'Everyone is scared': Govt's criticism of Infosys, Tata worries India Inc

Business leaders worried about hardline approach; some executives though call for more corporate accountability

A public diatribe against two Indian business giants by Prime Minister Narendra Modi's officials and his ideological allies has unnerved the business community, several industry executives told Reuters.

Over the weekend, a magazine run by members of the Hindu nationalist Rashtriya Swayamsevak Sangh (RSS) launched an attack on Indian tech giant Infosys for failing to resolve glitches in the income tax website it manages.

The group, which is the ideological parent of Modi's ruling party, called Infosys "anti-national" for letting down the tax system, sending a chill through Indian industry wary of falling on the wrong side of the Modi government.

Just last month, the finance ministry "summoned" Infosys' CEO over the tech issues and in an unusual step took to Twitter to announce the summoning, heightening a media frenzy around a company that has been the face of India's IT's prowess.

And in August, the commerce minister publicly lashed out at the $106 billion Tata Group for criticizing proposed stringent rules for e-commerce and said local companies should not only think about profits.

In India, safeguarding domestic businesses has been Modi's priority. While government or RSS criticism of foreign businesses like Amazon and Monsanto is common, local businesses are rarely caught in the crossfire.

But the latest events have raised concerns among business leaders about whether Modi is now taking a hardline approach towards domestic giants as well, five industry sources said.

One venture-capital executive said the criticism was akin to "harassment" of businesses and risks souring investor sentiment.

Another executive working at a global consultancy said "everyone is scared" as businesses don't want to run foul of the government.

"The frontal attack on iconic elements of Indian businesses have only buttressed the need for companies to ensure they are conforming, not just with tax issues, but with other government initiatives," said Dilip Cherian, an image guru and co-founder of leading Indian PR firm Perfect Relations.

R.C. Bhargava, chairman of Maruti Suzuki, defended Infosys, saying it had played a key role in building India's software reputation globally.

"It needs to explain the glitches, but it doesn't mean there is a conspiracy to damage the country," he told Reuters.

A senior member of RSS, however, said there's nothing wrong in the way the companies have been criticized, saying they must be thick skinned and held accountable.

"Why should questions not be raised, have corporates become a holy cow?" said the RSS official who declined to be identified.

Infosys and Tata didn't respond to a request for comment.

INDIA INC LARGELY SILENT

So far, Modi's government has not commented on the backlash on social media and from politicians. None of the sources who spoke to Reuters wanted to be identified as they fear a reprisal from the government and no Indian industry lobby groups has come out and spoken against government or RSS.

The Indian Express said in an editorial it was "time for India Inc to stand up", saying business leaders had maintained "a studied - and perhaps strategic - silence about the vitriol that has been seeping into the public discourse." The Infosys controversy is related to the government's new income tax filing website launched on June 7. But there were many glitches which Infosys could not fix, despite assurances.

When the Infosys CEO was summoned in August, the finance minister conveyed "deep disappointment and concerns," giving the company until Sept. 15 to fix things.

The magazine Panchjanya said the company was making the same mistakes over and over again, creating doubts about its motives.

"There are allegations that the management of Infosys is deliberately trying to destabilise the Indian economy," it said.

After the furore over the article, Sunil Ambekar, the joint head of the RSS publicity wing, sought to distance the organisation from the contents and said Infosys had made a seminal contribution to the country.

But concerns remain others may be targeted, too.

A mutual fund manager with Infosys and Tata investments said he was worried as it indicated "the government was not pro-business", and there were fears other companies can face such backlash for lapses.