In a Land Of Missed Opportunities, Let's Not Miss This One
Get the Business Fleeing China
We are struggling to combat Coronavirus pandemic and trying our best to straighten the curve. While our greater focus is on saving lives, but adequate attention to saving livelihood is somewhat missing our focus. Millions of daily wagers and other workers found their factories and work places shut down, at almost no notice, and were on the roads for a long march to their homes. In most cases this meant hundreds of kilometers of painful trekking, with their small children and paltry belongings.
Spread of this Pandemic from China and that country’s handling of information about it and failure to caution the world has created some degree of suspicion of the origin of this Virus. China’s refusal to allow an international enquiry into this case, has further added to the existing suspicion. Few states of USA and some others have raised claims amounting to trillions of dollars on China for the economic loss to these countries. These countries now want to shift their, businesses, factories and production facilities out of China. Some of them seem to show interest in relocating these facilities in India.
Given the extent of efforts being put, in containing spread of Coronavirus pandemic, success will hopefully come about, but it is the livelihood of millions of workers and stimulus for the economy, which will take much effort and time. This demands forward planning, urgency and focused attention, which of now seems to be somewhat missing. Halfhearted effort, lack of foresight and planning cannot take us far.
Setting up business in India for an Indian company is pretty tough, but extremely difficult for a foreign enterprise. We have simply failed to create a friendly atmosphere and congenial environment for starters. By stifling the economy we drove our young talented engineers and scientists to foreign countries. The, ‘single window,’ to start business is an idea which is foreign to us. Added to that has been a disproportionately high tax regime, resulting in large range of goods produced within the country being uncompetitive with those produced by say China.
Chinese goods imported by India are cheap, in price and quality. This drove some of the Indian companies to shift their production facilities to China. The trade deficit with china is to the tune of $ 62 billions and that is without taking into account Indian businesses under invoicing of goods imported from that country In India low tax regime but hundred percent tax compliance can generate the same results as somewhat higher tax. China not only has very low tax regime for its exports, but in fact has been giving incentives for exports.
India continues to figure below 50 amongst list of countries in what is known as, ‘Ease of Doing Business.’ While there is much talk of, getting American, South Asian and European businesses from China to India, yet there is no talk of easing of doing business in India. There is no talk of single window concept for starting a business. To bring these concepts into practice, the politico-bureaucratic mind-set has to change and change sooner than later.
In the past many a time opportunities did arise but every time we simply let these slip by. We embraced democracy with all its potential for free enterprise but adopted economic policies of socialist countries and that of communist USSR. Thus in the field of economics we fell between two stools, adopting state enterprises, (government undertakings -thoroughly inefficient) at the same time suffocating others with unwanted controls, permit and license raj and on top of that added an inspector for sustained milking of private enterprises.
At the dawn of independence, India was led by leaders of stature and courage, but they were innocent of governance and complexities of national security and modern economics, Equally their interdependence and increasing role in statecraft and wealth creation.
Only the bureaucracy had some experience of administration and it took, full advantage of political class’s ignorance in this field. It appropriated to itself greater control over administration. Thus to note just one case, defence secretary was assigned the responsibility for the ‘defence of India. ‘Even after seven decades such absurdities remain unaltered.
Those who were at par or even behind India at the cusp of our independence, marched well ahead. Of all the ills, the most debilitating and soul destroying has been the, all pervasive corruption which has eaten into the vitals of the nation and seeped into our blood stream. Before Indian subcontinent was colonized, it was one of the great manufacturing hub, of the world.
In one field where, there has been no government control or guidance, is information technology and it is in this field that Indians excelled themselves. Indiana have entrepreneurial flair and managerial talent in a range of fields but government policies kept these suppressed. Ministers and bureaucrats acquired too many discretionary powers and often bent these for their own benefits.
Notwithstanding all this, soon after independence, Tata Electrical and Locomotive Company ( TELCO ) was manufacturing one hundred locomotives a year with 98 percent Indian parts. Now some seven decades later, with Russian transfer of technology and advancement in manufacturing processes, the government run factory at Madras does not reach the figure of 100 tanks in a year.
We missed the first industrial revolution due to British policy to keep India dependent on it for most of its needs. After independence, a great opportunity existed, where German Industry lay shattered due to Allied bombing and was willing to suitably re-establish and relocate itself more so its technical manpower.
However, we were caught up in socialist pattern of development and concept of state monopoly in this field. It is only TATAs, that somehow managed to get a few German engineers for the development of diesel engines, while HAL took just one German aeronautical engineer( Mr Tank. ) But he was expert only in the field of airframes of aircrafts. Thus with an air frame of a fighter plane ready, HAL spent next few decades looking around the world, a jet engine for this German designed airframe.
The next great opportunity arose when USSR broke up and scientists and engineers working in East European countries with Russian factories and establishments were seeking re-employment and relocation on a pay of few hundred dollars. India simply let this great opportunity slip bye, while China took 2000 engineers and scientists. 20 years ago China’s and India’s GDPs were almost at par, but China’s GDP now is six times that of India.
In the field of cyber warfare, missile technology, artificial intelligence and robotics etc, China has made great progress.
While we did away with, ‘License- and Permit raj,’ in 1991, but discretionary powers and corruption continued, surfacing. Scandals such as, Common Wealth Games and allotment of Spectrum surfaced, to mention just two out of a number of cases.
At the same time crony capitalism continued to prevail. We were not willing to shed innumerable, ‘government undertakings,’ and privatize these. Neta-babu, combine functioned as normal. After over six decades of existence of DRDO, with over four dozen establishments and thousands of scientists on its rolls, we still import 70 percent of our defence equipment and are currently seeking to import a humble rifle for our soldiers.
If India wishes to be the future center of industrial and manufacturing hub and draw on industrial establishments wanting to pull out of China then a sea change in our approach to attract foreign investment has to come about. We have to remove the tag that India is one of the most difficult places to start business.
Bureaucrats and ministers have to mend their ways, adopt friendly, understanding and helpful attitude towards entrepreneurs. Country has to get rid of Mughal period land laws, so that acquisition of land, with fair compensation, becomes easy and a fast process.
We need to adopt, ’Single Window,’ concept, bring transparency and fairness in government functioning. Rationalize Taxes, more so GST and ensure their full compliance. Mere television debates and ministerial promises will not tempt foreign companies to invest in India..
India must make, EASE of, ‘Doing Business,’ really EASY. Go out and invite these companies out of China. They must be given land as required and not in one or few states but across India, so as to spread job opportunities though out the country. These new arrivals must be offered maximum possible tax concessions: preferably no tax for a period of time.
Lt General Harwant Singh retired as Deputy Chief Of Army Staff