'Education and health, the priority'

Interview with Lord Swraj Paul.

"If I was the government I would first concentrate on total literacy and health for all. Investing in industry, infrastructure and so on would come only after this," says Lord Swraj Paul, ambassador for British Business and chairman of the United Kingdom-based Caparo group of companies. During a visit to India recently, he called for "huge investments in human capital, knowledge and creation of structures to meet the needs of the new revolution in the era of globalisation," which he says is here to stay with all its benefits and drawbacks.

In 1952, when he was 21, Swraj obtained a master's degree from the Massachusetts Institute of Technology (MIT) in the United States (where he had done his bachelor's) and returned to India to join the Apeejay Surrendra group, a diversified industrial com pany founded by his father in Jalandhar. In 1966, he went to London for the treatment of his daughter Ambika, who was suffering from leukaemia. She passed away in 1968, but Swraj decided to stay on in Britain. And there began the story of a spectacular b usiness success based on entrepreneurial acumen.

Following the acquisition of a small tube unit, Natural Gas Tubes, with a loan of &pound5,000, he bought more units, mainly in the steel products manufacturing industry, on both sides of the Atlantic. Most of the companies thus acquired were ailing one s where Swraj would implement a modernisation programme involving the workforce and turn the units around into profitable ventures. Today the Caparo group is a conglomerate of small and medium-size companies, with total annual sales of over &pound500 mil lion, and operating profits in excess of &pound50 million.

Though he is one of the richest persons in the U.K., in his personal life Lord Paul practises relative simplicity. He remains a teetotaller, a vegetarian and a non-smoker. His dictum: "Better to be a model than a missionary." A leading member of the Labo ur Party, he was made a life peer on the recommendation of the Labour Party government, as Lord Paul of Marylebone.

In 1984, after a failed attempt to take over the DCM and Escorts groups of companies in India, Swraj, prodded by Indira Gandhi with whom he had a warm friendship, agreed to invest &pound300 million in a fertilizer plant. However, he gave up the idea when pressured to buy equipment from the Italian firm Snam Progetti.

Among Lord Paul's many benefactions are his contribution (of &pound1,000,000) to keep open London's Regent Park Zoo, which was on the verge of closure. Among the honours bestowed on him are the Pro-Chancellorship of the Thames University (1998) and its G overnorship (1992-97). He is a member of the Foreign and Commonwealth Office's Foreign Policy Centre Advisory Council.

Lord Paul has been honoured by various international organisations over the years. In 1983, the Government of India conferred on him the Padma Bhushan. In one of the latest in the string of awards, on January 6 he was conferred the Bharat Gaurav award by the Indian Merchant's Chamber. His publications include Indira Gandhi: A Pictorial Biography and Beyond Boundaries, his autobiography, which tells the story of the origin and growth of Caparo (the book was reviewed by C.V. Narasimhan in Frontline, in the issue of August 28, 1998).

In Chennai, Lord Paul spoke to Asha Krishnakumar on globalisation and India's position in a globalised world. Excerpts from the interview:

What is your assessment of the situation in India in the light of the ongoing reforms and the increasing economic and social disparities?

I do not say you should liberalise. But if you do, you need to have a clear focus. One of the problems is channelling our efforts. Whether we talk of reforms or liberalisation, most important is to be sure of the focus - it could be setting up industries , building infrastructure, creating wealth, or promoting the well-being of all the people. There seems to be confusion in defining our focus.

There is a lot of talk of investment in industries and infrastructure. But I think it is crucial to invest for the people, that would enhance their lives. For this, we need to change the mind-set, without which nothing can happen.

What, according to you, are the essential components of "investing for the people"?

Investing in people is a crucial component of this. By this I mean investing in primary education and making everyone literate. To me, this is the basic thing we need to do. It is a fundamental right and we need to make it so in our Constitution. For ove r 50 years we have failed to provide basic education to all our people. That is not acceptable.

Similarly, health should be a fundamental right. A poor man should be able to be treated at affordable rates. Health care should be accessible to all. I am not talking about fancy, corporate hospitals. But basic health care facility for all. This is what would give dignity to the people.

For me, basic rights and access to education and health are the priority. Anything else comes only after this.

In what ways can the government fund the implementation of universal primary education and health for all?

There are many ways. Instead of giving huge loans to industrialists who do not pay back, the government must use that money to make health and education accessible to all. It would give a much better dividend and provide an excellent future for the count ry.

Liberalisation and the consequent market orientation have led to a decline in per capita government spending in education and health. In such a situation don't you think 100 per cent literacy is wishful thinking?

If the focus is reforms for the people, then it would automatically mean you have to invest in social sectors such as education and health. It is in this direction that we have got to focus our thinking. In this age to have an epidemic is a national sham e. We have got to realise that.

Liberalising the economy and pushing through economic reforms without adequate institutional and structural changes would hit hard the domestic industry, the farming community as also the workforce and the people in general. Last year in Bangalore yo u said that "we are learning the hard way that changing environments without changing systems causes enormous problems and has profound political consequences." What systems did you have in mind?

