Click to play videoNew Delhi: HDFC Chairman Deepak Parekh hit out against the Opposition and the coalition parties and said their style of politics is hurting India's growth. Speaking to Karan Thapar on Devil's Advocate, Parekh praised Prime Minister Manmohan Singh for his efforts and called him the cleanest Prime Minister.
Karan Thapar: Hello and welcome to Devil's Advocate. As 2012 gets underway, how do India's top businessmen view the government and its handling of the economy? That's the key issue I shall discuss today with the Chairman of the Housing Development Finance Cooperation Deepak Parekh.
Mr Parekh, let's start with the year that just ended. Many people say that 2011 was one of the worst years faced by any government for a long time. Others say that the country has ended up depressed, some even say disillusioned. Would you agree with both of those?
Deepak Parekh: I would agree with those. 2011 is a year to forget about. Not only for the India but for the whole world - you see what happened in Europe, in US everywhere. So 2011 has been a bad year and so also for India. We should now in the new year think positively and look at options and opportunities.
Karan Thapar: Now in the open letter that you wrote on the January 17, you spoke of the collapse in the self confidence and self belief of Indians in themselves and in the State. Twelve months later, has that collapse of self-confidence got worse?
Deepak Parekh: It is at a low end. You know the more you criticise the government, the more negative you are about the government, the confidence around you, the confidence among the people of the country also takes a dip.
Karan Thapar: So it becomes a self-fulfilling, vicious spiral?
Deepak Parekh: It becomes, absolutely. And I think we have to look at it differently today and we have to be more positive. It's a new year. Let the past be behind us and let's look at what we can do. How we can get back to 8 per cent GDP growth.
Karan Thapar: Okay. I will come to that in a moment's time. But for the government, after a succession of scandals and scams, after the CVC imbroglio, after the crisis with Anna Hazare and Baba Ramdev, and then right at the end of the year the debacle over FDI in retail and the debacle over the Lokpal. Would you accepct that the government's authority and credibility have also been damaged?
Deepak Parekh: It has been damaged. It has been damaged but part of it. You know, the way the politics works in our country. First of all we have a coalition government and partners with minor seats. Less numbers of seats can dictate policies rather than the party with the largest number of seats.
Karan Thapar: It's a bit like the tail wagging the dog?
Deepak Parekh: It is the tail wagging the dog. Then the Opposition has also not played a positive role. Now the role of an Opposition party anywhere in the world is to oppose, but in a democracy, dissent is acceptable. Disagreement is part of democracy but not distortion, not breaking up Parliament every day. You know, disruption in politics is not good and what we saw in Parliament this session and the earlier sessions this year needs a lot to be desired. It gives you a little negative feeling on democracy. What are we doing? Is it a victory of democracy or democracy is becoming a big curse for us? No decisions can be taken if every item, if every policy issue which the ruling party puts up and the Opposition opposes and opposes by disrupting Parliament, by dislodging Parliament. So I think we need to have a better system. Everyone has a day in the (sun). The Opposition will get their day in the sun but I think the Opposition party also must behave more responsibly. The coalition partners in a coalition government must also behave more rationally.
Karan Thapar: If I understand you correctly, you are suggesting not just the behaviour of the government but the response of the Opposition has thrown into question the functioning and efficiency of India's democracy?
Deepak Parekh: Yes. Unable to take decisions. This is because of the political system, the democracy the way it is working, with so many parties and so many coalition partners, it becomes very difficult.
Karan Thapar: So this has raised serious, if not damaging, questions about the very system of governance in India?
Deepak Parekh: Absolutely. I think the people of India will realise that in general elections you must have one party running the country and not ten different parties joining hands. It doesn't work. It doesn't help. It doesn't do good for progress.
Karan Thapar: So it's not just a government crisis, its not just a political crisis, it's a system crisis.
Deepak Parekh: It's a system crisis.
Karan Thapar: Which means it's much worse.
Deepak Parekh: It is bad because you know. You can't take decisions then how can the country progress?
Karan Thapar: Now one key issue, which was there in both the open letters you wrote last year, was what you called the widespread governance deficit. One of your colleagues, Azim Premji said, "The biggest concerns now are government issues and the complete absence of decision making in the government". Explain to me, what does this mean for industrialists, for investment and the economy?
