[Guest article by Rajeev Mantri of Navam Capital, an early stage VC firm . The article compares the education/ economic policies of the two national parties and strikes an insightful debate. Do participate!]
As the title of this piece clarifies, I am writing about public policy. I should make it clear the outset that I will not touch upon dynasty, sycophancy, communalism or secularism, because those are political issues. This article will focus on the policy stance taken by the two national parties, the Congress and the BJP, in domains of specific relevance to the startup and venture ecosystem. These domains are education and the economy.
Sound policy-making in education, which falls under the purview of the Human Resource Development Ministry currently headed by Mr. Arjun Singh, ensures that India keeps churning out not just talented employees for enterprises and businesses of all sizes, but also tomorrow’s entrepreneurs and business leaders – the Sunil Mittals and NR Narayana Murthys who have created world-class companies from scratch.
The Finance Ministry and Commerce Ministry take crucial policy decisions in the financial and economic sphere on matters such as taxation, capital markets, international trade, industrial development and formulating the Union Budget. Policies in these areas affect business and companies of all sizes.
In the Congress-UPA regime, we’ve seen an increase in reservations in the nation’s premier institutions of higher learning and creation of news IITs and IIMs. Mr. Arjun Singh has gone to the extent of calling for enforcement of caste-based reservations for faculty at IITs and IIMs. The overnight creation of new IITs has come in for severe criticism from an authority no less than Dr. CNR Rao, eminent scientist, educationist and chairman of the Prime Minister’s Scientific Advisory Council. The HRD Ministry has been doling out IITs and IIMs like toffees to schoolkids.
The BJP-NDA HRD Minister Murali Manohar Joshi has an ordinary record. Mr. Joshi wanted to make Astrology a course in colleges, and also spent part of his tenure trying to rewrite history books used by schoolkids. Mr. Joshi also drastically cut the fees charged by the IIMs, meddling needlessly in the affairs of the country’s top business schools. These policies are, however, far less destructive than calling for student and faculty quotas and diluting the brand and standard of IITs and IIMs by creating them overnight.
Neither party focused with the same vigour and enthusiasm on primary and secondary education.
For the current election, BJP’s stated policy on higher education is one of reforms and capacity creation. As a Wall Street Journal article noted recently, there is a serious and silent crisis brewing in higher education, and there is an urgent need for reforms. The BJP is the only major party calling for liberalizing the education sector and allowing private companies and philanthropic foundations to operate universities under newly-formulated rules and regulations.
Private philanthropy have delivered the goods in other fields – Abhinav Bindra, India’s first-ever individual Gold Medal winner at the Olympics, and boxing Olympic Bronze Medal winner Vijender Kumar, both received financial support from LN Mittal-backed Mittal Champions Trust. Sunil Mittal’s Bharti Foundation has initiated the Satya Bharti School program to reach out to rural India, providing access to pre-primary and primary education for children. Why not encourage philanthropists to build world-class universities?
The dearth of world-class universities has resulted in large numbers of Indians going abroad for higher studies, sometimes never to return – but not all Indians can afford the high fees charged by universities abroad. Even IIT and IIM graduates tend to stay abroad on going there for higher education or professional employment, in what has been dubbed a “brain drain”.
On the other hand, we have Samajwadi Party’s Mulayam Singh Yadav, former Chief Minister of UP and former Union Defence Minister, calling for a ban on English language use in schools and on the use of computers and agricultural machinery. It was this same Samajwadi Party which the Congress-UPA government turned to to survive the trust vote in July last year.
Mr. Mulayam Singh Yadav’s argument is that computers and machinery take away employment from farmers. By that line of reasoning, we should all go to back to doing everything manually so that we can “employ” as many people as possible – so much for productivity gains, the raison d’être for every new product and venture! Clearly, Mulayam and his friends want to take us back to the Stone Age. The scary thing is there is a good chance that he could be a Union Cabinet Minister in the new government.
In the economic policy sphere, the Congress party has historically been socialist. Mrs. Indira Gandhi went to the extent of including the words “socialist” and “secular” in the Preamble of the Constitution of India during the Emergency imposed by her in 1975, a time when civil and political liberties and freedoms were suspended. Mrs. Gandhi invoked extraordinary powers and altered the very Constitution of our nation. Most people reading this article probably weren’t even born at the time.
Today, every political party must profess to be socialist to be able to register with the Election Commission of India and contest elections, as this article from the Wall Street Journal notes. It is not that the socialism of Congress was unchallenged from the start – Chakravarthi Rajagopalachari (Rajaji), a close confidante of Mahatma Gandhi alongside Sardar Patel and Jawaharlal Nehru, broke from Nehru, his colleague of four decades, on the issue of License Raj, a term also coined by Rajaji.
