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May 11, 2000


The Rediff Business Interview/Arun Bharat Ram

'Old Economy is going to be right here'

Arun Bharat Ram A hardcore supporter of privatisation, a believer in modernism, an admirer of the new e-ntrepreneurship, an old economy tycoon, chairman of SRF Limited and now the president of the premier industry chamber. Meet Arun Bharat Ram, the new president of the Confederation of Indian Industry, or CII. He, however, is different from his flamboyant predecessor, Rahul Bajaj. Bharat Ram is reticent and prefers to keep a low profile. He does not mince words when it comes to taking the government to task over controversial issues like divestment. Email this report to a friend

Ram shared his vision of a New India with Neena Haridas. Excerpts from the interview.

You are a stern believer in privatisation. In fact, you even suggested that Maruti Udyog Limited should be privatised. Do you mean that government has absolutely no business being in business, even if the venture is a successful one?

On the one hand, India talks about liberalisation and global competition. On the other, there are still government monopolies such as Videsh Sanchar Nigam Limited (VSNL) and Mahanagar Telecom Nigam Limited (MTNL). These are debt-ridden public sector units (PSUs), inflating national debt by billions of rupees.

I don't think liberalisation and government monopolies can go hand in hand. For a truly competitive market, where every player has a level playing field, the government should get out of the business. This is why I suggested that Maruti should be privatised.

Similarly, I think civil aviation should be privatised. To begin with, we can have 40 per cent foreign stake in Indian Airlines and Air-India.

In fact, one of the prime issues on my agenda as CII president is to take up this matter with the policy-makers and trade unions of the country.

Which are the areas in which you will suggest immediate government divestment?

Well, frankly the government should move out of every industry. But that is asking for too much in too little a time, considering that one has to keep the human resources angle in mind.

But we can start with areas that need immediate sprucing up. First, the tourism industry. What is the need to have the India Tourism Development Corporation? Why not leave this business to the private players?

As it is, the private tourism ventures are doing far better than the ones run by the government. Why then should the government be in this business at all?

Second, aviation needs privatisation with immediate effect. If you expect global leaders to invest and travel within India, we need to give world-class travel facilities as well. In fact, foreign airlines or any other foreign investor should be allowed to pick up 40 per cent stake in any company in the aviation sector, be it for domestic airlines or for the international carrier.

Third, why is basic telephony limited to MTNL alone? Why not privatise these sectors and make some money?

Privatising mammoths like MTNL and VSNL will rid the country of national debt worth more than Rs 300 billion.

There's no point in staying in a business that is not providing quality service, is drying up the national exchequer and where you are making losses, too.

The CII will hold meetings to chalk out the time-frame and extent of equity to be divested in various PSUs, including Maruti. We will work with the government and trade unions to identify the companies, which need to be privatised.

We will act as a catalyst in the entire process.

But do you think trade unions will agree to such privatisation? What about the people?

Yes, it has to be done with a heart. We will work out a safety net for the workers as several jobs are likely to be on the block following this privatisation exercise.

The opposition to privatisation is also because many do not really understand the implications. Then there are political parties, who make a killing from this paranoia.

We must first dispose of the misconceptions, and then think of solutions to the inevitable retrenchment problems.

Workers should be trained and made globally competitive. About 30 to 40 per cent of workers in most organisations will reach retirement age in five or six years. They have to be compensated in whatever way possible. The rest who might be laid off should be given other job opportunities.

The chamber's role would be interact with trade unions and explain why privatisation in a particular unit is needed and what we can do for the workers. Even if we succeed in getting a few PSUs privatised, we would have achieved a great deal.

The real problem is in the unorganised sector, because 80 per cent of the workers in India are in this sector. There is no protection and security for them. Carpenters, chaiwallas (tea-sellers), plumbers…. There are so many who think they are employed. It's virtual unemployment really. I think the government, the industry and the trade unions should work toward uplifting their income levels and giving them security, too.

Do we ever hear politicians say what they are going to do for the unorganised workforce when they lose their jobs?

Besides privatisation, what other priorities do you have as CII president?