Deepak Parekh: See, when we talk of governance deficit, we are talking at two levels. One is the petty corruption, which you and I and every one in India faces. And one is the corruption at the senior level - large amounts like the Commonwealth Games or the telecom scandals or Aadarsh building in Bombay. These are bigger issues. Now if you look at the small man. The common man in the country is fed up because he can't get anything done without paying a bribe. For instance you want a driving licence, you want a death certificate. I had to pay for a death certificate. You don't get death certificates.
Karan Thapar: You yourself?
Deepak Parekh: I had to pay. Birth certificates, passports, driving licence. Now the main reason for this corruption at low level and this is 100-500-1000 bucks. Small amounts. The salary levels of people are abysmally low. How do you expect a policeman on the street to keep law and order to protect the citizens when he lives in slums or slum-like conditions? He doesn't have enough money to feed his children.
Karan Thapar: People in authority, even if they are only policemen, have to be paid enough to guarantee that they don't have to resort to corruption?
Deepak Parekh: Yes, absolutely.
Karan Thapar: Once again we have to think through very carefully right down to the very bottom how we pay and how we run the system. It's a root and branch.
Deepak Parekh: Absolutely. So what we said is that we need some redressal mechanism for the common man and particularly we need police reform, judicial reform and the electoral reform.
Karan Thapar: But you also wrote about what you called policy paralysis, the fact that the government talks about critical reforms but is unable to deliver them. In that context, how damaging was the debacle over FDI in retail where the Prime Minister endorsed the policy but Sonia Gandhi was silent, the allies opposed and the government couldn't go ahead?
Deepak Parekh: It was a very.. It was a bad day for Indian democracy and I think it was a bad day, it was a sad day for Indian business. I think FDI in retail will help the farming community. We need to invest in farming. We need much more R&D and technology and we need to upgrade our farmers. And whether you like it or not, FDI in retail will do that to some extent.
Karan Thapar: Given that FDI in retail is so critical to India's future in so many ways, when the government proposes it and then within ten days has to back down. How much of a hit did the government's image and credibility take?
Deepak Parekh: Government's image has been tarnished, has been hit, but I must say that the Prime Minister and the Finance Minister have confidently said 'we will bring back FDI in retail on the radar and it will be through by June 2012'. They have both emphatically said that and I believe in that and I am sure they will try and do that.
Karan Thapar: That's absolutely true but when you and your fellow business colleagues met the Prime Minister on December 22, he pointedly bristled at some of the critical comments you had made. In fact after that meeting the Prime Minister's office issued a formal statement which said, "it is little disappointing to hear negative comments emanating from our business leadership ought to be told that the government policy are causing slow down and pessimism in the industrial sector. How do you respond to that?
Deepak Parekh: Well, what I started in the beginning that if the Prime Minister's point and he had a point. He said that if all of you are negative and all of you have negativism and you are totally pessimist about growth, about future then what will happen to the country.
Karan Thapar: Except that so many people share that criticism?
Deepak Parekh: That is true but the point is, it's an accumulation of things that happened over the year.
Karan Thapar: But was he being defensive rather then being open and admitting that the government has let down people or disappointed people. Was he being defensive?
Deepak Parekh: No, I think this meeting took place at the end of the December. And as we said let's forget the past, let's see what we can do next year?
Karan Thapar: Except that he went a little further, he said that comments like yours were creating uncertainty. He said that you were emboldening those who have no stake in India's economic future.
Deepak Parekh: No we have stake in India's economic future. All of us who were present had stake and all of us present are concerned. And this is the right time for Indian to outshine the others. And we did not take that advantage.
Karan Thapar: Except that he seems to have taken your advice slightly in the wrong spirit?
Deepak Parekh: Well, you know no one likes criticism, no politician likes criticism and you and I don't like criticism of ourselves. So I guess it was a defensive statement. I guess it was the statement which probably was prepared by his press guys.
Karan Thapar: It was bit of an error to be defensive. Wasn't it?
Deepak Parekh: I agree.
Karan Thapar: Your colleague Harsh Mariwala, the president of FICCI said shortly afterwards, "There is problem of trust between the government and the corporate sector".
