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The Rediff Business Interview/ Murasoli Maran

'If multinationals and FDI are evil, they are necessary evils'

Murasoli Maran, industry minister in the Deve Gowda and I K Gujral governments, surveys the state of the Indian economy in a frank interview with Shobha Warrier.

As a former industry minister, how do you assess the performance of the BJP government?

We do not know how they are going to perform. The BJP government is an unknown entity. We are yet to know their economic philosophy. There is nothing new in what Mr Vajpayee announced at the CII meet. I will tell you one instance. He said, FIPB (Foreign Investment Promotion Board) clearance will be done in 60 days. During our regime, I was clearing it in four weeks to six weeks time. I do not know who gave them this wrong idea.

Why do you need 60 days? Even now, it is done in four, six weeks time. The United Front Cabinet had passed a resolution that the Urban Land Ceiling Act should be abolished. Now he says it will be amended. Why should be go back now? It is a retrogressive step.

I think they are in a confused state. They don't know the state of affairs. I am sorry to say the prime minister should give more explanation and the country wants an explanation from him.

He has said the PMO will look after the implementation of all infrastructure projects. Will it help in any way?

It will take more time. The intention is good. It is very difficult for the PMO to clear it. We created a Cabinet committee on infrastructure. It is still there. If we create more functionaries and more bureaucratic systems, it will create further delays. So, we need simple measures. He says there will be another commission to go into the laws. What is the need for that?

We all know what is wrong. Each department should be asked to come with a solution within 15 days about the cobwebs of the rules and regulations. Then the Cabinet should decide in fifteen days. Why do you need a commission for that? The commission will be picked and chosen by interested parties and the result is more delay and confusion. Why do you want all this?

When I was minister, I asked my ministry to go into all the rules and regulations. Probably it will be ready by now. (Laughs.)

As industry minister you wanted more industries to come up and the economy to grow, but the UF government is said to have been very bad for the economy. Why did our economy slow down so much?

Yes, Chidambaram produced a very good Budget which was called a dream Budget. But twice the government was destabilised. Finally it fell. For the last six months, nothing worked. I did not look at any file for the last six months. The moment Gujral tendered his resignation, I stopped going to office.

So, just imagine there was nobody to mind the store for six months in a big economy like this. Therefore, whatever was envisaged in the Budget could not achieved. For example, reduced taxation could not be effected. You need a proper climate for the economy to grow, but it was shattered by instability.

Was the stability factor the only reason why economic growth slowed down?

Nobody could take any decision at all. What was our locus standi? The government had resigned. Then, how could you take a major decision? Democratic norms say no. That was the main reason. In the last six months, nothing moved. Conditions are very important. Because of the instability, nobody wanted to venture into any business, nobody knew what would happen next. When you have that kind of an atmosphere, why should anybody come and invest here?

There was a lot of confusion. All along, the BJP was talking loudly about swadeshi. In their manifesto, swadeshi was mentioned in seven places, but in the national agenda, swadeshi finds a place only once. Now they talk in a different tone. So confusion prevails even now.

How much will swadeshi affect India's economy?

First of all, we should know what swadeshi is. They have not cleared it.

Will it affect liberalisation?

No, but they should say what swadeshi means. Does it mean protection? Does it mean reinventing the wheel? Does it mean we can produce whatever we want in the economy? Do we want to be another Cuba? All these questions should be answered.

Are you for protecting domestic industry?

All over the world, everybody is protecting their own industries, even in the United States. Protection, yes, for sometime to come, till you are able to stand up and compete with others. But not protection forever. That should be made very clear.

Even in the US, they gave protection for automobiles, but for sometime only. Not all the time.

It seems most of our industries are scared of foreign competition. Will they be eaten away by these huge multinationals?

I feel our Indian corporate sector is very strong. We are strong in many fields. So, we need not worry about foreign companies. There are about 200 Indian multinationals all over the world. What do you say about that? Should they close shop and come back to India?

But many of our industrialists want protection and appear to be against competition.

This is what is called the third class railway mentality. Have you ever travelled third class? I have done so. People fight to enter the compartment. They shout at those who are inside to open the door. But the moment they enter, they close the door and shout, No more! No more! This is exactly like that. Those who are already there want to prevent others from coming in. This mindset should change.

You have to consider the interests of the consumer. You want to produce cheap goods and you want consumers to pay a higher price and be satisfied. At the same time, all over the world, better things are available at cheaper prices. This is wrong. I am not saying we should close down the Indian corporate sector. There are many Indian corporate giants who can compete with the world, who are competing with the world.

Supporters of swadeshi say with the advent of foreign companies in India, India culture will get polluted. Do you agree?

(Laughs.) You will be surprised Pizza Hut was first allowed in New Delhi which has a BJP government. The multiplex theatre complex was first permitted in Maharashtra which the BJP rules. I don't agree with their argument at all. How can anybody or anything pollute our culture? Give me one instance.

There is a wrong opinion about foreign investors, some misconception. I want to disabuse that. If you want our economy to grow by 7 to 8%, we need foreign investment to the extent of $ 10 billion. It comes to only 2% of the GDP. This FDI is very critical to the development of our economy. Because it brings us besides capital, much needed technology. It provides employment. It creates an export market. So, why should we be against it?

