Salute-cum-plea for nation's growth engine

The stunning $19-billion Facebook deal for WhatsApp triggered debate why Indian entrepreneurs lag their counterparts elsewhere in terms of creating something substantial. India Uninc. by R Vaidyanathan, a finance professor at IIM-Bangalore, unwittingly provides an answer. IndiaUninc. could not have been timelier, published as it is amid renewed drive towards financial inclusion, lack of access to affordable credit among India’s underprivileged, growing concerns about non-performing assets or bad loans of banks due to big-ticket defaults by leading corporates, and raging rows over foreign direct investment (FDI) in retail, gold lust, current account deficit (CAD) and corporate taxes.

Examining all such issues and more, the book seeks to put both corporate India and non-corporate India in their places, thereby hoping to create a proper perspective. The author argues that though it is the former that hogs media limelight and pockets a large chunk of banks’credit, it is the latter which is “the engine of economic growth”. He defines ‘India Uninc.’ as the “non-government,non-agricultural, non-corporate activities” carried out by “partnership/proprietorship firms and self-employed persons”, mainly families and communities – entities that are somewhat unregulated, unincorporated, if you will, but subject to mostly state-level levies. It is a “sign of our times that the largest segment of our economy requires to be identified by negating something else which is relatively small. It is perhaps part of our tradition to define a thing based on the concept of Na Ithi – ‘that which is not’,”writes the finance guru who has served as a board member at a number of corporates, regulatory bodies and institutions.

India Uninc. accounts for a whopping 89% of working population and contribute a mammoth 45% to the gross domestic product or GDP,dwarfing the private corporate sector’s contribution of a “minuscule” 18%. Yet,it is the latter that gets pride of place in popular economic discourse. This, the prof argues with some admirable candour,irreverence and deliciously Brahminical wit, is muddled thinking, are sidue of Western/ Anglo-Saxon influences on Indian brains. So,the author takes upon himself the role of a lawyer for India Uninc,out to argue the case for a better deal for his client.

For, India Uninc. makes “significant contribution to savings and capital formation” and dominates services like “trade (wholesale and retail), transport, construction, hotels and restaurants and other services” (like those offered by barbers, carpenters, astrologers,Bollywood’s make-up artists and cricket pitch curators). The so-called unorganised or informal sector, the professor says, “has the largest share” in India’s national income, manufacturing activities, services, savings, investment, both direct and indirect taxes, credit market, employment and forex earnings”.

Why, it even accounts for a significant share in India’s exports.Yet,it is a victim of both governmental neglect (at both the state and national levels) and “the myth of superiority surrounding the corporate sector”, and is often ignored by policymakers andreform-pushers.Hence,India Uninc. deserves urgent attention and support, and “needs to be studied, analysed and understood”, given that unchecked globalisation could savage this sector, compromising India’s “savings, employment, social security and other related issues”.Thismessage the scholarly author delivers via compelling argument scouched in layman-friendly language and creative use of arresting facts and copious figures. But what holds attention is his ability to pepper the narrative with imaginative analogies and observations. For instance: “FDI/ FII… is like pickles to curd rice and not the main dish”; “India Inc. in our economy is like an item number in a Bollywood movie”; “…every Indian woman wants her children to be better than her husband…”What,however, really takes the cake is his contrarian stance, the sheer audacity with which he challenges widely held beliefs that have come to be accepted as unquestioned wisdom.Forinstance, marshalling government and private statistics, he disputes the popular notion that India’s recent resurgence was due to the economic reforms initiated by the Narasimha Rao government in 1991.Thosereforms helped only the private corporate sector, successive governments and the public sector, and their aggregate contribution to growth was lower than that of India Uninc. In other words, the India Growth Story came about “due to the extraordinary savings generated by the non-corporate sector”.Similarly,the authority with which he propounds new perspectives is refreshing.Sample: “the concept of capacity is cosmic and is unlimited in India”; “gold acts as a social security and insurance for the middle and lower class woman as well as collateral for trade”;“import of capital goods, mostly from China, is a major reason for CAD, and not import of gold”; “is the assumption of incremental capital output ratio (of 4) mandated by God?”; “stock markets are not the barometer of economic health”; “caste is not always bad –caste in politics divides but caste in economics unites”.Insimilar vein, the guru questions lopsided policies and practices that mete out a raw deal to India Uninc. “… educational expenses are,in a perverse way, inversely related to the level of education, like KG (kindergarten) being more expensive than PG (post-graduation)…Banks do not provide loans for school education but provide forIIT/IIM education. It is like giving loans for constructing the second and third floor of a building but not for the foundation.”Hehappily takes potshots at… well, almost everyone and everything insight: capitalism, communism, Marxism, consumerist urban elites thatcan’t have enough of consumption-driven economics, West-leaning economists, assorted experts, business media, Western/Anglo-Saxon thought, the political class, corrupt, bribe-taking government officials, policymakers... Thankfully, the author does not stop at exposing shortcomings in the current system.Healso recommends remedial measures and hints at potential solutions for India’s unique problems. For instance, he argues that India Uninc. should not be taxed at all in the absence of any social security cover, and be given full tax credit for education and health expenses and cultural ceremonies (relating to birth, wedding and death). Bemoaning the funnelling of India Uninc’s savings into wasteful or unproductive government and private corporate sector’s activities via banking, capital markets, provident fund and insurance (where returns don’t even beat inflation), he calls for mechanisms to encourage India Uninc. to save more so as to take care of rising education and health expenses.Time-testedIndian virtues like thrift and giving (epitomised by the character of Karna in the Mahabharata) get a big thumbs-up, while the propensity to put Western billionaires such as Bill Gates and Warren Buffett ona pedestal for their much-publicised philanthropy is laughed at.Somebody should tell those guys that the Tatas, Birlas and the Bajajs practised giving wholeheartedly aeons ago, the prof adds cheekily.Theauthor leaves absolutely no doubt that his heart beats, and bleeds,for India Uninc. “The best way the government can generate more employment is by shrinking itself and encouraging private initiative and allowing the pushcart vendor and the self-employed trader to live in peace and with honour and dignity.”Towards this end, he recommends “substantial reforms at the state level to remove several constraints on India Uninc… India (must) go beyond Marx and Markets and think up a paradigm which accommodates the primacy of families and communities”.