Deepak Parekh: If you ask me, in the year of 2011, government and the industrialist have instead of coming closer have become further apart. That trust, that closeness, that association that one must have to succeed in a country is diminished. For variety of reasons. And if you ask me give me one reason I can't, there are number of reasons.
Karan Thapar: But the fact is it has diminished?
Deepak Parekh: It has diminished. And industry and government have gone apart rather then coming closer.
Karan Thapar: Whose responsibility is it to be the first to reach out?
Deepak Parekh: No, I think both parties have to reach out. The industrialists also have to reach out and industrialists reach out to the government when they are in the difficulty.
Karan Thapar: But the government then perceives that as criticism and becomes defensive?
Deepak Parekh: No in the sense if the particular industry is not working well, if massive losses are there in any industry, then the industrialists come crying to the government for help. So when the need is there they come running and so both of them have to be blamed and both have to work closer.
Karan Thapar: Harsh Mariwala has also said that the business confidence today is lower then the it was in 2008 and that was when the Lehmann Brothers and the recession hit us.
Deepak Parekh: No, he is right. Today if you look around what is fresh investments are not happenings. We need massive investments in India - both from the public and the private sector and neither are investing. When you tell me that every public sector company sitting with massive funds, resources on hand, that means they are not investing. We need investments in India for growth.
Karan Thapar: They have lost confidence in India that's why they are not investing.
Deepak Parekh: I don't know whether they have lost confidence, they feel the risk of investment because the approvals take a long time. And if a project is always risky, they may put some large amount of money in a project. If it is doesn't take off then they will be blamed. Why did you spend so much money?
Karan Thapar: Okay may be they haven't lost confidence but the risk of investing in their eyes has gone up?
Deepak Parekh: The risk and the negative accusations if the projects fails or if the project doesn't take off and they lose lot of money then they will be pointed at and said 'why did you do this' and they blame them.
Karan Thapar: This is why 2012 has begun on a gloomy note?
Deepak Parekh: Yes. But now we have to see what we can do.
Karan Thapar: Mr Parekh, after your meeting with the Prime Minister at the end of the December you said we have discussed what needs to be done to change the mood of the country. What are the top three things you want the government to do?
Deepak Parekh: I would say you need more then three things but first is investment. We need investments. Investments when I mean new industries in infrastructure, roads, airports, ports, powers.
Karan Thapar: And the government must facilitate this?
Deepak Parekh: Yes, investments by both the private sector and the public sector.
Karan Thapar: And here the budget has to facilitate them?
Deepak Parekh: Well the budget has to facilitate, the implementation process, the approval process has to be streamlined much more than what it is today. You see industrialists are today telling me that why we cant put up a project in India. We don't know what the project cost will be, we don't know when it will complete and start production, because of all the uncertainties that are there of different approvers.
Karan Thapar: So remove the uncertainties..
Deepak Parekh: Remove the uncertainties, give us a timetable that by which we can get our approvals and permissions. Whether it is coal or environment or water. Let it not drag on and on and on forever.
Karan Thapar: Okay that's one clear thing. What are the others?
Deepak Parekh: So one is in fresh investment is needed. Secondly, interest rates have to come down gradually. Food inflation has come down extremely low. Interest rates have to come down to spur growth to spur economy.
Karan Thapar: In other words, you would like Pranab Mukherjee to have a word in the ear of the RBI governor.
Deepak Parekh: In other words, as the governor has said repeatedly, if inflation comes down, we will look at interest rates and he has repeated that last week.
Karan Thapar: Now he must deliver.
Deepak Parekh: Now he, well, he will. I'm sure he will. So that's another. The third thing is this approval process has to be streamlined for all infrastructure and non-infrastructure. The fourth is there are dozens of projects which are stuck halfway, particularly in power sector. These power projects have to kickstart again. And we have suggested when we met the Prime Minister, that why don't you have someone in the PM's office look at ten marquee projects and let them analyse what are the decisions necessary and let's push them.
Karan Thapar: So in other words, appoint a special person who would be responsible for analysing and pushing.
Deepak Parekh: Or a group of persons analysing and giving the Prime Minister and his senior colleagues a decision that these decisions are necessary.
Karan Thapar: How important in your eyes is the need to push through critical reforms which the government has spoken about but which are stalled either in Parliament or caught up in party politics - DTC, GSD, Pension, Banking, Insurance - all are up.
