Stop bashing industry. Govern better

It should be obvious to any observer of the Indian scene that the rich are getting richer, salaried employees seeing big jumps in pay, the share market booming, companies becoming more successful, and the economic situation improving -- and also that the benefits of all the nice things that are happening are not getting spread very evenly.

One need look no further than the government's statistics on the numbers below the poverty line, which show slow improvement for an economy that has been doing so well, and at the rate of farmer suicides in Maharashtra.

So what is to be done? Mani Shankar Aiyar, speaking at a CII meeting a few weeks ago, said the problem was that the rich had hijacked the economic agenda, and the poor got nothing out of "reform," which is why no government got re-elected.

And the prime minister, after speaking out against corruption in the roads programme early in the week, told the CII on Thursday that business had a social responsibility -- to provide jobs for the disadvantaged, spread education, protect the environment, fight corruption, show restraint when it comes to salaries and spending, and so on.

It is entirely proper, when the times are good, that the government pay attention to those who are not sharing in the good times. It is also understandable that when government leaders are concerned about things going wrong, they seek to generate public debate, and to point to the problem areas.

The problem starts when the government, which is there to provide the solutions, starts blaming industry for the problems (as Mr Aiyar did ), or expects industry to provide the answers (as the prime minister did).

But industry can deal with only those who are in the market; it is the government that has to help those who are not part of the market, to protect those who lose out because of market forces, and to write the rules to ensure both efficiency and systemic fairness.

Take the poor progress on poverty eradication. Some numbers that came out a few days ago, on the issue of "below poverty line" (or BPL) cards to the poor, showed that roughly half the cards were issued to people who were not poor at all. Naturally, much of the benefits intended for the poor are captured by those who are not poor.

Such leakages in the government system, its inefficiencies (in health care delivery and in providing education), and plain old corruption (Dr Singh should check on the role of his ministerial colleagues when it comes to the road programme that he spoke about) are what hold back the poor.

If governance systems do not improve, the poverty numbers will not drop -- no matter how much other "reform" is done, or private sector salaries reined in. In the case of the cotton farmers in Vidarbha, their productivity per acre is a half or a third of what their counterparts achieve in Gujarat and Andhra Pradesh; naturally, the Vidarbha farmers will find it hard to compete. The solution lies in addressing the cropping pattern and providing irrigation, not in blaming "reforms".

A lot of the change required is in state governments; but that is still government, not industry. In any case, it is the Centre that abolished the long-term tax on capital gains on shares (in a buoyant market, these outstrip salaries in the income of the truly wealthy).

When it comes to employment issues, the fact is that the private corporate sector accounts for only 10 million jobs, less than 3 per cent of the total. As for all the other issues, a market system must have rules, and those who do not play by the rules must get penalised.

Yes, industry should be socially responsible and it would be nice if the rich did not flaunt their wealth in a poor country, but what is needed most of all is effective governance and reform of the government. That is how the system will work better for all concerned, and that is what the prime minister and his colleagues should turn their attention to.