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Brand India losing shine ?

Monday, December 20, 2010

The above questions came from a top international fund manager when Mayura Shanbaug asked him about ‘Image Brand India’ and his perception as a major investor in this country

“Government must trust corporates and corporates need to trust government. You cannot get a society that moves fast and grows unless you have mutual trust. Sadly as it stands, trust is lacking. You have to provide for an honest mistake if you trust each other. Defaults must be accounted for in a transparent manner, but somewhere there must be a clear dividing line between honest mistake and a default.”

Prime Minister
Dr. Manmohan Singh

A similar view prevails across a spectrum of business bosses, economist and everybody who has a financial interest at stake. And all of them concurred with the opinion that the corruption and scam ridden levels are reflecting on India’s brand on the world stage and if no serious steps are taken immediately then ‘Brand India’ could lose its shine...

From HDFC Chairman, Deepak Parikh to Tata Group Chairman, Ratan Tata everybody has spoken about it with great concern… about the damage it may cause to the Indian growth story.

The Tata’s abandoned their plans to launch an airline due to corruption, cumbersome procedures and dirty practices perhaps; forced Arun Bharat Ram promoted SRF Ltd.to abandon its planned diversification into the power sector.

And now even the Federation of Indian Chambers of Commerce & Industry (FICCI), in a statement issued after its national executive committee meeting in Delhi, it said that FICCI was deeply concerned about “the potential damage to brand India and the India story due to brazen acts of corruption by a select few.”

“Whatever has happened and happening is certainly wrong. We need to do some thing to catch the crooks. There are some bad eggs on both sides, we need to punish the guilty politicians and Industrialists,”said Rahul Bajaj chairman Bajaj Auto.

However, in the same breath Bajaj emphasizes the inevitability of the situation said, “Zero corruption level cannot be achieved .Nobody is a Gandhi now and we are not running an ‘Ashram’, we are running the country.”

There are others who believe that corruption in India has become a way of life for Indians. “ It’s no point blaming only politicians for the rampant corruption, please ask yourself before you blame others of corruption .The person who bribes is equally responsible along with the person who takes it.” says Arun Nanda ,director Mahindra & Mahindra.  He feels, “In the given environment banks will get scared to take positions.”

Leo Puri, managing director Warburg Pincus India was spot on putting the fears of the investors in perspective, “Nobody wants to invest in an over- regulated vicious environment, where there is an element of mistrust between politicians and businessmen.” “The worries of the investors are heightened in such a scenario” he added.

According to one of the latest WikiLeaks cables from the US embassy in New Delhi, US diplomats complain of bureaucratic inertia, a lack of capacity, oversensitivity, corrupt or populist politicians and a bureaucracy stuck in the era of the cold war.

The Environment of Mistrust
After the Radia Tape leaks, the Government and Corporates are at loggerheads on the issue of individual privacy leading to an environment of mistrust which is not conducive for India’s growth quotient.

Also the proposed regulatory regime which is set to transform the way corporates do business has left many industry people worried about the future scheme of things.

“I understand there is an element of mistrust between government and corporate world right now. It is a sad state of affair,” said Salman Khurshid, minister of state for corporate Affairs while addressing the chieftains of the industry at the 6th Corporate Governance summit 2010 by Confederation of Indian Industry (CII) in Mumbai on Friday.

“Honest mistakes are made in every sphere of life but honest mistake and mistake by default should have a dividing line” he said.
Assuring the Industry of the government’s continuous support to corporate growth he said, “To be cynical towards the Corporates in the country is a biggest disservice to the country, and we need to solve problems.”

Hinting at the various scams he said, “We can not wish for the perfect world but what happened has served us with better preparedness for future.” “We are much prepared today,” he assured.   

What do the numbers and outlook say?

"India's economic recovery appears to be losing steam,” cautions the Paris based Organisation for Economic Cooperation and Development (OECD).

OECD comprises of a grouping of mostly developed nations that account for over 60 per cent of the global economic output. The observation is based on OECD's Asian Business Cycle Indicators (ABCIs), which looks at the short term economic climate of Asian economies. ABCI is mainly based on composite index (that assesses change in economic fluctuations) and diffusion index (that provides a broader picture of overall economic activity).

The crisis in Europe, which accounts for 36 per cent of India's exports, remains the major worry. The OECD's grouping's Composite Leading Indicators (CLIs) data indicates that India's economic activity is seeing a slowdown. CLI provides early signals of turning points in business cycles -fluctuations of economic activity around its long term potential level.

"Downturn signals are still evident for Canada, Italy and India, while Brazil remains in a slowdown phase," OECD said. CLI for India was at 100.6 in October, slightly lower than 100.8 recorded in September. The indicator stood at 100.9 in August.

The Optimists
There are some who continue to believe in the Indian growth story and feel that the current phase is a small glitch.

“India is a young and growing country which is an investment destination on everybody’s mind, I don’t think any of that will change because of what is happening now,” asserts Kalpana Morparia, CEO, JP Morgan India.

Sharing Morparia’s views, Nimesh Kampani, Chairman JM financial said, “No impact will be seen on investments and there will be absolutely no impact on growth.”

Then there are others who believe that corruption is a phenomenon which goes hand in hand with growth and prosperity. “India is a democracy, these things are bound to happen in an environment of high growth,” opines Partha S Bhattacharyya, chairman Coal India Ltd. Defending the question that Public Sector Units (PSUs) is more prone to corruption he said, “As far as PSUs are concerned, Institutional corruption is impossible.” “An individual or a chairman can be corrupt,” he admitted.

“Scams are a part of all societies from US to Europe ,every body knows what happened there, it is nothing typical of India,” says Jiban K Mukhopadhyay professor SP Jain Institute of management. “We may see a temporary downturn in Foreign Investments but India will continue to have an advantage over China since the Chinese economy is showing signs of a slowdown,” he said.

So, what is the Solution?
Calling for transparency, accountability and “probity” in governance, the FICCI sought tough punitive action for the corrupt. “We believe that anybody found indulging in corrupt practices either as payee or recipient, must be punished summarily in a fast tracked process,” it said.

The new president of the Associated Chambers of Commerce & Industry, Dilip Modi, has called for setting up an integrity and ethics commission on the lines of the Planning Commission and the Election Commission to check corruption in the country.

“You can not control by regulation, we need implementation of the existing regulations,” said Arun Nanda. As Dr. J.J. Irani, director Tata Sons puts it “We don’t lack good people or good laws.What we lack is implementation of the laws. And if this in not clearly understood then Brand India could soon lose its shine.

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