Industry draws PM's flak

Cartelisation, spiralling salaries and corruption invite Manmohan Singh's ire.

Taking India Inc by surprise, Prime Minister Manmohan Singh today asked companies to desist from operating cartels to keep prices high, rein in rising CEO compensation, offer employment to the less-privileged and ensure that corporate social responsibility is not defined by tax planning strategies alone.

For the second day running, Singh made a specific mention of fighting corruption at all levels and asked industry to develop a code of conduct in this regard. "There are many successful companies today that have refused to yield to temptation. Others must follow."

He even had a word of caution for businessmen dabbling in politics: there should be no give and take between the two activities. "Businessmen who enter politics should erect a Chinese wall between their political activities and their businesses," he said.

With the realisation that the recent rapid economic growth may not have benefited all sections of society, the United Progressive Alliance government is looking at ways and means to make the growth more inclusive.

The PM's speech, received in pin-drop silence by the cream of Indian industry at the National Conference of the Confederation of Indian Industry (CII) here today, outlined a 10-point social charter aimed to supplement the government's attempts to make economic growth socially and regionally inclusive.

There have been charges that there is a cartel at work driving up prices of key industrial commodities. With inflation ruling more than 50 basis points over the target of 5 per cent set by the Reserve Bank of India, tight monetary control measures have been put in place, causing interest rates to rise sharply for companies and consumers alike. Industry, on its part, has refuted all charges of cartelisation.

"Desist from non-competitive behaviour..... Cartels are a crime and go against the grain of an open economy," Singh said, adding, "Even profit maximisation should be within the bounds of decency and greed."

The prime minister also cautioned against rising pay packages of promoters and senior executives, as it could lead to social unrest given the extreme poverty that co-exists in the country. With a severe shortage of senior managerial talent, salaries have risen sharply in the last few years. Surveys suggest that there are over 75 top executives in the country drawing a salary of at least $1 million. Stock options have spawned a new army of billionaires.

The prime minister's remarks struck a chord with his Congress colleagues, with party general secretary Satyavrat Chaturvedi endorsing his remarks. He underscored the need for industry to participate in promoting inclusive growth.

India Inc's response was perhaps best articulated by CII vice-president-elect and ICICI Bank Managing Director KV Kamath: "Industry will have to fall in line. It (the social charter) is part of a holistic approach and has to be taken up in totality".

Kamath's view was echoed by CII President-Elect Sunil Mittal, who dropped his prepared speech, which he was to deliver after the prime minister, in favour of extempore remarks saying that Indian industry would take up the challenge and partner the government in promoting socially inclusive growth.

Responding to the prime minister's remarks, Tata Sons Director JJ Irani said: "Industry has been performing its job diligently in the past, though there is a need for introspection in the changing circumstances. Some of the points outlined by the prime minister today in his 10-point agenda have already been accomplished, but there is a need for more affirmative action by companies to meet the diverse demands in the country."

The prime minister, who left after delivering his prepared speech, had specific advice for advancing the charter. For instance, while asking industry to respect their workers and invest in their welfare, he said that they must give them pension and provident fund benefits. Similarly, while asking for investment in people and their skills, he asked them to offer scholarships.

In another oblique hint, Singh asked companies to promote socially responsible media and advertising. "Through your advertisement budgets and your investments in media, you can encourage socially responsible media".