‘Time is ripe for second phase of economic liberalisation’

By VK Mathews

Economic liberalisation introduced in the early 90s not only staved off an economic crisis, but also transformed the way India does business. Over the past 30 years, the overarching dominance of the government in economic activity (the infamous Licence Raj) came down progressively, paving the way for private enterprises to bloom and flourish.

Liberalisation brought in investments to sectors that were hitherto government monopoly. This has resulted in high economic growth, more employment opportunities and significant reduction of poverty.

The Indian economy has grown 9-fold at a CAGR of 7.8 per cent during the past 30 years. However, we are seeing a stalling of the growth in the past half a decade and the time is therefore ripe to move to the second phase of economic liberalisation for improving the ease of doing business and make India an investment destination of choice for the world.

The secret of India's growth and success is in the enterprising mindset of the Indian people, despite all the odds that we can expect in a developing economy like India -- inadequate infrastructure, inefficient bureaucracy, limited resources, corruption, political compulsions, growing inequality and so on and forth.

The first phase of liberalisation focused on opening up sectors for private investment, and more importantly, government withdrawing from running businesses, upholding the tagline "government has no business to be in business".

The second phase of economic liberalisation should change the role of governments to business/industry facilitators for job creation than operators and providers of services.

Governments, even in the most advanced economies, are not ideally placed to provide customer service. Enterprises need timely services from government for them to create opportunities and perform to potential.

While governments should enact laws and own the rules and regulations, its implementation and effectuation should be done by the private sector (professional organisations, specialised in business process management), creating a PPP model for business facilitation.

This is the one change I would like to see which can make a huge difference to the economic prospects of India.

Business enterprises - small, medium or large - require several government approvals and permits, both initial and ongoing compliance approvals. Today, this is the biggest bottleneck and growth stifler as this process causes inordinate delays, cost overruns, arbitrary inspections and corruption.

A PPP model business facilitation would mean that the government will continue to create rules, guidelines and acts, but its effectuation and compliance will be done by reputed Indian professional organisations, specialised in business process management. This will solve the single biggest pain point of the business community in India today.

A government servant works within a system that stifles the enterprise. In a bureaucratic environment of inertia, another application means additional work for no incremental returns for the employee. In a developing economy like India, this leads to inefficiencies and widespread corruption as we witness it today.

India has some of the biggest and best business process management companies (such as Infosys, TCS, Wipro) that manage the complex business processes of public and private sector organisations worldwide.

However, the benefits of their services are enjoyed by the developed world and not by India and Indian citizens. This has to change. These companies need to be engaged in India's nation building exercise in a bigger way.

I see no better way than outsourcing the industry / business facilitation to them. TCS managing the passport services for the government is a demonstrating case in point. Today, a team of over 2,500 TCS employees offer the Indian citizens, from 93 passport offices located in 63 cities, quick, efficient and transparent services. This model needs to be replicated in other areas of government as well.

This is a paradigm shift that would challenge the status-quo and, needless to add, could lead to objections from stakeholders with conflict of interests. But if India has to come of age as an economic powerhouse, we must pursue and institutionalise this reform.

(The writer is the Founder & Executive Chairman of IBS Software)

Source: IANS