Economic reforms don’t happen in India, or don’t happen fast enough. That proposition can be taken as given. There are gainers and losers from liberalisation and, on balance, gainers gain more than losers lose. But losers are more vocal and cohesive than gainers, who are diffused and fragmented. Hence, reforms run into rough weather, another given proposition. Accepting that generalisations can be misleading, which side of the divide is business on?
Business can probably be divided into three categories - the really small entrepreneur about whom no one cares, the small and medium scale with an emphasis on small, and big business. Pushing for reforms requires a long-term vision, beyond one’s own narrow myopic interests. Arguably, big business may sometimes have this vision. But it is doubtful that small industry has it.
While really small entrepreneurs rarely have groupings that can collectively push their perceived interests, that statement is not true of small business. These have lobby groups that become especially vocal at this time of the year, for pre-budget memoranda and post-budget reactions and reliefs. After arguing for liberalisation generally, such memoranda invariably have wish lists, arguing why a particular sector needs special dispensation. Inherently, there is an element of protectionism also.
The myopia is perfectly understandable, because such small industry is invariably family-owned and family-managed. The broader knowledge and vision that professional management brings is singularly lacking. There is reluctance to let go of both ownership and management, because both signify loss of control. While small business groupings invariably flag the government’s reluctance to let go of controls, this control mindset within business itself is never mentioned. However, this has direct implications that work against any pro-reform drive.
The caste system had a point. Lest this sound completely reactionary, one should explain. There were brahmins, who were thinkers, teachers and priests. There were kshatriyas, who were warriors and rulers. There were vaishyas, who were traders. And the less one says about the way the caste system treated shudras, the better. The excesses of the caste system resulted when it became hereditary and prevented lateral mobility. Otherwise, it is a simple case of comparative advantage, humanly rather than divinely ordained.
Some people are good at certain things and not at others. Even if they have absolute advantages in certain professions, there is comparative advantage. Or, there is a deliberate choice of professions. The caste system imagery is particularly apt for small business, because both ownership and management are hereditary. They are passed down as family heirlooms.
These are the vaishyas of today’s India. Vaishyas are meant to be subservient to brahmins and kshatriyas. Except that the brahmins today have no power to curse, or perform miracles and are not needed as intermediaries on the way to attaining God. The kshatriyas of today’s India are the government category, broadly defined as MPs, MLAs, judiciary, civil service and most important of all, ministers. These categories also represent God for these modern-day vaishyas. Hence, one doesn’t need brahmin intermediation.
Rare is the instance when we pray to God without asking for something in return. Give us this day uninterrupted and cheap power and forgive us our taxes. It is not surprising that small industry’s attitude towards this entity that is Government and God rolled into one is much more than servile. Witness the obsession with inviting a minister, preferably the PM, to business events and the fawning and tail-wagging when the minister eventually arrives, even if he/she is one hour late. Any such event will typically have something like a plenary or inaugural session, which is when the minister graces the occasion, followed by technical sessions.
If you are stupid, you will presume that it is the technical session that is important, since that is where the meat of the discussion will be found. Nothing can be further from the truth. The technical session is when attendance is wafer-thin, since the objective isn’t to discuss reform issues. The objective is to grab a photo opportunity with the minister, get caught on camera handing over a bouquet or a memento and get in a word to the minister, for some special favour or for mentioning one’s name, so that there is recognition when the subsequent telephone call follows for a private meeting. That apart, proximity to the minister, caught on camera, is preserved for posterity as proof of one’s power, other than massaging the ego. Thus the petty squabbling over who gets to be in the frame, and where in the frame, in the first row with the minister, or somewhere else. Who shows the minister in and out? Who gets to have tea with him/her?
There may be the counter argument that lobbying exists in other countries too, including the developed. However, there are qualifications. First, in other countries, lobbying is transparent. There is no hypocrisy in arguing for reforms with one part of the forked tongue and pushing for special treatment with the other. Second, the degree of servility is unlike anything I have witnessed in any other country. One might argue that this is because, in an interim stage of reform, the government is still important. The State hasn’t withered away. Which vaishya can afford to antagonize a kshatriya? Although this proposition has a grain of truth, I don’t think it offers a complete answer.
I think small business is quite happy with this nexus, cultivated and fostered down the years. Who wishes to abandon familiar terrain and chart into unknown territory? This is the Stockholm syndrome, with the government very much the kidnapped. Depending on the indicator, small business accounts for 50 per cent of the industrial economy. And, if I have argued out my case well, we know 50 per cent of the reason why reforms get stuck, especially liberalisation that concerns industry.
Why pick on small business, since other segments also display resistance? The answer is simple. Because these other segments of society don’t usually pretend they want reforms.
The writer is an economist
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