Had the informal "Bombay Club" of the nineties existed in 2014 there's a fair chance it would have had several multinationals clamouring to join. That ephemeral interest group of top industrialists from western and northern India - which its members insist didn't really exist - had lobbied the government for a level playing field against foreign competition in the face of lower import tariffs and open doors to foreign direct investment. Today, big domestic businesses certainly enjoy a level playing field with foreign competitors. But it is hardly the kind of levelling either they or multinationals would welcome. The deteriorating business environment has become a great leveller for all businesses, Indian or foreign.
Back then, Bombay Club members were excoriated for being cowardly and protectionist. In retrospect, their demands were valid. What did they want? Barring a generous dose of devaluation, Indian companies had little protection against competitors from the West and south-east Asia owing to a truly appalling business environment. Interest rates were high, labour laws were rigid and accessing infrastructure was a challenge. These were the issues the so-called Club wanted the government to sort out as the momentum for liberalisation gathered traction.
More than two decades along, those problems have scarcely abated. On the contrary, the list of common grievances has widened to include acute problems with land acquisition, an opaque and extractive taxation regime and growing law and order problems as a result of communal polarisation and crimes against women. These are the stories that dominate the discourse in the influential foreign business press - when it chooses to notice India, that is - and they form a discordant note to the manufactured din of impending achche din, Make in India, Swachh Bharat and prime ministerial triumphalism abroad.
The issue is by no means a recent one but the cumulative impact of two decades of unsatisfactory solutions to age-old problems. These were inherited by the ruling regimes of the 1990s but the approach has been so frustratingly incremental as to leave India wallowing in the Third World pond. There are fewer poor people, of course, but still not few enough for India to claim any kind of great leap forward.
India's sub-Saharan human development indicators have been highlighted with wearying regularity by international institutions for 15 years to bear repetition here. But Katherine Boo's 2012 book Behind the Beautiful Forevers captures the enduring irony in her account of a Mumbai slum. Its inhabitants live in a state of permanent deprivation and insecurity - prey to life-threatening disease and a venal urban security apparatus of the kind that would define a 1960s' ghetto in the United States. Yet the denizens of Annawadi are deemed to be over the poverty line - and, therefore, no longer entitled to the state's subsidies that they didn't access in any case owing to the corruption involved.
In a curious way, the fortunes of urban poor do intersect with a deteriorating business environment. The opaque tax laws that led to the imminent suspension of handset production at Nokia's Sriperumbudur factory are a case in point. The factory provides employment to thousands of women, providing them an independent income and all the incremental social benefits that go along with that. If the factory eventually closes, these women, on the first shaky rung of gender equality in chauvinist India, stand to lose.
Although Nokia is not entirely blameless in this instance, taken together with similar controversies involving signature names like Amazon, Vodafone, Shell, AT&T and scores of others, the dispute has consequences for the virtuous cycle of investment, expansion and job creation that could transform the lives of the urban poor.
The narrow metrics of the World Bank's Ease of Doing Business rankings also underline the weaknesses of the "Make in India" rhetoric. Although a strict time series comparison is difficult since the methodology and sample size have changed over time, India has remained a middle ranker among the countries listed, whereas China has been able to retain its position within the top 100.
Which is why the Bombay Club's grievances turned out to be prophetic not for its members - they phlegmatically adjusted to the transition - but for the thousands of small and medium enterprises (SMEs) that provide so much of the informal employment that keeps India ticking over. Lacking the financial wherewithal of big business, SMEs suffered the most from the poor business environment after 1991. From locks to thalis, saris and idols, footwear to plastic furniture and table fans, whole markets have been commandeered by the vast factories of Guangzhou. In effect, India exported jobs to China on the lack of a level playing field.
Today, most large Indian companies have signalled their unhappiness by increasingly investing outside of India. From any development-oriented politician's point of view, that's a dismaying signal to convey to the multinationals these companies so feared just two decades ago.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