One of the items that is way up on my priority list are the small and medium enterprises (SMEs). In the wake of privatisation and global competition, it is the SMEs that are likely to suffer the most.

With import quotas going away, SMEs are going to be in trouble. The chamber's role would be to help companies survive and become more competitive. I would also like the CII to play an important role in getting some kind of consensus on reforms.

I know it is not possible for the CII to completely change the political mindset. But we are going to make a determined effort to adopt a consensus approach and make sure that second generation reforms go ahead.

Under these circumstances, where do you see the old economy heading?

It is going to be right here. Businesses are evolving by the day and, accordingly, we have to bring changes to our so-called brick-and-mortar industry so that we become truly competitive. The old economy has to work in tandem with the new economy.

The two economies will complement each other and open new fora. For instance, do you not think the old economy can make use of e-commerce to increase sales?

So the issue is how to make optimum use of the new and the old. We need to get the government to make laws that will enable this.

In this context, I even think the CII and other industry chambers should evolve. Two years down the lane, we won't be able to provide efficient service to our members considering the kind of services they will need. For instance, earlier, we concentrated more on lobbying. Now, however, our approach is to encourage competition. We are not going to lobby, for example, for reduction in import duty. We realise that tariffs will come down and Indian companies have to compete globally.

When do you think the so-called dot-com bubble will burst, if at all?

The dot-comers should tread carefully. Those who are foraying blindly into the dot-com segment, should do a thorough analysis before entering this business. Nine out of ten such companies in India fail. Youngsters should carefully look at their personal strengths and values.

In India today, there are still businesses which are difficult to do because of the environment, corruption, bureaucratic hassles and so on. You have to look at your market, look at your strengths, and build a clear-cut vision for yourself and your colleagues. It is not that the bubble will burst. It will be the survival of the fittest, the strongest and the smartest.

Where is the Indian economy headed this fiscal year?

Hopefully towards growth! I think the economy must grow at 8-10 per cent over the next few years in order to create enough jobs. For this growth rate, we need to take the inefficiency out of our system, which is where privatisation plays its role.

We forecast a GDP growth rate of 7 per cent for this fiscal. To attain a GDP growth target of 7 per cent, agriculture, industry and services sectors should grow at a rate of 1.5 to 2 per cent, 8 per cent and 9 per cent respectively. But I think it is too early to talk about fiscal deficit, considering that this year we have the drought when it was floods last year. But a considerable amount could be generated through divestment.

Then inflation... I think it should be somewhere between 5 and 6 per cent, savings rate between 25 and 26 per cent, import growth at 11-12 per cent, exports growth at 11 per cent, exchange rate at Rs 44.5 per dollar and forex at $ 42-43 billion.

Talking about forex, can you tell us about the Indo-US Free Trade Agreement that you have initiated?

It is a draft paper we are in the process of developing with our counterparts in the US. It would not mean free trade, but freer trade. Through this we want to increase trade between the two countries. The initiatives would broadly cover areas such as research and development, technology and bio-informatics, focus on small and medium enterprises, privatisation of public sector enterprises, corporate governance, competitive services, setting up of a services council, enabling state governments, initiatives in infrastructure, and financial sector reforms.

Its initiatives in R&D would include working with the industry and labs to raise awareness and spread the use of R&D, strengthen the patent office and setting up of an Enterprise Development Fund to help start-ups.

Bio-informatics is an area that presents immense opportunities for India. The year 2000-2001 would also see a major expansion of the chamber's activities in the sector with the setting up of sub-contracting exchanges and Enterprise Development Fund.

CII would also continue to build on its initiatives in the field of corporate governance and develop its network with the World Bank, Asian Development Bank, NASDAQ, New York Stock Exchange, Bombay Stock Exchange, National Stock Exchange, the Securities and Exchange Board of India and the Reserve Bank of India.

What do you think is the reason for investors still being wary of setting up shop in India?

Redtapism. Why should there be one window for one clearance, another for another clearance? The man just keeps running from one window to the other. By the time he gets his stuff, he doesn't need it anymore. If things were not so bureaucratised, business would be smooth.


Profile of Arun Bharat Ram



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