Ever heard of the bobbing duck? A bathtub toy that mothers leave floating around to humour babies? Those cheap, cheerful ones that you just can’t sink, hard as you may try. What’s more, every time you see one it reminds you of your early days. It has a sense of naiveté to it and yet it’s something, you just can’t outgrow.
In the last few weeks, everything from the microfinance industry to stock markets to the airline industry has been slammed for aspiring to make too much money. It seems they should all, diverse as they are, aim for only reasonable profits, if at all. It is India’s big bathtub toy, left around by big-momma policymakers. The bright bobbing duck called “Not-for-big-profit”.
Much has been made of untrammelled lending and strong-arm collection tactics in recovering small loans to the rural poor. But the truth is, if the government had done the job well enough, private enterprise wouldn’t have found a business model there. Least of all, a lucrative one. In India, as in many other parts of the world, private firms do well in areas where the state hasn’t, because it’s often not competing with the deep and subsidised pockets of the establishment. To now ask microfinance firms to squeeze shut the profit tap will choke off whatever structured lending is available to the aam aadmi.
And then there is a recent recommendation on stock exchanges, which says they should “generate only reasonable profits”. It goes on to argue that the maximum profit available for distribution to shareholders should also be capped. It’s hard to see this as progressive. Exchanges should simply be trading platforms, stripped of all regulatory function. These trading entities should be allowed to make enough and more money to invest in other regional or international exchanges. Excess profit should be used in hiring the best talent in the world and getting the most investor-friendly technology platforms and products, so retail investors can participate more extensively. And in a year exchanges don’t do any of this, why is rewarding shareholders such a bad thing?
Meanwhile, businessman-turned-politician Praful Patel is now cautioning private airlines against charging excessive money from passengers. Unfortunately, private airlines are in the business of flying to make money, given they don’t have the same recourse to liberal does of taxpayer funds that state-led Air India has. And after two rough years — if they see a killing in the festive season, they won’t stay out of the hunt. Patel’s job, at best, may be to alert the competition commission if he suspects collusion — most certainly not to tell airlines to limit ticket fees. If the prices are excessive, seats will go empty, rail coaches will be fuller and airlines will be forced to correct prices because the consumers are shunning them.
Why should policymakers have any say whatsoever over how much profit private enterprise should make? That isn’t really their job. They have a greater task to do which by their own admission they have, for the most part, failed at — to govern and administer.
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It seems to me that every time they babble about excess profit-making, the underlying message is that India should give up wanting to be a true free market economy. We should stop aspiring for job creation, a better quality of life, public conveniences, law and order and greater social inclusiveness that comes with wealth creation in well administered nations, with few leakages.
We’ve all seen the rise of the so-called middle class and job creation because private enterprise has worked for profit — large profit. It is what makes us more competitive, and grows the economy. It is what will help us build the India we want, not the India we have.
Hobbled as they, are by the series of grafts that are coming to light, policymakers would be better off floating a new bathtub toy — “Not-for-bribe”.
(Anjana Menon is executive editor, NDTV Profit. Views expressed here are personal)
