 "How close is too close for industry and Modi government")
It said the changes were being made after certain issues were raised by "stakeholders such as chartered accountants and professionals".
Just days earlier, Prime Minister Narendra Modi was seen next to Gautam Adani of Adani Enterprises in Australia and with Mukesh and Nita Ambani in Mumbai.
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Have the Modi government's terms of engagement with industry and its leaders changed? Are the government's ministers more open to dealing with industry and their concerns, with a view to addressing these without being unduly worried about this being misunderstood and branded as pro-industry?
A few months prior to that, during the United Progressive Alliance (UPA) regime, power, petroleum and even the ministry of finance and the Planning Commission would often have the Ambani brothers and many other industrialists meeting secretaries and ministers. But, by the time the UPA completed a decade in office, the industry was already looking for a change. In anticipation of the Bharatiya Janata Party (BJP) coming to power, the stock market started rising and by May 26, 2014, when the Narendra Modi government took oath of office in the presence of industry stalwarts, the BSE Sensex had already jumped some 17 per cent over January 1, 2014.
But the BJP government took care in ensuring their leaders were not seen hobnobbing with industry leaders. A few days after formation of the government, Power Minister Piyush Goyal sent a message to his officers: They shouldn't be entertaining corporate lobbyists. Similar directives were issued in other ministries. Visits of corporate bigwigs became less frequent. Officials said there was an informal watch that the prime minister kept on his ministers for their proximity to business.
A government's relationship with industry leaders is always watched closely by the electorate, as also the opposition leaders in any democratic country. But the manner in which the relationship between the Modi government and industry leaders has evolved has come under close scrutiny and become a subject of debate.
"With the crony capitalism narrative being dominant over the past three years, the fact of Indian political life is that governments would want to work on an image which is not seen to be promoting crony capitalism. This is the banal reality of governance," says Pratap Bhanu Mehta, president of the Centre for Policy Research. Most of the things required to create such a system require a well-functioning market, with regulatory checks.
Arun Maira, former chairman, Boston Consulting Group India, whose appointment as member in the Planning Commission raised questions on industry coming too close to the Manmohan Singh government, sees nothing wrong with public expectations of business being kept at a distance. "If in India, we don't want that industry should influence government decisions, then it is a good thing. Industry has money and, therefore, their chances of being heard are more than that of common people," he said.
He cites the example of the United States, where money is held to be influencing policy-making. "More money means more opportunity to be heard, so voices of those who have most money becomes the loudest, which is not fair."
Any modern government has to create an environment, which promotes investment but, as Mehta puts it, do it legitimately, so that it passes the legal muster. "If you don't do either of these things, then you have a problem."
Both Maira and Mehta say the perception that the UPA government was anti-industry is not correct. "Industry always complained that they kept meeting the government but thereafter nothing happened. But, it was only that big decisions that were to be taken by the Centre to enable investment were not being taken," says Maira.
Besides, the bulk of industry issues, mostly relating to implementation, are in the realm of state governments. It is not that state governments are not responding. They are openly seen hosting industry meets and rolling out a red carpet for the industry like never before. At the same time, the National Democratic Alliance government, too, had its Make in India show and was seen to be doing something.
Maira says retrospective tax amendment by the previous government created mistrust among industry. "Finance Minister Arun Jaitley has said hereafter there will be no retrospective taxation. The government is also not appealing against the Supreme Court judgment in the Vodafone case." Also, the ease of doing business through measures like self-attestation helps, since if industry has to keep coming to the government for too many administrative, regulatory, land and other clearances, then there will be too much of corruption, through abuse of systems and procedures.
For making the system work in its favour, however, business does not need to be physically present. Mehta draws a distinction between business and industry here. Being pro-business might not necessarily be pro-market, since that requires a level-playing field and a more objective and competitive market. "Business is inherently against creating a market. The real question is whether the government is on a reform trajectory to create a well-regulated market," Mehta says.
Evolution of mature policies requires interaction with all stakeholders. In Germany, for instance, law requires registration of chambers of commerce, which are funded by the government. Businesses are part of these associations. Before any decision is taken by the government, consultation with the industry is mandatory as with the unions.
Maira prefers this system over the US model. "There should be consultations with industry, just as there should be with the unions. It should be truly representative. But this does not mean individual businessmen travel with the prime minister and one of them gets everything. Representation should be collective." In that sense, lobbying can be more harmful than bribing, as it can influence policies long-term, while bribery is a one-time transaction for the benefit of an individual.
Beside, a photo opportunity might enhance the prestige of a businessman and create a pro-investment image for a prime minister but it does not make a material difference if there is no such thing. And, as Maira says: "There is no value in those meetings. Confidence comes if real work gets done."