Acche Din need AccheVichaar



In a recent family interaction that took place at my friend’s house, I couldn’t help but draw parallels to the functioning of the Indian government!           A few weekends ago my friend had invited me for lunch wherein I witnessed an amusing interaction between him and his son that made me realize how a lot of things are done in India. My friend’s son recently turned 18 years old and they sat him down and told him now that he has  become of responsible age and starting college, they are going to stop the rules they had set for him.

Overjoyed as he was he reaffirmed if he could study when he wanted, eat, sleep stay out at night all at his own choice and they nodded saying yes son.

Immediately after setting him free of his previous rules they informed him that with his new set of wheels (they had bought him a new motorcycle) he could only do so many miles every day, told of him of the type of helmet he had to get, the number of times he had to go see his auntie etc. etc.

That my friends is our Governments ease of doing business strategy. They relax some unnecessary regulations on one hand so that they can supplant others that either totally dilutes their initial steps or reverses it.

One of the most amazing things is the complete lack of awareness on the part of our rulers. And I use the word rulers with due cognizance and that’s what we should really call them because they do things without a lot of input from the people affected by these decisions. I do not think they are evil or on purpose harmful rather their world view is limited by group think where they reflect each other’s assumptions and no new information can come in to disturb their minds. They make decisions based on what they believe is right and in the best interest of the industry/people ascribing much more wisdom than is justified based on their performance.

Take the case of the growing menace of NPA’s in our public sector banks.

First of all which banks have it: it’s the most regulated ones i.e. government banks (one doesn’t see Citibank, HSBC, Deutsche on that list), Second who caused these NPA: Most NPAs are concentrated in highly regulated industrial houses, Third who has come to find a solution like the bankruptcy code: the same regulators and now who thinks that the bankruptcy code should be further regulated, you guessed it right my friends it’s the regulators themselves or as I call them rulers.

We as investors and believers of free enterprise should ask them “Maharaj” if you are so wise to save us why did you let it happen in the first place. And if you got it wrong once we can understand however it seems that you keep finding new ways to mess it up all the time and instead of taking a break you make more rules.

As an Investment banker in the USA, I get calls from Indian Asset Recovery Companies and other distress resolution companies to raise capital in the USA to buy and restructure these NPA companies. Frankly I listen to them politely and then tell them we can’t help. Why?  While we raise billions of dollars in the US for restructuring because businesses fail here too but the bankruptcy laws are extremely clear and there is no constant interference from the government. Investors who invest in distress want to make money and are prepared for losses for bad decisions, bad timing, bad cycle but not for  constantly changing regulations. Imagine the position of the investor who after all his due diligence agrees to invest Rs.1000 Crores in an ARC but money cannot be deployed because of unpredictable changing regulations. The investor who itself is an institution will now have to answer to its stakeholders as to why they took their money yet haven’t deployed it. So not a cost-free event.

Business is both about success and failure and you cannot predetermine either. And if businessmen are caught doing malfeasance or theft or manipulation, they should go to jail. The decision the government must make is whether to let business work and only catch where they find malfeasance or stop business altogether until they figure out who is not going to commit malfeasance. Frankly the latter is beyond their power and there is ample evidence of it in both distant and recent history.

My personal interaction with Indian politicians and senior IAS officers has always impressed me with their smart intelligent thought process. That’s why it baffles me to read and see the things that they end up doing.

Our country desperately needs to start moving faster and needs to unleash the power of all our people and entities. USA economy is 1100% larger and its growing at 4%, so we should stop being pleased with 6-7%. Or we will be the perennial country of promise.

(The writer is an investment banker based in Saint Louis USA. Views are personal.)
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