We have to change our mind-set from protection to survival. That is what globalisation is all about. It means that you should be able to stand on your own feet. For this we need to convert our ills to our advantage and exploit the market. For instance, t he one billion population should not be seen as a liability but as an asset. Why should we worry about China dumping its goods cheap in India. We should be able to produce it cheaper if we produce large volumes. We should then dump our goods in the world market. In agriculture, basmati rice is being copied in the U.S. and other countries. There is a demand for it in the world market. So we need to produce it on a large scale and sell it in international markets. We should use our resources and assets mo re efficiently. Efficiency does not mean retrenching people.

There are two issues in this that need to be addressed. One, with mass production and increasing supply, prices would fall, which would severely affect the small industries and its workforce; two, without the necessary institutional changes - in indu stry and agriculture - people would be unequally placed in facing the market. For instance, in the case of the farm sector it is important to address the issues of land reforms and production relations. And in the case of industry, the small sector would get wiped out, unable to take on the competition. How do we deal with this situation?

It is important to make everyone competitive - in the farm sector and in industry - before opening up the economy for globalisation.

If you look at the history of small-scale industry in India, most of them were really not small. It was the big industries that set up ancillary units, mostly for some poor relative or the other, to supply components for the big industry. This kind of pa tronage should not be given to small-scale industry. We have always set up small-scale industries to patronise them. It should not be that way. A small-scale unit can be set up if the entrepreneur comes out with a worthy product and is a leader in that. Small-scale industry should grow only that way and not out of a system of patronage. You should not protect industry, you should focus on protecting the country.

You have always stressed the importance of manufacturing industries. But the profit margins in manufacturing are a mere 3 to 5 per cent of investment as against 40 to 50 per cent in the information technology industry. What do you think is the role o f manufacturing industry in India?

The role of manufacturing industry is still a very important one. But if the industry produces more than is required, then some units would have to go. For instance in the U.K., many units have closed down. In 1979, Britain's production capacity was twic e as much as it is today. Yet, it produces now four times more than it did in 1979. Thus, manufacturing industry would not go. The cost of production would increase over time and some units would have to go. One should not regret this.

In the future, every country should undertake the manufacture of only those products in which it is competitive on a global scale. For instance, in the near future no country can compete with China in steel manufacturing. There is no reason for India to expand its steel capacity merely because good quality iron ore is available.

Where is India positioned in the global IT industry?

At present, India is No. 2, only after the U.S. India is far ahead of Britain. That is why Britain is looking to India for partnerships. However, India cannot rest on its laurels. The world is changing rapidly. Today's leaders can become tomorrow's lagga rds and vice-versa.

I have only one fear. India is not concentrating on product development. We are becoming only a service industry. We are concentrating on just servicing the IT industry. That will not make us leaders. It will only make us labour providers for the world. People are challenged every day to produce more products. World demand is changing rapidly. Youngsters should be encouraged to produce newer products and not just rest on their laurels. The younger generation should not stop with looking up to Narayana M urthy or Azim Premji. We have carried on far too long with just a handful of industrialists. We should not make the mistake again.

You set a trend two decades ago by trying to take over DCM and Escorts, when takeovers were unheard of. But today it is almost becoming a normal feature in the Indian industrial scene. Has the situation in India become conducive for this kind of take overs?

What India has done is not enough. Things should become more transparent. Not enough is done on that score.

It is high time you made a Takeover Code. Do not go around stopping it in courts or cultivating the media, and so on. The media should take only one position. And that is in the interest of the shareholders. They should not take sides with the management . If the media are objective and straightforward, they should side only with the shareholders, who are the poor people. Ultimately, things should benefit only the poor shareholders. In 1983, when I spoke about the shareholder, no one understood. Everyone took the position that the shareholder is a nobody, he has done nothing apart from putting some money in the venture. Today it makes a lot of sense. The bottomline is only to see if the company is run for the benefit of its shareholders.

Management is a constant process of upgradation. There are many reports dealing with issues pertaining to problems of management and such other issues. None of the reports is a gospel. All these form part of the learning process. We have to learn from e ach one of them. For example, in Britain there is the National Society for Prevention of Cruelty to Children, of which I am the chairman. The organisation spent more money collecting funds than it did in actually administering it. Now we are asking every one working for it to explain how this has happened. Unless we have this process, nothing is going to work properly.

What is the lesson India has to learn in negotiating with foreign investors in the light of Enron's Dabhol Power Project experience?

India made a big mistake. In its desire to do something, it did foolish things. The cost-plus approach is against the very concept of competition and globalisation. That kind of thing should never have been done. But you always learn from mistakes - more than you would from a success.

Have you any plans to enter India?

I have retired now. My sons look after the business. They have a factory just outside Delhi. They are certainly looking to expanding business in India. My younger son is very involved in film and media. He co-produced a film that became a big hit. He is thinking of venturing into film-making in India.