THE EXCHANGE. The real world: riddled with holes

Any forecast for the future must take both the past and the present into account, or it will be rendered wishful. There are real world anxieties and societal concerns that Indian enterprise faces. Policy solutions are not in its domain but one can analyse concerns without criticism.

There can be no doubts about the Government’s intentions on fulfilling society’s inherent rights to food, health, housing and economic opportunity. It is making profound choices on development and growth; I believe it is entirely within India’s grasp to meet these objectives. But such choices will have tangible outcomes only in the long term. This leaves most of us to trust, hope and toil in the short term.

Private enterprise has proven abilities in creating economic growth and prosperity. But it suffers increasing criticism and distrust in an environment of growing income inequality and insufficient occupational opportunities. Constant discussion on illegitimacies can overwhelm mind space and create fault-lines in society in the face of quietness on legitimacies.

It is of central importance that enterprise as a whole be trusted; in turn such trust is bound to be reciprocated. Responsible voices and leadership help build trust. Businesses may also need to reflect on how to be recognised for address society’s issues rather than be perceived as self-serving vehicles. The answers do not lie with CSR.

Income inequality is not a symptom of unequal distribution of income or wealth. It is a symptom of insufficiently broad-based value-creating capacity, that is, means of production or commerce. The essence of capitalism is creation, and this must not be confused with reallocation. The gaps today arise from this capacity not expanding.

Isn’t it obvious that a society that is well-educated, healthy, with good housing and quality of life, exhibits high productivity and competitiveness? These attributes are crucial to the long-term destinies of people and enterprises, but the said community essentials must be generated from greater economic activity. It is difficult to explain to the average person that “being rich” does not simply mean “having lots of money” but instead implies value generation. Money and wealth are lofty words, but value is a word that people can ignore. Value is created through work, mining resources, developing ideas, and inventions, manufacturing, agriculture, mutually beneficial commerce, and so on.

This key word “value” is therefore more relevant than wealth or money. It is the central factor around which human endeavour and economies revolve. This is the message we must reinforce.

GDP growth is a global metric for measuring progress. In India’s case, quantified GDP applies to the formal economy and the informal economy usually tops it up by a few percentage points. The jury is still out on how these figures add up. Any losses at the bottom of the pyramid may queer the pitch going forward, so people are looking for both anecdotal and hard evidence. But GDP alone does not reflect how growth changes people’s lives. Real world events signal both the direction and health of a political economy, in which policy needs may not always be supported by or are in tune with objective economic considerations.

While GDP numbers make India one of the fastest growing economies, the basic problems fester — bad loans, weak capacity utilisation and business profits, serious private investment deficit, and lacklustre consumption. Net FDI (after acquisitions) may not add sufficiently to capacities and employment. Until these are well behind us, real roadblocks to sustainable livelihoods remain.

Of course, there are businesses that gain access to capital that does not grudge being destroyed, but that is not the case for most who invest their skin in the game. Poor business investment, indifferent export performance and uncompetitive manufacturing are pushing predictions of 30-40 per cent job losses even before disruptive developments such as artificial intelligence. Service and self-employed jobs at risk are extra.

We should be concerned that today’s younger generation risks ending up poorer in real terms than their parents. Flat/falling incomes moderate demand growth and/or increase the need for social spending. Social consequences loom even if they don’t surface immediately.

Lack of livelihood opportunities occupies much mind space of policymakers and commentators. Really speaking though, anyone desperate enough to find a job finds some livelihood opportunity even if it is a partial solution. So what is the larger issue?

Whether it was detailed in the Bombay Plan of 1945 or articulated by the NITI Aayog in 2017, the deep-rooted problem is “underemployment”, that is, earning below an individual’s potential or core needs, whether due to seasonal/informal opportunities or complete skill mismatch.

It is conceivable that policy architects can get caught up in specific policy sub-elements, or even non-core policies, with the result that we don’t hear outcomes on “what’s the all-embracing set of policy actions needed to accomplish the larger goal”.

Much policy space carried forward from the past is being repaired, whether broken or not. This can leave the future somewhat hazy for one (whether from home or abroad) who has to assume market risk, raise equity, borrow money and undertake multiple levels of liabilities/obligations.

Regulatory, legal and unforeseen/disruptive possibilities add complexity. Sound policy may come up against indifferent implementation. All these prejudice risk-reward ratios.

Ayn Rand’s novel, Atlas Shrugged , dealt with people of means abandoning enterprise. Her stated intent for writing was “to show how desperately the world needs prime movers and how viciously it treats them” and “what happens to a world without them”.

At the same time enterprise must be alive to what its positive participation means for the society. Some may take the plunge sooner; some may wait but pay lip service in the meantime. The reality is that every day of waiting impairs our environment. In the 1983 movie, War Games , a supercomputer recognises the concept of futility by concluding “the only winning move is not to play”. It can be tragic for employment and society if perceptions and circumstances produce a similar non-participative view in consumers and enterprise.

This column explores ideas and opinions on Indian enterprise and economy. The writer is an entrepreneur and former president of Ficci. The views are personal