Rising country risk perception upsets corp India

The SC’s quashing of P J Thomas’ appointment as CVC has again highlighted the problem of ‘governance deficit’ in the country, an issue that has engaged the attention of many corporate India stalwarts.

Most notably Wipro Chairman Azim Premji has transformed from a reticent, media-shy IT billionaire to a staunch critic of the crisis in governance. In February addressing Nasscom delegates he said governance was in shambles in the country.

It was only a reiteration of the concern he expressed a month earlier in Davos. Describing the crisis as a ‘national calamity’, he said, “(It) is personally very devastating because one had so much confidence when they (UPA-II) came in,” he told television channels. 

He also signed an open letter in January along with 13 other eminent personalities urging the government to pass Lokpal Bill and strengthen Lokayuktas across the country and take other measures to curb corruption and improve governance. There are also many who may disagree. Bharti Group Chairman Sunil Mittal, who was also present at Davos, told reporters that “…We are becoming too negative about our own country.”

Corp  India’s role

But, if the country is facing a governance deficit, the contribution of corporate India has been generous. Many of its leading lights are under CBI scanner for playing the system to grab the precious spectrum.

Deccan Herald spoke to a few senior executives to gauge the mood of the industry.  
Most of them opt to be more guarded than Premji, but concede that he has a point.

“India has a chance to catch up with China and Korea in manufacturing, but there are too many bureaucratic hurdles. We were expecting clear-cut directions from UPA-2, but things have got more confusing,” said Dr Vinod K Nowal, CEO of Jindal Steel Works.

An India head of a mid-size US IT firm, who spoke off the record, was more scathing. Due to serial scams, the perception of country risk has gone up among the investors. “Raising capital for business in India will become more expensive in international market if the trend is not significantly reversed,” he  said.  “It is surprising that the PM who started the reforms programme is not able to conclude it. He is looking increasingly clueless,” he said.  Shekar Viswanathan, deputy managing editor, Toyota Kirloskar Motor, said the recent controversies may have made ‘some’ impact on the image of the country and investor confidence. “But it is not the end of the world and there are many reasons to be optimistic,” he said.

The Toyota plant in Bangalore was in need of a new road. There was some delay  because of multiple claims over land, which had to be acquired. But different government departments worked together to make it happen, he said.

“You can’t expect problems to get resolved here the way it happens in Singapore. We are a democracy, there are certain limitations, we should be mature enough to recognise,” Viswanathan added.

Commenting on the status of governance, he said the deficit was more political in nature. “The CVC controversy was avoidable. The government similarly walked into CWG and other scams trying to defend the indefensible,” he said.

‘‘A senior officer gets killed fighting oil mafia. That shows the system is still working,” he added. But he said there were also many slips in administration. Illustrating his point, Viswanathan said the government had appointed a Large Tax Payers Unit in Bangalore but overlooked to appoint a specialist officer, who understood the complicated transfer pricing rules. “This has triggered a huge amount of litigation. I think this slip is more of a functional oversight than being a symptom of a deeper malaise. But instances of these functional oversights are increasing,” he said.

‘‘I represent a large company, have a trained staff and can meet ministers and senior officers. I can get things done,” he said, while adding, “But an individual may face governance deficit.”

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