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Vested interests hurting reforms: Ratan Tata

Last updated on: August 26, 2005 21:37 IST
Voicing concern over strong 'behind the scenes' maneuvering by 'vested interests in the private sector,' industry doyen Ratan Tata on Friday said these things hurt India's progress, stops reforms and makes the policies 'toothless and ineffective.'

"India is suffering from a very strong influence of vested interests. Regrettably, sometimes this is more often than not from the private sector. Vested interests and political pulls are the two things that today are hurting the country's progress and reforms," the Tata Group chief and Chairman of the Investment Commission told PTI.

"Because what happens then is that the policy gets modified, manipulated, changed so that it either serves vested interests or hurts the people. This eventually makes that policy sort of toothless and ineffective," he said.

Tata, who has navigated the group's meteoric rise since 1991 and was instrumental in increasing its turnover eight-fold to the present Rs 80,000 crore (Rs 800 billion), regretted that "there is behind the scenes stopping (of) reforms in a spurious manner, because reforms help some, hurt some."

Turning philosophical, he said, "If your are truly a nationalist, it should not matter whether it hurts you so long as it is fair and moves the country forward. But regrettably human nature is not that way."

Analysing impediments to the reform process, he said, "What we are doing is a lot of back-stepping and rolling back. . . what is happening is that sometimes the policy is being compromised to an extent where it had no strength or is ineffective."

A major shortcoming in the policy was the absence of a holistic view, he said, adding that "we are just treating things based on sometimes knee-jerk, sometimes short-term, views. Sometimes it is worthwhile to look at the whole policy and re-write that policy since things have changed."

Asked about the situation in the labour sector, role of Left parties and handling of the oil-pricing issues, Tata said, "I think certainly we cannot keep the subsidies at a level where government deficits become huge, endangering the prosperity of the nations. I think sometimes along the line there has to be hard recognition of some facts."

Advocating a realistic decision-making process, he said there has to be a recognition that all things cannot be subsidised forever.

If the crude oil prices go up in the international market, it should find reflection in the domestic market and to offset the huge subsidy burden, kerosene prices should rise a bit, he said.

However, he exuded confidence in the vision of Prime Minister Manmohan Singh, considered to be the harbinger of economic reforms in India, saying, "What I think needs to be done is already being advocated at the level of the prime minister or the finance minister."

Commenting on the labour situation in India and its implications on the manufacturing sector while competing with China, Tata said, "We must not lose the benefit we have from abundant and low-cost labour. There's a great deal India can do, which it has lost to a country like China."

To salvage the situation, the country needs to recognise and improve labour productivity, he said.

Sounding sceptical about India's position in the global manufacturing scenario, he said it needed to do "other things" if it had to gain position in manufacturing.

Elaborating on the "other things", he said, "For manufacturing, to be the factory of the world if you like, we need inputs which are at the international rates, which India does not have."

"It needs economies of scale compared to China, which we do not have. We need labour productivity to the extent China has, which we do not have," he said.

Asked if India could make up for the above deficiencies in the near future, Tata sounded pessimistic.

"I know the political system is different and labour productivity, or discipline or lack of the ability to rise up, of not being exploited. It is different in China from India but we have to find a way to recognise that labour productivity must improve," he said.

Indicating that the policy decisions might not provide an immediate relief to India in this regard, he said all components of industry needed to be put in its place if the country wanted to be seen by one and all as a global player.

Stressing the need for reforms in the labour sector, he said the protections given to the organised labour need not be emphasised at present, as the level of exploitation has gone down drastically.

The labour policy needed to be shifted towards the end objective of making India a global player, he said, adding, "let us put all the things in place to make ourselves a global player."

Coming back to the state of Indian economy, he said it seemed to be doing well with a sustainable growth rate, but emphasised there was a need for investment in infrastructure.

Though the government has realised the importance of such investment, the pace and size of investment was not fast enough to make a difference, he said.

"What needs to be done in my view is that the government should have a stated policy and go ahead and implement it with a courage to see it through," he added.

Sunil Shivdasani and Rakesh Pathak
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