'Unless we change and we see a change in the direction we are taking, times can only get worse.'
"I find in many of the schemes the government has, it is paying attention to microeconomic issues and that is where we are going to get the real change," Arun Maira, management consultant and former member of the planning commission, tells Rediff.com's Vaihayasi Pande Daniel in the concluding segment of a two-part interview.
- Part 1: 'Big guys r**e the economy'
Sometimes it seems like this government is not concerned enough about the economic issues that the country is facing.
It perhaps feels sorting cultural issues will keep people happy and bring about its re-election?
If I say this government had been concerned very much about sanitation issues, which are health issues.
This government is concerned very much about cooking gas issues, which are again health issues, as well as giving it at less cost, so people have more incomes in their home.
So it is concerned about economic issues.
But it is not the economic issues that the big economists say they should be concerned about.
They want things to do with tax rates for the rich people. Interest rates.
Those are the macro economic issues.
This government, they say, is not paying enough attention to the macro economic issues.
But I find in many of the schemes the government has, it is paying attention to microeconomic issues and that is where we are going to get the real change.
So you are saying it is paying enough attention to the key microeconomic issues?
Needs much more.
And the reason it cannot pay enough is because people are criticising them because they say: 'You are not paying attention to the economic issues'.
Then they get frightened: 'The big investors are going to criticise us. They won't put money and so on. We got to pander to them and tell them we are paying attention to you also...'
Everyone's mindspace -- yours, mine, the government's mindspace -- is limited.
It must not get distracted towards things, which at this moment are not fundamental.
But it is being distracted by discussions that are happening, in our business media for example.
Basically you are saying that is what has been happening to successive governments too.
Yes it has happened.
It has carried on for the last 20, 25 years.
It is not just here.
Now the whole world is waking up and saying that growth everywhere has turned out to be inequitable, unsustainable.
We have got to find another model of growth, which grows the quality of environment, grows the incomes of everybody, not just people at the top.
We need another model.
And India will have to discover it.
We have this problem the biggest, bigger than anyone else.
China continues to have it, but it has gone very far ahead of us.
With regard to this whole issue of decline in the GDP and the slowdown in the economy there seems to be a sort of blame game going round.
Is this government responsible? Or is it the result of the previous ten years?
What is the real answer? Or is there is no real answer?
Exactly.
Neither this government.
Nor the previous government before that.
I go back to a whole paradigm of growth.
And that paradigm of growth has infected governments everywhere.
And that is what I say we have to examine, re-examine.
The previous government is also trying to prove that it (had done) very good by that paradigm of growth and this government is also having to prove that it is very good by this paradigm of growth.
When you say this government is paying attention to -- what you call -- cultural issues, you can divide them.
There are some cultural issues which are Hindus's views and Muslims's views.
But when you talk about our own traditions, our gram (villages), our swadeshi, you can call it cultural.
But those are economic issues.
Those are how to deal with economic situations.
I call it Gandhian therefore.
It is not a bad way to think about it.
So what is the border - I say -- between social, cultural and economic?
When you look at the cast of actors -- the key leaders presently on the Indian political stage, even chief ministers of different states -- who do you feel is talking a lot of common sense, economically? Who is showing some spark?
I don't want to name people.
I mentioned an idea of Aam Aadmi Party for example.
Since I mentioned that I can say okay when I hear Manish Sisodia and his lovely book on education.
He is a government person.
He is not just talking an idea.
And they have under tough conditions because prevalent ideas of privatise education and this is the way to go are there.
They have proved the quality of education, for 100 per cent of the citizens, through the government system.
And it is done by local communities, parents' participation, empowerment of teachers, empowerment of principals of the schools.
That's the way a community builds its own capability.
So that's a very good example.
Odisha is doing some very good things too, in the rural areas.
And you have those stories coming out.
There are many good stories in India about this Other Idea growing up.
Any other good rural stories like these, worth writing about?
That's it. We need to have in mainstream journalism is these stories need to be told, not just as odd examples if we were genuine-ise and adopt much bigger change... The Times of India keeps bringing out stories of change.
But they are sort of put at the back.
But they are dismissed as: 'Something you do on the side and let's now concentrate on the GDP!'...
Is reducing corporate tax a good solution?
What about the move to set up a ₹25,000 crore debt fund to finish incomplete housing projects? Will it boost the cement and steel sectors in the coming months?
Are these the kind of broad measures required?
We do need them.
You are in a crisis. You need to do things quickly and in the short term.
But the things you do quickly and in the short term must be done with a picture in mind of where you want to get to.
(It should not be) just to rectify the present problem and not improve the shape of the house at all.
Just like a house.
This leak here, that leak there.
You start fixing it without saying actually there is some basic structural problems.
So we have to change the basic structure.
Meanwhile, while the basic structure is being changed, I have to fix some things, but I have a picture in my mind of what the house is going to look like.
It is very apparent that there are many industries that are bearing the brunt of this slowdown immediately like automobile, builders, farmers.
What are the kind of constructive options available to help them in the short term, with as you are saying the larger picture in mind?
NREGA is an immediate constructive option.
And that's why it is a good idea.
Now are people are saying you should have a NREGA in the urban areas, what we call NUEGA.
Create employment at the bottom by government using their labour, paying a little for it and some material from the government to construct infrastructure in the urban areas also.
As you know our urban areas need a lot of it too! That's one immediate idea.
Reducing the taxes on the rich say is immediate like a silver bullet hopeful solution.
But it doesn't trickle down.
Because companies are saying it's not the tax.
First, I got to earn money to make the profit.
Then I pay the tax.
Only if someone is going to buy my stuff.
Where is the income, where is the profit?
What do you think the current environment is as far as business goes? Is it a conducive climate? Is it a too regulatory environment? It has been a bit of a mixed message as far as one can see.