If it is harmful, we can take action at any time. Every other country has done so. In France there is an electronic company called Thomson. It is the pride of France. The Koreans wanted to take over the company. But the French said no. That kind of protection can be given to any national company.

Fortunately or unfortunately, foreign investment is synonymous with multinationals. If multinationals and FDI are evil, they are necessary evils. Some people think foreign investors are standing in a queue and knocking at India's doors to come in. No! If you don't create a climate here, they will go to China or Vietnam or Eastern Europe. They have got better places to go.

You said India can easily absorb $ 10 billion as a direct investment. Do you mean in the consumer sector?

No, no. Of all the foreign investment that has come so far, only 10 to 11% go to the consumer sector. In that 10 to 11%, 75% constitute automobiles.

The impression is that we get investment only in the consumer sector...

That is false propaganda. Pepsi and Coca-Cola are visible everywhere. Do you know we have a huge Australian collaboration at Bombay Port? You can't see that. It is below the sea. Because Pepsi and Coca-Cola are visible, people make noises. It is not against our national interest at all. In fact, foreign investment is very critical to our national development.

Do you expect more FDI to come to India? How do they view India?

The United Front government has created such an atmosphere. The Exim Bank of Japan made a survey and said India is better than China in the long run.

Is it because we are democratic?

No. They have given several reasons. The economists of UK came to a conclusion that our conditions are better than some of the South-East Asian countries. That is the climate we have created. But there was uncertainty for six months and now there is confusion and hesitation. So, it is the duty of the prime minister and the others to create an atmosphere.

How long do you think it will take for the economy to recover?

People at the helm of affairs should declare that this is our policy in this, this and this. Only then, the atmosphere will improve.

In this era of globalisaiton, can any country remain shut off?

Impossible. Or else, you should be like Cuba.

Will the swadeshis in the BJP be able to reverse liberalisation?

They can't do it. Now the BJP has realised it. That is why they are slowly coming to the mainstream. Swadeshi is taking a back seat. Or, they are giving a new interpretation to swadeshi. It is good. You can't expect them to make a right about turn.

In many joint ventures, Indian partners get absorbed by many foreign partners after sometime. Why is it happening and what can be done about it?

When I was minister, one of the guidelines was if the foreign partner wants to start the same venture again, it had to get a resolution from the FIPB. So, you can't kill the original joint venture and start a new venture.

In the case of Mahindra Ford, Ford is going to be independent soon.

It also happened in Daewoo. They had a quarrel and finally the Indian partner said, you go away. They passed a resolution in that direction. After getting the resolution, we allowed them. So, it is done with permission. Just because they are tied down with a joint venture, it is not that there is no way out. The way out is, get the permission or consent of the joint venture partner.

You once said 'we want both potato chips and computer chips.' Swadeshi Jagran Manch leader S Gurumurthy said his mother and grandmother can make better potato chips and we do not need foreigners to come and make potato chips.

Okay, okay. Now they are in power, let them ban it. I went very deep into the question. A company wanted to make potato chips. You know what they did, for two years, they made extension services to the farmers. They brought special seeds so they can make potatoes of a certain size. They taught the farmers how to handle the new seeds. You know who benefited? The farmers of Bihar, Bengal and Uttar Pradesh. Potato is a perishable commodity. With the help of the new technology, they can store potatoes for a long time. It is packed and sold everywhere.

That is why the West Bengal government ruled by Marxists -- they are also a different type of Gurumurthy -- applied for French fries. Why? Because there was backward integration which includes farmers and forward integration with new technology. The forward integration is so great and large that it helped many people. This is my explanation. He (Gurumurthy) is talking about the mamis who make chips at home. Are we against them? No, we are talking about highly technologically oriented potato chips!

The same is the case with fruits. India is said to be one of the largest fruit producers in the world. But most of it is wasted as we do not have the technology to store them.

We are the second largest fruit producer in the world. But 90 per cent of it is wasted. How do you save it? Only with the help of foreign technology. You can't say, we don't want foreign technology.

Will Moody's decision to downgrade India affect our fund raising capacity?

Yes, it has some effect. People go by that also. But some brush it aside. What marks did these same people give to the South-East Asian countries? But there are some who buy this too. Not in a big way, of course. Especially after the South-East Asian meltdown, everybody knows who these people are.

Can we learn anything from the South-East Asian crisis?

Definitely, definitely. Take for example, the non-performing assets of the so-called nationalised banks. We should have a second look at it. But our fundamentals are very strong. We are totally different from the South-East Asian countries. They went very fast and their reforms were irresponsible.

Our reforms are intelligent reforms. So, you can't compare these two. They don't even have an accounting system. They were favouring a handful of companies. In a democracy like India, can you pick and choose any one company? No. The next day the government will be out.

Everybody was talking about full convertibility once. But is it good for the world as a whole?

Now, after the South-East Asian experience, we have to go very, very slow.

If one country sinks, the whole world sinks.

Yes. We have to think twice about the entire structure. Probably we may have to evolve a system, either at the regional level or national level or international level.

About full convertibility?

No. About the volatile nature of making a country bow down because of the adventurous nature of a few people.

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