Rajya Sabha MP and former Ficci president Rajeev Chandrasekhar says India could done a lot more in these two years, which were a heady period of economic boom. He also tells Bloomberg UTV’s Mini Menon that even after  years of privatisation, India still hasn't learned how to auction telecom licence.


How do you see the upcoming budget? Will it be big and bold and will the much- awaited second generation reforms finally become a reality?

Chandrasekhar: No, I don’t know whether the government will do it around budget time… if you just step back and examine the options that the government has, there are no options for the government but to launch a second wave of reforms, in some sense. I wouldn’t bet on that happening with the budget. But I would bet on some of that happening and being rolled out, post the budget.

Why hasn’t the government done anything till now? Many people believe they came in with lot of promises and a very good mandate, but squandered an opportunity. What are they waiting for?

Chandrasekhar: I think there has been a global crisis and the overall economic scenario around the world doesn’t lend itself to high risk-taking, whether it’s a corporate house or a sovereign country. I suspect I’m not plugged into the insights and minds of people in the government… people are waiting for that overall economic situation to stabilise a bit. But there are a couple of important issues for the government to examine. How do you draw and exit from the stimulus and lead to reforms?

But one could also argue that there was time and it would have been logical to expand and invite investors. We haven’t quite done that. For the longest time, we have said we are going to outgrow the world and everybody is looking for an opportunity. Yet, we haven’t taken that step…

Chandrasekhar: I have said this in 2006 and 2007. Clearly, if you look back now, the years of wasted opportunities were the peak of 2 years of  heady economic boom, globally… all the excess liquidity around the world, we could have, as an Asian country, done a lot more and attracted double and triple the FDI we did.

I have maintained that during the 2007 and 2008 budgets when people in India saw this problem coming, the government did very little. So, if you want to go back and see the case of lost opportunities, I could tell go straight to 2006 and 2007.

There is still an awareness and the need to be concerned about the external environment around us in India. India and China are still islands in a period of global turmoil … we have to do stuff, yes, but we also need to time it with global recovery, the western economy, in particular… the investment capacities of global economy need to played before we start these reforms. It is a no-brainer that if India needs to exit from the stimulus and maintain growth, we need massive dose of external investment. But whether the external world is ready to bring in those investment is the question and that is the issue of timing.

So you are saying that second-generation reforms will happen somewhere towards the end of the year, not perhaps get frontloaded in the budget itself?

Chandrasekhar: I think if we frontload these reforms too early, before the rest of the world and the investment community is ready for it, you will be sitting around and thinking that these reforms were a failure. I believe for that to happen, there are no options for the government than look at second-generations reforms in a massive way.

When you were the Ficci president, I remember you going to the government and making a case for not hardening rates, saying that would hurt investment-based corporate India. Now, we are seeing the same a kind of a situation where there is supply-side inflation coming in and once again we are talking tightening. Is that going to hurt us at this stage?

Chandrasekhar: One thing that worries me a lot is the government approach to the whole issue of inflation. It tends to be very reactive. Even two years ago, I made a case that this is not inflation in the conventional sense, and this is really a supply-constraint inflation and the government objective must be to ramp up supply and create investment and capacities. Unless you address that, you will never address this nature of inflation. I suspect it was ignored then and I suspect it is going to be ignored again, because there is too much of focus on statistics. There is too much of reliance on numbers as if they are, in some way, the description of an entire economy.

Is it a demand-supply issue?

Chandrasekhar: Yes, it is a demand-supply issue and it is not a monetary policy issue.

Two years down the line, you are talking the same language and nothing has been done. Is it again wasted opportunities which we have not addressed?

Chandrasekhar: Yes, of course. The one thing I have been critical about this government in the last two years and now again is that they tend to be chasing the problem rather being ahead of the problem, especially the problem of inflation. They don’t seem to be ahead of it, they don’t seem to be proactively addressing it. They seem to be chasing the tail of the problem, if I can use the phrase.

What went wrong out there in the telecom sector?

Chandrasekhar: This is a great question. In a lot of way, the telecom sector summarises to the people who think India is a super economic power why we are not so even 20 years after we have gone into telecom privatisation. It was in 1991 that private telecom players were invited. If we still can’t figure out how to auction a licence, there is something deeply wrong in what I call the governance system in this country.

Point two is that you have to look at who is to be blamed for this issue. Unfortunately, we have not assigned the blame and responsibility for the telecom model. The institutions of regulators were created in 1998 to ensure that this kind of nonsense does not happen. If you look at the history of the independent regulator, in the 1999-2003 period, the independent regulator got compromised… the Parliament to which the regulator is supposed to report did not oversee the regulator. So, you have now a dysfunctional sector -- dysfunctional to the consumer and the investors.

As far as the government and the independent regulators are concerned, this is really a lot of way in which we can describe the state of the nation today. We have great entrepreneurs, we have a great market and a potentially high growth rate… but the government and the institutions like the regulators are failing us every day. They are getting more and more politicised and less and less transparent and more and more corrupt…

So, I agree with you it’s a bad situation for telecom today. It’s even worse, if, after 500 million subscribers, you still can’t figure out how to auction a licence.

So, what is the way out of this?

Chandrasekhar: We need reforms. In my opinion, one of the things that we are not focussing really in India is economic reforms. The private sector and private entrepreneurs have grown. The private sector in India is globally competitive. Sunil Mittal can still take on anybody. There are smart people like Narayana Murthy and they can take on the best in the world.

But the government we all elect and put in place is lagging far behind the private sector in terms of efficiency, commitment and ability… Therefore, either crooked entrepreneurs get better of them or the crooked politician get the best or both. I have been repeatedly saying, when we talk about the next wave of reforms, that we need reforms in business, and, of course, reforms in the economy.

We must also reform on the full decade of governance… we need regulators who can take out politics from public policies.

So, looking back, are you happy that you got out of telecom when you did?

Chandrasekhar: No, it’s not a question of being happy. In the 10-11 years of my telecom experience, I learnt the good, the bad, the ugly, the vicious and the not so great. I also had my moments of extreme joy. In 2005, when in an interview, somebody was asking why you leaving, I said the only challenge in telecom now is how to lobby for spectrum and I’m not good at it nor do I want to be good at it. Events have proved that 2005-2008 was all about spectrum hogging. It’s not about building a better franchise nor about mergers and acquisitions. It’s really about how to get the spectrum without paying the market price for it.

You got out of telecom in 2005. But you have gone into a series of  very, very good interesting ventures and you have done well for yourself. So, what do you think is it going to take for entrepreneurs like you to survive?

Chandrasekhar:  My own outlook is that I want to do things I have fun doing. After telecom, I swear the one thing is never do business with the government. I would get into businesses which are to do with consumers and my creativity and management. I would not want to get into a business where meeting ministers are the required competitive advantages. That is something in my mind.

My focus is that today India remains, from a consumer’s point of view, an exciting market for a serious of products and categories -- whether it is hospitality or media or entertainment.