Sauce for the goose

TOP industrialists, too, met with the Finance Minister in the course of his pre-Budget discussions. They went hammer and tongs at the poor fellow; interest rates were high, because government expenditure was high. Government had just too much flab. There was a great deal of slack in every department; some departments even needed to be entirely done away with. The Minister listened for a while, as patiently as he could, and then hit back : there was a great deal of slack in industry too. It was time that the magnates did something about it. It would not be possible for the government to shield them for ever.

This led the corporates to bring up the question of exit policy. How could they cut flab, they wanted to know when the government did not allow them to fire or even redeploy excess workers. How could they cut flab when the government did not allow them to close shop even when things were beyond redeem.

When a unit became terminally ill, they said, how on earth could they be forced to continue to run it. Fair enough, is the official reply; but, in fact, many of these units became irremediably sick because at the first signs of trouble, or even without them, promoters resorted to blood-letting; began to quietly siphon off funds.

But then, what choice did they have but to climb over the walls when they were not allowed to walk out of the gates. The Grasim unit in Kerala, for instance, was doing fine, until the government suddenly changed the rules, and began insisting that the company stop discharging its effluents into the streams that were the only source of water for people living in the vicinity. Faced with additional costs, the unit claimed it was unable to get on; but at the same time it was not allowed to get out.

This debate could go on and on. What sort of fight could domestic industry hope to put up, saddled as it was with high interest rates, power failures, congestion of roads and ports and so on. Enough to drive anyone to tears. But then, suddenly comes a thought. While the corporates support the exit of government employees and departments, actively lobby for permission to exit their own employees, and withdraw their capital, they seem to develop some hesitation when, at last, the bell tolls for them.

Take for instance the case of foreign tie-ups. For very many years it has been obvious, to consumers, to the foreign investors and even to their domestic partners, that the latter have quite outlived their utility. They have to be dumped, because they no longer have anything to offer, and probably never will. Foreign investors too have to zig and zag to avoid all those pot holes on the road. But they have no doubts about their ability to do so; unlike domestic industry, whose only advantage lies in its supposedly better knowledge of 'local conditions'.

But, come to think of it, it is not fair to cast aspersions on their superior knowledge of 'local conditions'. It was this that they used to scuttle, many years ago, the decision of foreign investors to exit the tie-ups, and go into business on their own. It was this that enabled them to insist that foreign investors must first get the 'permission' of domestic corporates (fraught though the move is with all the perils of the 'licence raj').

Finally, last month, it seemed that foreign investors had won the battle. The government decided to scuttle the earlier notification. But then, at the last moment, unseen hands came to the rescue; and it was decided to scuttle instead the decision to scuttle the earlier notification. The party could now go on.

But I doubt if it can continue for ever. Already China is able to get in six months the direct foreign investment that we are able to garner over a decade. And now, as import barriers/duties come down, it will become ever more tempting for foreign investors to increase imports into India, rather than their investments in it. This will also enable them to escape some of the pot holes and pitfalls that domestic industry is forever complaining of.

SUDHANSHU RANADE

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