Newsflash
The government has lost focus of the business agenda as it scurries to put its house in order. That is the resounding reaction from respondents to two independent surveys that unambiguously pinpoint what is wrong with the ruling UPA government - it can't take decisions, and that is going to hurt economic growth.
A little over three-fourths of corporate honchos surveyed at 75 companies by The Economic Times and industry body Ficci are unhappy with the way Manmohan Singh & Co are handling the country's political and economic situation. Some 80% say that forget path-breaking reforms, even the pace of routine decision-making has slowed. And 72% have that sinking feeling that this crisis in governance is going to hurt economic growth. A majority of those surveyed feel the situation is serious enough to affect their business and investment plans in some manner; and 15% expect their plans to take a major hit.
The only silver lining: There are many out there in India Inc who believe the UPA can still pull off some key reforms and kickstart growth in the three years it has left in power. The gloom in India Inc is corroborated by another survey of 43 CXOs done with Synovate, the majority of whom are unhappy with the current mode of governance and fear that it may derail the India growth story.
"The prevailing negative sentiment amongst domestic investors will have a bearing on the perception of foreign investors looking towards India as an investment destination unless corrective steps are taken urgently," says Harsh Mariwala, chairman & managing director, Marico Industries, and president of Ficci.
At a time when the inflation monster refuses to go away, manufacturing growth keeps falling, interest rates inch upward quarter after quarter and anything beyond 8.5% growth looks a mirage, the government has its hands full fighting fires on other fronts - like dealing with corruption charges involving its ministers, and struggling with confrontations with civil society that included efforts to persuade a stubborn godman to break his fast.
"There are problems that the government is facing currently due to the scams and the demands of (social activist) Anna Hazare and Baba Ramdev. It has not been easy for the government to handle these agitations, especially as they appear to have tremendous public support," says Bajaj Auto Chairman Rahul Bajaj. There is a reason for the public support, says Bajaj, adding, "everyone is tired of corruption and black money".
But it may not be just the government that is to blame for the sorry state, industry too should carry a part of the can. Some 72% of respondents to the ET-Ficci survey and 64% of the CXOs who responded to the ET-Synovate poll feel that business houses are also responsible for the crisis of corruption. "Taali do haath se bajti hai (you need two hands to clap). How can only one be the problem?" asks SP Hinduja, chairman, Hinduja Group. "The giver and taker are both equally culpable."
Hinduja adds that it is the rich who cause corruption by offering to pay to get favours out of turn or to deny other rightful claimants. But he also believes "the more the number of hurdles and permissions the government imposes the more it facilitates the corruption process".
That is why activists like Hazare have managed to strike a chord with citizens. Ramdev has succeeded in turning the spotlight squarely on unaccounted money stashed in overseas accounts.
Those surveyed make the point that the current crisis is being perceived as one triggered by rampant corruption. The crisis is compounded by the government's ineffective handling. Some 73% in the ET-Ficci survey believe the government has handled the 2G licence scam crisis in a ham-handed manner.
"The general public is under the impression that there is a strong government-business nexus in influencing major government policy decisions. This may erode the trust of people in the government," says a CEO on the condition of anonymity. Some 47% of the CXOs in the ETSynovate poll think the government is not meeting the legitimate demands of civil society.
The mood is downbeat but there is a glimmer of hope. A majority of the respondents to the ET-Synovate poll and 43% in the ET-Ficci survey expect the remaining three years of the UPA government to be more reforms-oriented.
To be sure, there are a number of bills pending. This includes one for a goods and services tax that aims to create a nationwide and uniform market for goods and services. There is also the Insurance Laws (Amendment) Bill, 2008, which, if passed, will allow foreign insurance majors to hold up to 49% equity in their Indian ventures. A parliamentary committee is currently examining the bill.
"Industry still believes the current regime can undertake reforms necessary to improve the investment climate. It is important that this faith is sustained," says Rajiv Kumar, secretary-general, Ficci. Adds Bajaj: "I do not believe the government has been rendered ineffective." It is now time for the government to bite the bullet and prove the 'P' in UPA stands for Progressive and not Pusillanimous.
(Additional reporting by Kala Vijayraghavan, Lijee Philip and Kausik Datta)
