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Business Commentary/Ashok Mitra

The United Front of Confusion

Union Industry Minister Murasoli Maran's plainspeaking to Japanese automobile giant Suzuki -- it was welcome to quit India's shores in case it disapproved of the manner the government went about installing the new managing director for Suzuki-Maruti -- has received, as was only to be expected, diverse responses.

The secretary to the ministry of heavy industry is chariman of the Suzuki-Maruti joint venture with shares held by the government and the Japanese firm on a 50-50 basis. According to standing rules, should there be a deadlock in annual general meetings, the chairman is entitled to use his casting vote.

In the face of opposition from Suzuki, the government used the casting vote of the chairman to ratify its decision to promote the company's deputy managing director to the managing director's slot.

The person concerned was apparently not in the good books of Suzuki. In a joint venture where shares are evenly held, the selection of such a strategic functionary as the managing director, asserted the Japanese firm, should be mutually agreed upon a priori by the two parties.

Once the government used its casting vote, hell broke loose. The Japanese did not waste any time to post an appeal with the International Board of Arbitration in Paris.

A key official with Suzuki decided to take the low road of bluster and blackmail: if this is the way Indian authorities choose to deal with foreign firms, he thundered, just wait, foreign investors will teach India the appropriate lesson. This country is desperately looking for direct foreign investment from overseas; hundreds of millions of dollars of fresh investment proposals are on the anvil, mostly from multinational firms, including Japanese ones. Once the story spreads about the brusque treatment accorded to Suzuki by the Indian industry minister, it will be an uncertain time for this country. Prospective foreign, including Japanese, investors will be in a funk; they will immediately switch off funds for this country; what will then be the state of being of hoity Indian ministers and civil servants?

It is a liberalised universe, and the snub to Suzuki drew instant sympathy from important Indian personalities. The former finance minister, under whose auspices the great reforms were initiated in 1991, did not waste any time to issue a statement condemning the inept handling of the controversy involving the Japanese multinational entity. He in effect questioned the officiousness displayed by the country's industry minister. He had not one comment though on the shenanigans resorted to by the Japanese corporation to wrest full control over the Indian joint venture.

The former finance minister soon found himself in august company. Present Finance Minister P Chidambaram was away at Hong Kong to attend the annual meeting of the World Bank and the International Monetary Fund, when the story of Maran's supposed impetuosity hit the headlines. If the reports as circulated are to be believed, the finance minister, really and truly, blew his top. At the same time, he panicked. He this colleague of his, the industry minister, hailing from the same state as he did, gone berserk?

As the country's finance minister, he has been lobbying hard with foreign investors, including multinationals corporations, beseeching them that they must, please, make a beeline for India, they will be given red carpet treatment, all their requirements and grievances are to be looked into pronto. And his colleagues had to spoil it all by their pointless bout of belligerence. Foaming in the mouth, the finance minister flew away to New York to protest in person with the prime minister who was during the week visiting the United Nations in quest of a permanent seat in the Security Council.

As it happened, the industry minister was right in his hunch and the finance minister was wrong. After it was made clear by Udyog Bhavan contacts that, Japanese huffing and puffing notwithstanding, the government was not budging from its decision on the choice of the managing director, Suzuki piped down. The latter also communicated the view that in case the government so desired, the company would be prepared to withdrew its complaint at Paris.

It is a free ranging milieu, and the question -- whether foreign investors are to be regarded as gods and demi-gods whose every word is law or their demands to be treated strictly on merit -- remains very much open. Will foreigners have more respect for us if we surrender abjectly every time they ask something extra from us, or will they be more impressed if, every now and then, they are dealt with in the manner the minister for industry has dealt with Suzuki?

The minister has in the present instance succeeded in outbluffing the Japanese firm. The finance ministry will conceivably offer the riposte that one swallow does not make the summer, and maybe vigorous string pulling by it has been responsible for the easing out from the industry ministry the senior civil servant who had been the principal adviser to the minister in this matter. So the Japanese may feel less aggrieved, and the finance minister less incensed by the ongoing developments.

The episode has for the present blow over. But the prospect of a persisting tension between the different ministries holding different points of view is unlikely to die down. Egged on by domestic tycoons and the industry minister to compromise his 'reforms' credential, the finance minister has announced a two per cent ad valorem tax on all imports.

According to North Block circles, this is to be considered more as a mid-season revenue raising measure well within his province. He will not mind if the proposal also received approval from industrialists scared to death by rising imports which globalisation is all about.

Consistency nonetheless is the hobgoblin of little minds; North Block looks askance at the decision of the commerce ministry to slap down a series of anti-dumping measures to protect the generation of income and employment in a number of domestic industries. And the industrial circles would appear to be split down the middle in their attitude to the free entry of foreign capital; and foreign goods. Confusion is having a field day.

All this heralds an altogether new situation. The solid phalanx of unanimity in the national media on the welcome accorded to 'reforms' that was there in the early years following liberalisation has broken down. The 'there is no alternative' to the reforms school is unable to monopolise the space any more; it is not just the leftover lefties who are unhappy with developments in the economy. Eminent persons from trade and industry have joined the ranks of doubting Thomases.

The queries they are raising are almost identical with those that were till now the monopoly of the hard left. The government in New Delhi, in the circumstances, has a split identity. Ever since the United Front was assembled some 16 months ago, many of its constituents have splintered, so much so that the original 13-party integer now threatens to be transformed into a 20-party monstrosity.

These ladies and gentlemen had, once upon a time, composed a common minimum programme. The programme has ceased to be either an inspiration or a factor of restraint. UF members, quick learners in the arena, have discovered they can get away by putting their individual interpretations on the meaning of the common minimum programme.

The state of affairs has actually made even further progress. Members of the steering committees -- or is it the core committee? -- of the United Front even fail to agree on the decisions they took in particular meetings. The conditions obtaining in the Union Cabinet, rumour has it, are no better. Important ministers do not deny the collective responsibility they owe allegiance to. This is a free country though, comprehensively liberalised, and ministers confess that, sorry, they were not aware this or that item was part of the day's agenda.

In any event, as the fiasco over the Insurance Regulatory Authority bill illustrated, it is no longer possible to take parliamentary majority for granted even on matters on which leaders of different parties have arrived at a consensus.

The idea of a consensus has of late suffered an erosion; the base is often not willing to go along with the diktat of the superstructure. These problems are bound to make the task of the so-called expert group commission to evolve a compromise of a formula which could enhance the acceptability of the binding provisions of World Trade Organisation membership awfully difficult. Support from the state governments will be even more perfunctory.

We have to put up with this scenario, because it would seem to be the ground reality of the Union of India for the next quinquennium or thereabouts.