Deepak Parekh: All these are very critical. It's very critical not may be for me but for my kids. If they start putting these Acts in place, then it will help in the future. The other thing is the government must reduce their expenditure. The other thing is we have large number of social projects - social development projects..
Karan Thapar: Push them..
Deepak Parekh: Rural programmes. We must push them because we must. 60 per cent of our population, 600 million or so live in rural India. How do we make them put more money in their pockets, so they do more consumption?
Karan Thapar: You know you have given me a long list of things which also translates into a large number of areas where the government has been deficient or ineffective. Let me ask you a simple question. Can we hope to return to 8 per cent growth, leave aside 10, if these areas of concern are not tackled and if the policy paralysis continues.
Deepak Parekh: I don't think we will get to 8 per cent. We will have to be satisfied with 7 per cent. Don't forget this year, the monsoons have been good for the last two years. We have had agricultural growth of 3-4, 4.5 per cent which ensures that we will get at least to 7 per cent.
Karan Thapar: That wont happen next year necessarily.
Deepak Parekh: May not happen…
Karan Thapar: So if…
Deepak Parekh: Because we have to depend on the rain gods.
Karan Thapar: So if policy paralysis continues and agricultural growth doesn't happen, you could slip below 7.
Deepak Parekh: You could slip below 7.
Karan Thapar: One other thing.. If the policy paralysis continues, do you think Indian industries will either continue to sit on their money and not invest or look for opportunities abroad? Will that trend get worse?
Deepak Parekh: Well that trend can accelerate. More and more Indians are looking at investing abroad. But the market is in India. Everyone knows that the desire of Indian businessmen is first to invest here. Huge market, huge population, large middle class, urbanisation happening. All factors are positive. Only if we can get our act together.
Karan Thapar: And that really means if the govt can get its act together first. Now for the next two months at least, UP elections, Punjab and Uttarakhand elections are going to dominate politics and you know when elections are in the offing, politicians become populists. So are you also saying to me that we cant expect anything substantial until UP, Uttarakhand and Punjab are over and done with.
Deepak Parekh: It's one month. All or most elections are over by end of February. We are in January.
Karan Thapar: So the budget is your big hope.
Deepak Parekh: So the budget is the big hope.
Karan Thapar: Let me ask you a simple, perhaps blunt question. Are you disappointed with the Prime Minister?
Deepak Parekh: I wouldn't say I am disappointed with the Prime Minister, but Prime Minister has to take a much more broader, quicker decision-making effort. And he has to, you know, he has to push reforms.. I know he is under various compulsions. He tells us that you know today the secretaries and ministers are not able to take decisions. People are scared - scared to take decisions. Now, if every paper or every decision is pushed up to the Prime Minister, what can the poor prime minister do? We have created a fear psychosis in the minds of ministers and secretaries because of one or two major scandals.
Karan Thapar: But you are also saying to me, aren't you, that you expected more of Dr Manmohan Singh.
Deepak Parekh: We need Manmohan Singh. He is the best Prime Minister. He is the cleanest prime minister. He's been a blessing for India.
Karan Thapar: But he needs to do more?
Deepak Parekh: He wants to do more. And I am convinced he will do more.
Karan Thapar: He may want to do more...
Deepak Parekh: His hands are tied because his coalition partners don't support him. His hands are tied because the Opposition doesn't support him.
Karan Thapar: Are his hands also tied by Sonia Gandhi?
Deepak Parekh: Well I don't know about that. That you people in Delhi know more about it than me.
Karan Thapar: How do you view Rahul Gandhi?
Deepak Parekh: Hope. Good hope for the youngsters. He's, you know, he's hardworking. He is sincere, he is trying his very best. He is young. He has the right family name and who knows. He may become. He may be our future Prime Minister. Some day, some stage.
Karan Thapar: Are you really hopeful today in 2012, as the year begins, that Dr Manmohan Singh will live up either to your expectations or to the promises he has made to you.
Deepak Parekh: I am confident he will. You will see a different set of guidelines and difference in speed at which decisions are taken after February. You will see that. I am very hopeful, I am very optimistic that prime minister and his team have taken a view, have taken a decision, 'we will not let 2011 continue'.
Karan Thapar: Mr Parekh, a pleasure talking to you.
Deepak Parekh: Thank you.
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