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The Rediff Business Interview/Tarun Das

'We need competition, internal as well as external'

Tarun Das is the one person perhaps most identified with the Confederation of Indian Industry, India's leading chamber of commerce and industry. The CII director-general has been associated with CII for three and a half decades and has no plans to go anywhere, though he had earlier announced that he would prefer to retire next year, when he turns 60. His term, however, will end only in 2000.

India may be going through an industrial slowdown, but Das still draws graphs in the air in which the country's growth rate invariably touches 7 per cent. And he vehemently rejects the protectionist prop for that linear progression.

Among the many topics covered in this exclusive interview with Rajesh Ramachandran, Das vehemently denied having lobbied for a person of the CII's choice (read Jaswant Singh) as finance minister. "It was just a regular monthly meeting," he said disarmingly.

You have transformed CII into the premier institution in its genre. Tell us more about CII and yourself.

(Tarun Das [left]) This is my 35^th year in CII. I started as a trainee in Calcutta in November 1963, when the staff strength was only six. That is why I think I should get out next year. I can't say I have transformed CII, but there is a great synergy in CII between the members, office-bearers, and the secretariat. The members and office-bearers have been very enlightened and have given space to the secretariat. They have allowed the secretariat to take the initiative and drive the organisation forward. It has been a good partnership and we have a great staff at CII. We have also been lucky that things have gone well for CII.

Regarding CII, between 1963 to 1974, there were actually two engineering associations which merged. Part of the agreement was that the headquarters must move to Delhi. I was offered the position to head the secretariat in Delhi. I was 35 years old then.

When I came to Delhi in 1974, our all-India staff was only about 50 and our budget was only Rs 1 million a year. Today, it is Rs 600 million, all industry funded. And our staff today is 500.

We did our usual work with the government -- influencing government, impacting government on policy and procedures -- that is the core responsibility of an association like ours. Then we went on to trade fairs and to international offices, because we thought that international trade and investment have a very important role in the emerging world economy. Indian industry backed us strongly and our first international office was in Saudi Arabia. Today we have 12 international offices all over the world.

Then CII looked at specific subjects. We got into quality. We saw competition coming, saw the importance of efficiency and started our total quality management division. We had an outstanding leadership there, Dr V Krishnamurthy, former chairman of Steel Authority of India Limited and Maruti. He led the pioneering work on quality. We had 15 professionals working in CII offices around the country extending quality services to Indian industry.

From quality we went on to environment. We hired one of the best technical people on environment as senior advisor, K P Niati. He built up the environment management division which is helping Indian industry move towards an environment-friendly clean technology.

For technology, we brought in Y S Rajan. He was originally a space scientist who had worked with Vikram Sarabhai and Satish Dhavan. Now, a lot of companies are realising that they need new technology. They do not know how to go about it and Rajan and his team help them to network with R&D laboratories and scientists. So things are happening on the ground.

And last week, we set up a new, large division on energy. (Former Associated Chambers of Commerce and Industry secretary-general S) Raghuraman has agreed to head of our energy division. So that will look after all issues on energy policy, management, conservation, renewable energy, atomic energy, and the whole area.

The Bharatiya Janata Party manifesto says industry and the government should have a stronger partnership through a single entity as in Japan. What is your opinion about this proposal?

The BJP manifesto has talked about a MITI-like structure. It has nothing to do with chambers of commerce or industry, it is the ministry of international trade and industry in Japan. Unlike Japan, we don't have a single ministry for trade and industry but two separate ministries, so one can't compare Japan with India.

Secondly, in the old days, MITI used to decide the strategy for Japanese industrial development, then it used to work with individual companies in achieving that objective. That can happen in India also.

What we have been saying is that we want a partnership approach. Besides MITI, Japan has a powerful organisation, the Japan Federation of Industry, which is our partner organisation. Japan also has a chamber of commerce. Every country has two streams of employers organisation, one a federation of industry and the other a chamber of commerce. There is no connection between the MITI concept and restructuring the chambers.

The relationship between government and industry has changed over the last seven years. I think government and industry are working much more together than they ever did before. Let us hope with the BJP government we can improve on that further.

Very recently you had issued a statement that, investment is down, production is down, sales is down, so on. Why? What ails the Indian economy? What is the remedy?

In 1995, the then Government of India started a credit squeeze at a time when the growth rate was seven per cent of the GDP. The credit squeeze involved an increase in interest rates and a restriction of credit to industry. The primary objective was to bring down inflation before the general election. But while bringing down inflation, it also brought down growth, because investments were not coming. So it went into a downturn cycle, and has been that way since 1996.

The capital market is also down. Private sector investment in infrastructure has not materialised because approvals have not been given by government for pending projects. Public sector investment in infrastructure is not taking place. Investment was down and demand also went down because it is all linked.

It is for the new government to try and reverse this. We have been saying, let's have an early Budget. Let's go for a recovery plan through the Budget because the Budget is the main instrument.

Now you are talking about more more government spending, particularly in the infrastructure sector. Isn't this a reversal of your earlier stand that government has no business to be in business?

No, we feel that the government has no business to be in manufacturing and service industries. It need not have hotels, it need not make bread or bicycles or scooters. If you look around the world, even in the developed countries, the G-7 countries which are free market economies, it is the government that builds the roads and the ports, not the private sector.

It was a good idea to let the private sector come in and the private sector is working on many small ports in Gujarat and other parts of the country. The private sector is also coming into small airports, small stretches of roads. But the main highways, the major ports in Bombay and Calcutta, and the bigger airports in Delhi, Bombay, and Madras have to be run by the government.

What has been happening over the past few years is that the government has been spending more on revenue expenditure -- paying subsidies, making up for the public sector's losses -- but not on capital expenditure. That is why our infrastructure is going down. So the government needs to remain as a player and the private sector can supplement it.

If that is so, how can the fiscal deficit be curbed?

The fiscal deficit can be curbed by divesting shares of the public sector, which has not been done yet. All the reports are ready from the Disinvestment Commission and we can raise huge resources from the public sector's disinvestment. We need to go in for an auction system of shares in public sector companies, not five or 10 per cent but 40 to 50 per cent. The public, you and I, would invest when we know that there is a real change, not in the loss-making companies but in the profit-making companies in the industry which I talked about, like manufacturing and services.

If we sell Ashoka Hotel today, the government will get a huge amount of money. And it doesn't matter who owns the hotel. Let it be owned and managed by the private sector and let it give quality services. There are at least half a dozen hotels in Delhi itself which are managed by the public sector -- Ashoka, Janpath, Lodhi -- all of which are sitting on prime property. The government can rake in billions of rupees just by getting out of the ITDC hotels. That would help your fiscal deficit.

Tarun Das interview, continued