Invest in trust to promote entrepreneurship

What we observe currently is a dilution of the formal channels of communication, while there is not much evidence of the informal ones evolving

Think of past crises that delivered dramatic opportunities for India: For example, Quit India (1942), Green Re­vo­lution (1964) and Liberalisation (1991). Crises excavate society’s hidden ene­rgy. Even the current crisis shows signs of our society doing “impossible” things.

Driven by Covid, innovation is bubbling in companies and start-ups, indeed to a visible extent in government as well. Biotech innovators on PPEs or vaccines speak highly about how they received administrators’ support by texting officers. Indigenous production of PPE/ventilators has increased manifold in eight weeks. The inspirational work going on within public research institutions makes you wonder where such result-oriented energy was hidden all these years. Our society has benefitted from the damaging Covid — a crisis is too good to waste, as the adage goes.

Entrepreneurs need only two things: First, clear rules and coordinated decision-making among government’s multiple arms because too many departments have the authority to say Nyet without accountability to say Da. Second, when inevitable disputes arise, they should be judiciously and speedily resolved. Although policy makers think that India has dramatically improved EoDB (ease of doing business), investors and business leaders perceive improvement at a lower level.

Coordinated decision-making: The nation needs increasing levels of collaborative engagement between the states and the Centre. Our Constitution assumed that the Centre and the states would have a civilised conversation and cooperation. It lists the responsibilities of the Centre, the states and the shared responsibilities. Earlier, the National Development Council and the Planning Commission provided formal platforms for Centre-state dialogue. The GST Council was yet another such forum to foster cooperative federalism. Formal channels were supplemented with informal dialogues and shared goals. Recall how Atal Bihari Vajpayee saved the Sukhoi deal for India in 1996 by leveraging the informal channels of communication with opposition leaders and the media.  

What we observe currently is a dilution of the formal channels, whi­le there is not much evidence of the informal ones. Communications be­tween the Centre and the states as reported in the public domain ap­pear vitriolic. Old time entreprene­urs had harrowing experiences, running from pillar to post during the Licence Raj; regrettably, they still have their bit because government processes are a complex spaghetti. The absence of Centre-state dialogue shows through knee-jerk reactions like some states suddenly suspending labour laws for a while; or the Centre announcing resumption of flights, while states drag their feet; or millions of informal industrial la­bourers being pilloried on the streets mercilessly and without compassion. (Read Call of the hearth, Ashok Ganguly, The Telegraph, May 21, 2020.)

Judicious dispute resolution: This is a big subject. I am not a lawyer. The speech by lawyer, C S Lodha, to the Bombay Tax Bar Association on May 9, 2020, is an eye opener (https://­youtu.be/EB7E5R1oNNc). The speech was about Promissory Estoppel, a legal principle of not reneging on public promises, underlining a basic moral principle. The speech describes how in the last half-a-century, almost every state and central government, at some time or the other, attempted to renege on its promises to business — of tax breaks or policy pronouncements. It is not that one political party or another has done so, all have.

  

In the past, the judiciary stepped in to mitigate or redress such administrative overreach. However, the entrepreneur lost on legal fees and decades of time. This added to the woes of doing business — WoDB instead of EoDB! With the contemporary thrust on EoDB, has the government assured the business community that they can be trusted and that retrospective amendments of laws were an aberration of the past? It does not appear so.

On April 22, 2020, in the case of Union of India vs VVF Company and others, a three-judge bench of the Supreme Court changed the jurisprudence and accepted the view that the government can withdraw from its promises in “public interest”. To a layperson, it appears to have thrown the principle of Promissory Estoppel to the winds, the very principle on which trust is built in a society. In future, governments will be free to make promises and break them so long as they think it is in the public interest. The rigour to establish to an independent court that a supervening public interest existed seems to have been lowered, according to legal professionals.

We are a nation of excellent entrepreneurs, but not a globally competitive business fraternity; a nation with talented administrators, but not a purposeful bureaucracy; a nation with superb judges, but not a consistent judiciary.

The Covid crisis should foster a better atmosphere of trust — for entrepreneurship and citizens alike.

The writer is an author & corporate advisor. He is a distinguished professor of IIT Kharagpur. He was a director of Tata Sons and vice-chairman of Hindustan Unilever Limited

Email: rgopal@themindworks.me