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’There is a political consensus on economic issues’

Saturday 31 July 1999, by BAVADAM*Lyla

A captain of Indian industry, Rahul Bajaj is president of the Confederation of Indian Industry (CII). He is the chairman and managing director of Bajaj Auto Ltd, the flagship of the Bajaj Group which, with a turnover of more than $1.5 billion, is among the top 10 private business houses in India. The group’s 26 companies have interests in various industries, ranging from automobile manufacturing to sugar and steel. Bajaj Auto itself made a net profit of Rs.541 crores in 1998-99.

Rahul Bajaj has never been shy about expressing his opinion or proffering his advice on the country’s economic policies. Nor does he hold back when speaking about the controversial issue of corporate funding of elections.

He spoke to Lyla Bavadam from his residence in Pune.

What are business houses looking for in terms of political outcome?

Political stability. And this is something that not only business houses but most citizens of India would want. That is, we want Parliament to complete its five-year term instead of what we have been seeing in the last three years. This means either a BJ P or a Congress government or at least a BJP-Congress coalition. The kind of coalitions we saw under the two United Front governments is not conducive to stability because the two major political parties in Parliament at the time - the BJP and the Congre ss - were not a part of the Deve Gowda or the Gujral government. The BJP was opposing the government and the Congress was supporting from the outside. This is actually a negation of democracy and therefore while the ideal situation would be 273 seats for either the Congress or the BJP (though unlikely), I’d like either one or a coalition to be in power and not twenty parties when no one knows who is the boss.

Barring a couple of issues, there is a consensus among parties and especially between the BJP and the Congress about economic policies. After liberalisation started, there has been a consensus on economic issues. There may not be a complete consensus but it is not a desperate situation.

What about groups such as the Swadeshi Jagran Manch which are opposed to liberalisation and have a certain degree of influence with the BJP?

I’m not worried about the Swadeshi Jagran Manch. In fact, I’m confident about them (laughs and elaborates). Their extreme views are only talk. They’ve realised that we have opened up the economy. In any case, this question is only valid if the BJP get a majority and that’s not going to happen!

How would you rate the policy environment right now? Is it stable in terms of policies regarding tax rates, currency parities, and so on?

I won’t say stable, but yes, there is a continuity and also, the right policy is being followed.

Tax rates, currency parities, the industrial regulatory framework - all these things are essentially all right. For instance, we can’t have better tax rates. Certainly we want reduction in excise duties, steel import duties... certainly there are anomali es that could do with some fine-tuning.

What would you recommend as basic measures to inject life into Indian industry?

Essentially we need six things. One, fiscal discipline. Reduce the fiscal deficit from six per cent in the next year to three per cent. Specific action can be taken, like removing tax-payers from the Public Distribution System.

Two, proper infrastructure. Lack of this is a major handicap for the Indian private sector and doesn’t encourage foreign companies to come here.

Three, privatisation of the PSUs. Not just disinvestment but disinvestment to the extent where government equity comes to below 50 per cent and is ultimately zero. Even profit-making PSUs should finally be privatised.

Four, labour reforms. The policy should certainly be more flexible. Businesses should have the right to hire and fire. This may sound bad but I’m talking of reforms with a human face.

Five, financial sector reforms. This is more needed in the stock exchange, banks, financial institutions, NBFCs, insurance, and so on.

Six, there is a need for administrative reforms. Less of small print, less discretion. More openness, more transparency, more disclosure. The outcome will obviously be less delay in decision-making and less corruption.

More liberalisation means less controls but more regulation. Regulation reform is missing in infrastructure - telecom, roads, ports. There is no privatisation in these areas. All this is what I call liberalisation, deregulation and development.

Unless we go ahead with these six factors, we won’t get foreign direct investment beyond three-and-a-half billion dollars per year. China gets 40 billion dollars per year.

Why do think this government or previous governments have not moved rapidly on these six issues?

Now that we have opened up, I don’t know what the problem is really. The only place where I can see a problem is with the Left objecting to issues relating to privatisation and labour reforms. Otherwise, there should be nothing holding back the other fou r points.

Is the direction of economic deregulation and liberalisation appropriate?

Yes.

What about the partnership role between Indian and overseas companies - do you see a gradual dilution of the partnership?

Yes. Very categorically, yes. In a partnership between a European and an American company, both can be equally strong partners but it’s not the same in our case. Initially foreign companies used their Indian partners because they needed them for liaising with the government, for dealing with labour, and so on. Later on, when they got the hang of all this, they tried to buy out the partner. From their point of view there’s nothing wrong with this. I believe that the 200 top Indian companies should have a good mix of Indian and foreign elements. This is good for growth.

In fact, in some areas, I believe we should give foreign companies a majority or even hundred per cent equity. Of course, this would only apply to technologies that we don’t have or technologies that are not easily accesible - like bioengineering, pharma ceuticals, biotechnology. But in fields of steel, textiles, automobiles, pulp and paper, we shouldn’t give a majority equity to foreign partners.

Is this why you have been called a protectionist by some?

I’m interested in the welfare of the country. Often, national interest can be different from consumer interest. But I reiterate the need for those six factors I mentioned earlier. Those technologies that are in very few hands should be tempted to come to India. As it is, the lack of our infrastructure and other factors are not very inviting ... there should be no cap on foreign equity - 51 per cent can be got in any industry.

How do you respond to corporate funding of political parties during elections?

I believe state funding should be increased so that the need for the private sector to donate will be reduced. Obviously it will not eliminate it all together. I certainly do not think that corporate funding will continue if elections are held every 13 m onths! The last year has not been very good for many businesses - except perhaps for information technlogy, consumer goods and pharmaceuticals.

Does your company contribute to election funds?

Bajaj Auto does send a cheque. But we do it direct from the company and we send it directly to Delhi, not to State-level party offices. With liberalisation, there is less need to give.

How do you decide whom to fund?

I will fund the party I like. The last time I gave to the Congress.

See online : Frontline

P.S.

Volume 16 - Issue 16, Jul. 31 - Aug. 13, 1999

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