With prime minister Narendra Modi reportedly asking captains of industry to tell him what was wrong with his policies, India Inc had the perfect opportunity to appraise him of the problems they are facing, that are keeping them from increasing investment in a meaningful manner. Given the history of such meetings in the past over several decades, with even lower levels of functionaries, however, it is unlikely India Inc would have been really forthright, though The Economic Times reports that the meeting that was scheduled for one-and-a-half hours spilled over to almost three hours. But while it is easy to berate the industrialists for being lily-livered, the fact is that the PM doesn’t really need such feedback to know how little has changed at the operational level—indeed, the poor pick-up in industrial investment makes clear how industry feels about the business environment even if India Inc didn’t muster the nerve to speak frankly.
In the case of the oil sector—traditionally one of the larger investors in the private sector—for instance, in just the last few months, despite their signed contracts, the government has tried to arm-twist private firms into accepting lower returns; prior to that, it even sent service tax notices to firms who were paying the head of the consortium their share of investments made in oil/gas fields! Shockingly, for a government that professes to want more local production of oil/gas, it renewed Cairn’s Rajasthan concession only after forcing it to shell out 10 percentage points more as annual revenue share. And, for three years, its refusal to allow free-market prices of natural gas prices—despite the fact that its contracts promised this—ensured investments all dried up.
In the case of telecom, an even bigger investor, despite it being obvious that government levies were too high and were responsible for the industry turning sick—this is apart from the havoc wrought by RJio’s pricing—the government has done absolutely nothing for the last four years. Instead, it keeps trying to arm-twist companies into paying disputed levies—that have been stayed by various courts—when, as now, they are trying to complete various M&A deals.
While next to nothing has been done to fix labour laws, such is the lack of confidence in the government, the industry is not investing in even areas where some solutions have been implemented. In the case of textiles, for instance, fixed-term employment was allowed two years ago, but little investment has come in as industry is unsure the government will back it when workers need to be told to go home. In even defence, where government procurement was supposed to drive lots of investment, the inability to place enough orders has ensured the sector remains listless.
And, while the prime minister exhorted India Inc to invest in agriculture to boost farm exports, surely he must be aware that the mess in sugar is the direct result of high government-mandated cane prices and that his plan to increase MSPs of all agricultural produce (save horticulture) will ensure Indian exports of rice, cotton and even textiles/garments will be hit by this? How does he expect investment in, say, biotech, after the shameful manner in which Monsanto was driven out; or investments in medical devices or pharmaceuticals after the way his government has put all manner of price controls? If the prime minister is serious about getting investments to pick up—other than in e-tail, where policy arbitrage is the main driver—he needs to fix these issues. In the absence of that, having detailed conversations with India Inc appears little more than a public relations exercise.