We can’t get to $5T economy this way

The crisis-ridden Indian economy was exposed on the banks of Nethravati river in Mangaluru this week.

Café Coffee Day founder V G Siddhartha’s suicide should ring alarm bells in the corridors of the all-powerful finance ministry of Nirmala Sitharaman. The powerful mandarins in the bureaucracy and their political masters should no longer pretend that everything is hunky-dory vis-à-vis the Indian economy.

The image of Siddhartha’s lifeless body being fished out of the river will haunt us for quite some time. The ongoing investigations will reveal the details of the business deals and the debt burden, and possibly offer reasons that forced the owner of a successful enterprise to take the fatal step.

The stakeholders will get their dues and the market may stabilise after a while. But it is time for the finance minister and her government to wake up and smell the coffee. It is important that we learn the right lessons from this unfortunate incident.

Sunrise sectors in trouble

The recent credit squeeze and liquidity crunch have forced even some of the established players to cut costs and lay off people. The job losses are real and hurting. Sectors like automobile, pharmaceuticals and real estate, which were once called the sunrise sectors and fuelled real economic growth, are down in the dumps today.

According to a report by the Automotive Component Manufacturers Association of India (ACMA), 70% of the industry workers had contractual jobs and, due to the slowdown, most of them lost jobs. Several banks, says this report, have started going slow on the disbursement of loans and advances to auto-dealers. This will only lead to more job losses and further recession in the auto sector.

As it is, it is common knowledge that the initial cost of setting up a business venture in India is highly prohibitive when compared to other Asian and Southeast Asian economies. Further, the list of compliances required is gruelling and, at times, untenable. Add to this, corruption, red-tapism, bureaucratic lethargy and non-cooperation from the nodal agencies that are the immediate point of reference for any start-up or MSME entrepreneur. This is why it is difficult to be an entrepreneur in India.

Profit-making a crime?

The attitude of the government, which looks at profit-making as the anti-thesis of socialism, has not changed in the last 25 years.

This, in spite of the path-breaking shift from the socialist economic model to the free-market model during former prime minister P V Narasimha Rao’s tenure. It was expected that doing business in India will be easier — free from the shackles of red tape and the Licence Raj.

More than 25 years since liberalisation, the general feeling is that we do not have much to celebrate. Businesses in India, especially by first-time entrepreneurs seeking to break the glass ceiling, have to work hard in a hostile environment.

Officially, India’s ranking has improved on the ease of doing business index. According to the World Bank report, we are now placed at the 77th spot, up from 100 in 2017. But such numbers hardly reflect the ground reality.

The challenges faced by micro, small and medium enterprises (MSMEs) and other traditional businesses show that India has to do a lot more to facilitate business. An Indian entrepreneur still struggles to get access to capital, raw material, power supply and other basic necessities while starting a business venture.

No ease of doing business

Finance Minister Nirmala Sitharaman in her Budget spe­ech assured the business community that the government is not looking down upon “legitimate profit-earning.” But actions speak louder than words.

A tighter taxation regime, stricter audit norms, fine-tooth combing of ITRs (income tax returns) and balance-sheets have all but killed the incentive to make a profit and declare it.

It is the responsibility of the government to regulate credit, insulate lenders and creditors by protecting their interests and caution stakeholders against fly-by-night operators and serial offenders masquerading as entrepreneurs.

But the new corporate social responsibility (CSR) norms — a three-year jail term for defaulting officials if CSR norms are not followed — show that on the ground, there is no ease of doing business in India. This is definitely not how India can become a $5 trillion economy.

(The writer is a former editor of ‘Organiser’)

(This article originally appeared in the news website ThePrint)