Quick, answer this one: What’s the most defining economic or business moment in 2013? Nine out of ten times you’d probably draw a blank. Nothing spectacular was achieved. There was little to celebrate and lots to be despondent about. Therefore, the year 2013 may go down in India’s history as a hiatus. It was, as finance minister P. Chidambaram said at a function in Mumbai recently, the weakest moment in our democracy: brought on by a paralysed Parliament, an overactive judiciary and an ineffective government. Except for their unseemly hurry to pass the Lokpal Bill, parliamentarians decided to give themselves a self-enforced break from making laws. Industrialists were more preoccupied about the outcome of the general elections in 2014 and what it would portend for business and the economy. Pushed to the wall, the government tried scoring a few brownie points with the passage of the Food Security Act, the new Companies Act, but none of it did much to boost confidence--or indeed fire up those “animal spirits”.
And for most part, the contentious national debates remain unresolved. Between growth and equity. Development and environment. Centralised and decentralised planning. Industrialisation and agriculture. Entitlements and sustainable livelihoods. A wise investor, with an almost spotless reputation in generating well above average returns in the Indian stockmarket, and someone who prefers to remain unnamed, once told me that the best way to look at the India story was not to get forced into a year-on-year analysis. Instead, look at a five-year cycle, he said, and invariably you’d find that as a country we’ve managed to thread our way through all the chaos and confusion attendant upon a noisy democracy. By the end of this year, however, the very same investor, hit by one of the worst performances in his career, seemed to have lost his conviction about India.
He wasn’t alone. Scores like him, both within the country and abroad, were disappointed that the country hadn’t quite lived up to its potential. After battling nearly three scam-ridden years, 2013 presented an opportunity for the UPA government to recover from the crisis and show the country it could govern. Yet the government threw away that opportunity. It not only failed to learn the lessons from the coal and 2G scams that had rocked its very existence for much of its second term, it showed no desire to either press for greater accountability, root out chronic crony capitalism and strengthen the foundations of governance.
The general consensus: let’s wait it out till the general elections in 2014, in the hope that one party is able to get a large enough majority to push its writ in Parliament. Yet that hope might be a trifle too optimistic—and the chances of one of the two mainstream parties, especially the BJP-led coalition, emerging with a clear majority remain doubtful, at least as yet. So if politics isn’t about to deliver governance and reform, can good economics and business possibly triumph?
Strange as it may sound, the surprising rise of the Aam Aadmi Party in the Delhi elections may well be a wake-up call for the major political parties. It is a clear signal for them to get serious about rooting out the endemic corruption—and above all, crony capitalism. Particularly for our infrastructure industries, whether it is coal or airports, the recipe is no different: we need a more market-based model, with a level playing field for both public and private sector players, and a sensible regulator to set clear, transparent rules of the game. Pushing through this reform isn’t as hard as the UPA government would have us believe. Now, whether this new political pressure will force incumbent governments to go beyond mere tokenism remains a moot point to track in 2014.
In this milieu of uncertainty, there are many pulls and pressures that will emerge. But keep your eyes peeled on three big themes and how they play out next year:
- For one, business and entrepreneurship must deliver jobs and create new wealth for the economy to move forward. Yet the means are just as important as the end. Business itself needs to develop the capacity for long-term thinking and a more sustainable way of doing business. Or else the public trust in business itself will be irreparably broken. Greed may be good, but excess greed has ended up creating get-rich-quick models that have benefited a few, but harmed many. This search for a new model has given rise to ideas like Conscious Capitalism, Shared Values and Responsible/Sustainable Business. Leaders like Unilever’s CEO Paul Polman, Wholefood founder John Mackey or indeed our very own William Bissell of Fabindia and Wipro’s Azim Premji are already the new poster boys of capitalism with a human face—and 2014 could well be the tipping point for this movement that seeks to reform the very soul of business.
- For emerging markets, 2013 was a painful period as their runaway growth models began to hit a wall for the first time. Caught between high levels of inflation, interest rates and fiscal profligacy, neither India nor the rest of the brics pack will escape the pain next year. What’s more, 2013 saw the first signs of the US economy springing back to life, led largely by a new energy and construction boom. In 2014, expect the queue of many large Indian corporations, enticed by the opportunity to grab a piece of the largest market in the world, to get longer in sectors as diverse as construction, fertilisers, shale gas, textiles and auto components. This flight of capital could be one more reason why a new government at home will have to work much harder at genuinely improving the ease of doing business, for both overseas investors and domestic entrepreneurs.
- Large centralised models of planning may not work for a country as diverse as India. Yet over the years, the tendency for central governments to unveil one-size-fit-all central schemes has simply grown. It has now become clear that the success of large central schemes like NREGA aren’t uniformly felt across the country. The Planning Commission’s attempt to shift its own focus from central planning and allocation of resources to facilitating the sharing of best practices across states and helping in capacity building at a state or local level was indeed a welcome step for the last two years. The next year will tell us whether our political leaders, be it Narendra Modi or Rahul Gandhi, truly believe that the centre of gravity needs to shift to the states. Or will they merely turn the clock back to the days of command-and-control governance from New Delhi?
Needless to say, we’re poised for interesting times ahead. It remains to be seen whether we drop the ball yet again, as we did in 2013, or grasp the nettle. This time, though, the nation does want to know.
(The author was founding editor of Forbes India magazine)
