Enterprise as Manthan
There is now a widely held view that for some time now, the ‘animal spirits’ of Indian enterprise have remained subdued. The unwillingness of the rate of investment to pick up after it tumbled down to the low 30s, from the high 30s of the first decade of this century, has been attributed to fiscal restraint, high interest rates and a loss of appetite for business risk in the debt-burdened corporate sector.
During the tenure of the second Manmohan Singh government, this holding back of investment was primarily attributed to ‘policy paralysis’. However, the persistence of a lower investment rate over the last three years, in spite of the policy activism of the Narendra Modi government, suggests that apart from unfavourable global economic conditions, fiscal restraint and a conservative monetary policy continue to act as dampeners.
Nothing much can be done by policymakers about the global environment. But they have been slow to pick up the fiscal and monetary policy tools. Hopefully, we will see increased public spending and an easing of monetary policy in weeks to come. What of the persistence of a lack of business appetite for risk?
Government spokespersons draw attention to a variety of initiatives taken over the last couple of years to facilitate the ‘ease of doing business’. Yet, domestic enterprise still feels more needs to be done to revive their ‘animal spirits’ for risk-taking. This perception gap needs to be quickly bridged.
The idea of ‘animal spirits’, forwarded by John Maynard Keynes, describes the ‘emotional and irrational’ factors that shape the investment decisions of entrepreneurs. Private investment is not a function of rational calculations alone. It is often influenced more by expectations based on sentiment than hard data. It is the sentiment issue that Indian policymakers have yet to adequately address.
Even as the government seeks to ease the business environment, judicial activism and bureaucratic inertia continue to dampen sentiment. A new problem seems to be raising its head. This is best described as the emergence of a ‘Regulation Raj’ in the name of good governance. Every time a new person takes charge of a regulatory institution, the urge is to demonstrate that one is tougher than the predecessor.
Not a Cheat Code
It has become commonplace to regard business leaders as cheats. Sure, the visible lifestyle choices of some of our business leaders contributes to the public willingness to think of them as social parasites. However, if an environment is created in which entrepreneurs and business leaders feel unwanted at home, they will only migrate their investments. This has been happening.
A number of Indian companies are investing abroad because it is possible and beneficial to do so. If Indians will not invest in India, will a foreigner? In one of his first public statements, the newly appointed adviser in the ministry of finance Sanjeev Sanyal has deployed a helpful metaphor to explain the nature of enterprise. Enterprise and risk-taking are like ‘samudra manthan’ (ocean churn), Sanyal told a business gathering recently. They generate poison, failed ventures and bankruptcy, as well as nectar(अमृत), profitmaking, growth-generating business.
The government, he says, should be like Lord Shiva. It must have policy instruments at hand that will enable it to consume the poison and turn it into nectar. Sanyal believes the new bankruptcy law is one such instrument.
What I find attractive is the idea of ‘enterprise as manthan’ — that success and failure are two sides of the same coin. It is a commonplace idea in modern capitalism, but one that Indian policymakers and public commentators must get used to. The Indian penchant for a ‘Regulation Raj’ to deal with corporate failure, and the public vilification of those who bet wrong, can have the opposite effect of discouraging enterprise and, thereby, limiting the number of new ventures.
It is not an accident that Indian enterprise was unleashed in the wake of the 1991liberalisation when PM P V Narasimha Rao lent a new sense of public confidence in Indian business leadership. The Narasimha Rao and Atal Bihari Vajpayee governments allowed the full flowering of new enterprise in new areas like information technology, media and communications.
That phase of enterprise-led business development ended a decade ago. If the rate of economic growth has to return convincingly to the 7-8% range, then it is necessary that visible action be taken on all three fronts: a liberal fiscal policy that increases public investment in employment-generating sectors like construction, a supportive monetary policy that revives appetite for business risk and, equally importantly, the visible end to an incipient Regulation Raj.
Invest, So Shall You Reap
If the government succeeds in reviving the sentiment of Indian investors and local enterprise, foreign investors will rush in. Foreign direct investment (FDI) does not, and cannot, substitute domestic investment. FDI complements domestic investment. Global finance is desperately looking for productive avenues and India will be one when Indians act accordingly.
The coming year is crucial for the economy. If by the end of the current fiscal year, the investment rate shows an upward trend, the rest will follow.
- Subdued (Verb ) अधीन किया हुआ / वशीभूत: Overcome, quieten, or bring under control (a feeling or person).
Synonyms: Conquer, defeat, vanquish, overcome, overwhelm, crush, quash, beat, trounce, subjugate.
Example: At the first strum the previously subdued audience surged forward waving and chanting.
- Persistence (noun) अटलता / हठ :Firm or obstinate continuance in a course of action in spite of difficulty or opposition.
Synonyms: Pertinacity, perseverance, tenacity, tenaciousness, doggedness.
Example: Companies must have patience and persistence, but the rewards are there.
- Restraint (noun) कठोरता / संयम/ नियंत्रण : A measure or condition that keeps someone or something under control or within limits.
Synonyms: Constraint, check, control, restriction, limitation, curtailment, rein, bridle, brake, damper, impediment, obstacle
Example: Society’s methodical and systemic ideals stand challenged wherever individual freedom is put under any restraint .
- Conservative (adjective) अपरिवर्तनवादी / रूढ़िवादी व्यक्ति :Holding to traditional attitudes and values and cautious about change or innovation, typically in relation to politics or religion.
Synonyms: Right-wing, traditionalist, conventional, low, button-down, materialistic, cautious.
Example: The dress was very conservative , but it accentuated my curves.
- Appetite (noun) भूख/ चाव/ क्षुधा : A natural desire to satisfy a bodily need, especially for food.
Synonyms: Craving, longing, yearning, hankering, hunger, thirst, passion, enthusiasm, keenness.
Example: If television is anything to go by, there seems to be a huge appetite for shows about the love lives of rich New Yorkers.
- Metaphor (noun) रूपांतर / लक्षण / रूपक: A figure of speech in which a word or phrase is applied to an object or action to which it is not literally applicable.
Synonyms: Figure of speech, image, trope, analogy, comparison, symbol.
Example: This would be a good metaphor for something, no doubt, if I could only pin it down.
- Vilification (noun) गालियां देना: Abusively disparaging speech or writing.
Synonyms: Abuse, revilement, contumely, insult
Example: Warned that the constant vilification of candidates for public office was undermining the people’s faith in the political system.
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