satisfy their customers will not survive. However, we must keep in mind national interests and national pride. In the past, in certain countries, including India, these were sometimes taken to the extreme. Nowadays, it appears as if these are being forgotten completely.
The more developed a country, naturally, the more open it can afford to be. We in India should follow a balanced policy which encourages and welcomes the entry of foreign capital and technology but at the same time ensures the creation of a large number of Indian-owned and controlled MNCs in the next 15 to 20 years.
If we follow the right policies and have the right work ethic, I have no doubt that by the year 2020, India will take its rightful place among the leading economic powers of the world. It is this vision of India that inspires and motivates me to do what I am doing.