Relevance: Industry-Government partnership
Synopsis: No nation became prosperous without trust between government and business. A look at some such events that indicate lack of trust.
In the past few weeks, a series of events have raised the question of trust between government and business. It brought back unhappy memories of the Licence Raj.
What are those events?
- Present signs of distrust came in late July with the failure of the Indian Railways to attract a single private player to run 150 trains. The reform failed because of a lack of trust. Bidders had repeatedly insisted on an independent regulator to create a level playing field, flexibility in timings, routes and a fair exit. They didn’t trust the current regulator. However, the railways were not ready to heed to their demands.
- Second, govt released draft e-commerce rules and created uncertainty among foreign and Indian investors. E-commerce offers such hope to thousands of India’s small businesses of entering the world market via global e-commerce. It is India’s ticket to massive exports and millions of jobs.
- Third, differences came out in the open between India’s outward looking businesses, who want to integrate with global chains, versus the government’s inward looking atmanirbhar policy. In an intervention at a CII forum, the commerce minister reportedly said Indian industry doesn’t always act in national interest. He reportedly censured business persons of structuring foreign investments against the spirit of the rules.
- Fourth, the commerce ministry announced an online essay competition for students. One of the two topics was ‘Import substitution: Atmanirbhar ki Aur’. Surely, it was a mistake to revive a discredited policy of the 1960s that did so much harm to India’s exports.
- Fifth, Infosys was “summoned” by the finance ministry to explain failures with income tax e-filing. It could have been sorted out quietly. The vendor could be penalised for its faults without public messaging.
- Other issues that hamper Industry-Government connect
- Criminalising short spending on CSR philanthropy.
- Draconian amendments to the Foreign Contribution (Regulation) Act brought mistrust and panic among NGOs.
Implications of distrust
The prosperity of Germany, United States and Japan has been attributed to high levels of trust between business and the state.
In India, however, low trust has led to over-regulation, complicated laws, higher costs and making the nation uncompetitive.
Business was thus skeptical of ₹6 trillion monetisation plan announced recently. Although its brownfield projects are free of risks of land acquisition, environment clearance, industry fears hassles at each stage of execution, from unfair PPP contracts to lack of justice from weak regulators.
Reforms of 1991 ushered in a new age of trust and prosperity. As tax rates came down, compliance rose, taxes collected went up. When a government weakens trust, it harms itself. People do not want a pro- or anti-business government. They want one open to new ideas.