Most readers of this article probably cannot relate to an India where there were just two car manufacturers and barely half a dozen models to choose from, or an India where it took months and years to get a telephone connection and where Indian Airlines was the one and only domestic airline. If Rajaji had had his way, the first four decades after Independence would have seen businessmen other than Tatas and Birlas, whose companies enjoyed government-granted monopolies.
The man who dared to challenge the system and came out trumps was one Dhirajlal Hirachand Ambani, and his story is well-documented.
What’s wrong with socialism, one might ask? Isn’t socialism good for the poor and needy? Socialists work for the poorest of the poor, the aam aadmi, and without socialism this impoverished lot would really struggle to survive.
These are seductive arguments put forth by the Communist and Socialist establishment. Policies should be judged by their results, not their intentions.
The record of history tells us that it is precisely the socialist and communist nations which are also the poorest. In India, we have seen the magic of free markets and capitalism at work in sectors like telecom and civil aviation. Mobile phones and air travel were once the preserve of the wealthy, but competition has enabled even autorickshaw drivers to own cellphones and low-income groups to afford air travel. The DNA newspaper recently carried an article on how a group of debt-stricken farmers in Vidarbha declined government help, took charge and escaped the debt trap.
It never helps to pay people to remain poor and tax them heavily when they do productive work.
Moreover, companies like Bharti Airtel, Pantaloon Retail and Deccan Aviation are case studies in entrepreneurship. They were all founded by first-generation entrepreneurs who entered sunrise industries and built their companies from scratch. The result has been such that everyone is better off – the company founders, investors, employees and above all the consumers and citizens of India.
On August 15, 1947 India attained political freedom, but not economic freedom. Economic freedom did not come until the summer of 1992, when near-bankruptcy fructified the otherwise poltically-impossible decision of liberalizing the economy and began the process of the dismantling of License-Quota-Permit Raj. It should also be remembered that reforms were conducted not by choice, but necessitated by circumstances. The credit for taking the politically-tough decision goes to PV Narasimha Rao, under whose watch Dr. Manmohan Singh got a free hand to liberate the Indian economy.
Given the baggage of history it carries, the Congress party continues to believe in high taxes, sarkari welfare schemes and a regime of excessive regulation and control. The Congress-UPA insists on schemes such as the NREGS, even when their effectiveness is highly questionable.
The Congress-UPA has conducted zero market reforms in the last 5 years. It has initiated new taxes such as Fringe Benefit Tax and Securities Transaction Tax. When the banking and finance world was in the depths of the crisis last year, Mrs. Sonia Gandhi invoked the “wisdom” of Indira Gandhi’s bank nationalizations of 1969.
As an old saying goes, even a broken clock tells the right time twice a day.
The BJP-NDA’s record on economic reforms is far better. Indeed, the BJP is the only major political party which supports economic reforms, free markets and entrepreneurship, and has expressly called for low taxes in its manifesto. Under the Vajpayee-led government, the government privatized inefficient, government-operated public-sector enterprises, which were burdens on the taxpayer.
The business of business is not the business of government. Former secretary of the Disinvesment Ministry and chairman of the Telecom Regulatory Authority of India, Pradip Baijal, has given his account and made the case for privatization in the book, Disinvestment In India: I Lose, You Win.
Mr. Baijal explains how loosening government control and privatization results in efficiently-run companies and lower prices for consumers, not to mention the amount of money raised through divestment, which can be invested in more critical areas such as primary education, national security and basic healthcare.
When the Congress-led UPA came to power, it promptly disbanded the Disinvestment Ministry and folded it into the Finance Ministry as the Department of Disinvestment.
Why are economic reforms and market-friendly polcies important for entrepreneurs and venture investors? Because our energies are better spent in building and launching new products and services, rather than dealing with government agencies at every step of the way and paying taxes which are used to fund wasteful schemes such as the NREGS.
To all the entrepreneurs in the Internet, mobile VAS, retail and other growth sectors, I ask – would your ventures be possible without the promotion of free markets? We should think of the possibilites that reforms can open up in industrial sectors given the advent of materials-science driven innovation in clean technology and nanotechnology.
We must not take our economic freedom for granted.
Market reforms open up a world of opportunities for entrepreneurs and innovators, who generate both jobs and wealth, not to speak of the productivity gain and its multiplier effect. As economist Joseph Schumpeter and Nobel Prize-winner Milton Friedman have pointed out, entrepreneurs are the growth drivers of an economy. Any government policy must promote and sustain entrepreneurship and competition.
If the Indian economy is to grow at double-digit rates, economic reforms are a must. On this criterion, the choice between the Congress-led UPA and BJP-led NDA is clear and unequivocal. Our country needs more entrepreneurs, and as NR Narayana Murthy has said recently, entrepreneurship is the best solution for poverty.
Disclaimer: Views expressed here are personal views of the author.