It is a confused environment. Very, very confused environment.
First, very clearly, partly because it is a confused environment, largely because bureaucracies do get inefficient and really corrupt too.
All bureaucracies need to be toned up at all times.
Ease of doing business is the simplest thing which we must keep on simplifying.
Some people say get rid of the regulations and make it easier to do business.
But if you get rid of the regulations you will suffer, the environment will suffer and you will back to square one.
It is simplifying the implementation of the regulation -- that's bottom line.
Then what are the right regulations?
The time has come to examine what are the right regulations.
For example, labour. Staying with the labour laws.
Big thing. Surely we are in the 21st century and not a time to say: 'People could be used and abused.
And that's okay'.
Can't be.
So whether you employ one person at home or require ten people in your factory or a thousand, you have to treat them decently.
There have to be some regulations -- about what you pay your people and the conditions under which they work -- is necessary.
When you talk about labour reform, one can't be saying just remove all labour regulations.
You will have to have it in this area.
Then they talk about hiring and firing.
Make it easy for people to be fired so that we can hire more people when we need them.
But if you keep firing people they get out there and there is no income.
And you say you can't sell anymore so there is no occasion for you to hire people.
We have been in this country, where hire and fire has been applying, because even in the largest companies -- Godrejs, Tatas and all -- have been employing 30% to 40% of their regular employees on contract.
That means you can let them go and they were being let go.
Hire and fire has been happening in this country without changing the labour regulations.
So now the demand from the government to change the labour regulations.
The government's political capacities are always limited, of any government.
So don't misuse this on something which is not most necessary.
Certainly small enterprises, whose growth, we are talking about, ask them: What are your biggest problems?
They say one is: 'I don't get credit. I don't get paid by the big companies in time and that's why I need to go for credit'.
So the solutions are with the big companies to pay, be responsible and pay their own small suppliers on time and for the credit system to get to the small people, which has been happening in this country...
The third thing they say is: 'Please simplify the regulations. We are not saying no regulations but we are saying please simplify them for us. That is the implementation part of it'.
That's the main thing.
They are not asking for change in labour regulations.
And yet economists in front line papers, for the last few days, have been saying this government better have the courage to do the real faster reforms which are land and labour.
What labour reforms?
So when you say confused it because the government is reacting to this? Like a half reaction?
Exactly. Reacting.
You see all these chaps, who have economics PhDs and they are from Washington and they come and say to you, we have been around the world and we are telling you that you don't know what you are supposed to do.
And these chaps are not economists, like Mr Modi and others and therefore sometimes he stands up to this.
What was it? Hard work and not Harvard.
I think sometimes with these simple slogans he has got the idea.
We have to think about ourselves and think hard.
Growing the manufacturing sector has been a long-standing issue. What have been the missteps and right steps taken on the road to boost manufacturing?
Two big missteps.
One is to do with the government.
And the other is to do with industry.
The one to do with the government is this: We too quickly in 1991, just said the reason our industry is not growing is because we are not open to competition.
We are going to let in foreign investment and competition in the country.
Now the foreign money that came here didn't come here to build industries.
It came here to get to the market.
So least possible it could do -- some people just stuff, as even today, just packaged, made in China, sent here.
Some assembled a little bit, while most of the guts came from somewhere else.
We made it too easy for these people to get access to the Indian market.
Now, of course, they are suffering because they say the Indian market is not growing because you didn't grow the jobs here.
Now come to industry itself: We have excess or surplus in this country of one resource that enterprises need which is people.
We are short of another resource that enterprises need: Capital.
So for industry, if it wants to be competitive globally, it must build its production model based on the use of more people.
We will never run short of them.
Wages of our people will not rise that fast because more and more will come into it.
So your business model, your production model must be based on your use of more people and not based on the use of more capital, which is in any case more expensive for Indian companies.
When our companies start to measure productivity by this notion that only measure of productivity is how much output per person, nation's productivity or enterprise's productivity.... Then what you would do is do -- without going into the basics of it -- I must improve my productivity, my plant must be the most productive, better than some plant somewhere else, reduce the number of people here, replace them by machines, you will make another argument that people are always a nuisance, much better to have a quiet machine that doesn't argue with you...
Learn the skill to work with people.
Japan did this after the war.
It used the least amount of capital, less amount of capital, compared to Europeans and Americans yet they had the most productive, highest quality industries.
Using people. That's what we have got to do to grow the incomes of people.
Singapore did the same after 1965.
Our industrialists have to get the right business model.
I find lots of people are going to the livelihood space like Jaipur Rugs.
He said: 'People have skills, they sit at home, they weave carpets, I want to mechanise it. I want them. But do it under better conditions, more accurate, give them a little assistance on their machines, tools are better, train them, get them a little literate, so they can read the designs'.
So that's what they are doing.
He is using people as the resource.
Their incomes are growing.
His business is growing.
He is exporting everywhere.
Making good profit.
It is not a highly mechanised textile factory, (where) unless we get to the productivity measure of China where one person uses hundred looms...
Do you think we are going through bad times?
Of course.
Unless we change and we see a change in the direction we are taking, times can only get worse.
But if I begin to see, which I am, signs like: 'Let's get to the fundamentals'.
The more people say let's get to the fundamentals and sense the new direction and start discovering what would be required to walk in that new direction, ideas and examples, that will give us confidence about the new direction.
I am beginning to see some signs of that.
It is like the first signs of spring.
I have got the hope there.
Editorial Director Vaihayasi Pande Daniel has reported on news, business, travel and lifestyle for 30 years. Vaihayasi can be reached at haysidaniel@rediffmail.com You can read her features at: http://www.rediff.com/news/vaihayasi-pande-daniel.html
