JANUARY 19, 2003
 Letter From The Editor-In Chief
 Overview
 Features
 Trends
 Sectoral Snapshots
 The CEO Listing
 Code-Jock Factory
 The Lever Legacy
 Letter From The Editor
 Columns
 Brain Distillation
 20 For The World

Two Slab
Income Tax

The Kelkar panel, constituted to reform India's direct taxes, has reopened the tax debate-and at the individual level as well. Should we simplify the thicket of codifications that pass as tax laws? And why should tax calculations be so complicated as to necessitate tax lawyers? Should we move to a two-slab system? A report.


Dying Differentiation
This festive season has seen discount upon discount. Prices that seemed too low to go any lower have fallen further. Brands that prided themselves in price consistency (among the consistent values that constitute a brand) have abandoned their resistance. Whatever happened to good old brand differentiation?

More Net Specials
Business Today,  January 5, 2003
 
 
India A Superpower In The Making
The country of sadhus and snake-charmers has metamorphosed into one of code-jocks and I-bankers. Surely, global economic supremacy can't be far way?
Popular democracy is no excuse for poor economics, but it does explain our country's overwhelming obsession with the right means

I used to live there," said Mr Li, pointing to a plot where a clutch of cranes was taking out their collective cantilevered angst on the remnants of an apartment house.

This was Shanghai, April 2002, and Li was my first taxi driver who knew English-so much for hosanna-filled tour books that claimed every Li in the city spoke the language. A former steel worker who had been re-purposed into a taxi driver in a state-run taxi company-part of the government's efforts to make the steel plant leaner and meaner-the Li family learnt, sometime in late 2001, that its contribution to the country's progress wasn't complete.

The apartment house was being torn down to make way for something-a newer, bigger building, a road, an overpass, Li wasn't sure-and the family had to find a new home. A government worker took Li and his wife around three flats. They liked none of the three but had to pick one.

The fundamental fallacy with the Indian style of governance has been the mistaken assumption that merit has no place in a democratic system

The same worker also made a note of the number of people in the household and the amount of furniture. A few weeks later, a truck that was just the right size arrived at the door to transport the family to its new home.

The whole process had been efficient, painless (except for the family, and even it wasn't put through any real physical hardship), and progressive. ''It happens all the time,'' said Mr Li philosophically.

You won't find that happening very often in India. And when it does, there are enough people-right-minded individuals and bleeding heart liberals alike-to make something of it.

The visible lack of government sponsored urban renewal initiatives may lessen India's attractiveness to foreign investors some, but the various pulls and pressures of democracy ensure that when-this could be this year, or next, or 10 years hence-the country moves forward, it will do so as a whole.

Balancing the need to grow and concern for the small man is not easy, not when you are a country of a billion individuals with roughly two billion ideas on the right way ahead.

It is easier when you are a Singapore or a Malaysia or a Chile or a China, countries that are often held up as role models of liberalisation. But these countries are either small-Chile, for instance, has a population of 16 million-or non-democracies, or both.

Popular democracy is no excuse for poor economics, but it does explain our overwhelming obsession with the right means-a fixation that has its ironical counterpoint in our culture of corruption. And so, India's policy makers, while being open to influence, fair and foul, will eventually tread the middle path.

Anti-reformists may object to that sentence. It has long been their refrain that the Indian brand of liberalisation has only benefited a few and served to make the rich richer. The Chinese deal with this simply. It is enough for them that Chairman Deng said, ''Let some people get rich first.'' The Indian way has been different: The first 11 years of the reforms process have seen India's economic policy yo-yo between the complete opening up of the country's markets and cautious protectionism, between rich-friendly policies and concern for all.

The result has been a wholly pedestrian rate of growth of a little over 5 per cent for the 11 years. Still, when the country does manage to touch a rate of growth of 8 per cent, or more, it is likely to be far more permanent, far more sustainable, and far more equitable than anything China has achieved, or will do.

This composition isn't part of a new year resolution on our part to view India through kinder eyes. The country has several things going for it: the right demographic balance is the first. India is a country of the young, and will remain so even 20 years from now.

The first world, barring Japan, is grey; the Japanese, if they keep up their existing birth and death rates, will soon be eligible for the 'endangered species' status; even China, with its one-child norm, is ageing. That makes India the world's #1 source of warm bodies.

The country is already one of the largest producers of English-speaking engineers and managers. By some estimates, between 25,000 and 30,000 IIT (Indian Institute of Technology) engineers are now settled in the United States alone; in the late 1990s, some of the world's finest companies discovered the IIMs (the six Indian Institutes of Management).

In the 1980s, there were few Indians in the senior management corps of global corporations. Today, there are a few hundred-some of them in corner rooms.

That makes India also the world's #1 source of managerial talent. And as multinational companies such as General Electric, Unilever, and PepsiCo will no doubt vouch, their Indian operations boast some of the finest managers in their global network.

India's single biggest achievement in the 1990s wasn't the reforms process.

Rather, it was a milestone that went unnoticed: sometime in the past decade, Indian companies, a few at first, and then more, and then, still more, discovered that they could, by adopting the right approach to management, transform individual brilliance-the country had plenty of that-into organisational excellence.

The result is a crop of Indian companies that match wits (not resources, we are still not there) with the best in the world and came out on top.

The bottom-up journey-individual to organisational-ends there.

If organisational excellence is to translate into systemic, and then economic superiority, the government will need to get its act together.

The fundamental fallacy with the Indian style of governance has been the mistaken assumption that merit has no place in a democratic system; that, the way to maintain our democratic status is through reservation and protectionism, hand-outs and subsidies.

Actually, meritocracy is the highest form of democracy. It involves the creation of an environment that provides equal opportunities for all and then celebrates the winners.

If India can do that, there is no force on earth that can stop it from becoming an economic superpower.

Better still, we would have shown the world that it is possible to do it the right way.

 

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