March 5, 2016
Yesterday, at a Panel discussion organized by the Pune International Centre, Dr Ajit Ranade, Economic Advisor to the A V Birla Group, who moderated the discussion, remarked on the fact that three economists actually were agreeing on their assessment of the Budget as a ‘Good Budget’. The speakers were Dr Rathin Roy, Director, National Institute of Public Finance & Policy, Dr Rajas Parchure, Director, Gokhale Institute of Politics & Economics, Dr Bhattacharya, Director, National Institute of Bank Management. All gave the FM a clear thumbs-up!
In his recent Budget, the Finance Minister (FM) appears to have delivered on his commitments. He has kept his promise of keeping Fiscal Deficit (FD) to 3.9% this year. He has also stayed with the promise to reduce Fiscal Deficit this year by aiming for a 3.5% FD in the Budget for 2016-17. Besides following-through on promises, the FM has taken a number of steps to keep the Fisc in fine fettle. A single example is the Government’s borrowings activity. While last year’s Budget had targeted Borrowings at Rs 5,55,649 crore, the revised estimates peg them at Rs 5,35,040 crore, and in the coming year the target is even lower at Rs 5,33,908 crore. This is possibly a historic first, as Dr Parchure mentioned.
Why is all this relevant to our discussion on Governance? All three economists said that for the first time they are seeing a Government staying on the path of Good Governance. They all, of course, acknowledged that oil prices dropping by 70% was a stroke of luck for the government, and that passing on only 20% of that to consumers meant an ‘indirect tax’. But all were happy that the Government did this and stayed within the Fiscal Deficit target. This has meant that all financial markets have shown a positive appreciation (pun intended).
It is time for Corporate India to take notice and start adopting practices that will bring about more good governance. A good example is worth following. Especially on the background of all the talk of NPAs that are occasioned by large corporate borrowers not meeting their obligations to the Banking system. But..
‘Governance is diametrically opposite to sex. We would like to have sex but wouldn’t like to talk about it. We would like to talk about Governance but wouldn’t like to have it.’
– a Corporate Leader
Why is this so? And even in highly reputed companies?
Apart from care, which we’ve discussed a lot, Governance means commitment to deliver on promises, ethically and with transparency. This is challenging to stay with, day in and day out. The temptation to succumb to expediency is usually higher than the high-mindedness required to follow through on your promises, and stay ethical and transparent.
Most businessmen think they are in a war, with the whole world as their foe. This is simply not true. Seeing the falsehood of that approach is critical to good governance. When Directors are clear that they are responsible for maximizing shareholder value, while simultaneously taking care of employee, customer and societal interests – performance to promise, ethically and transparently, becomes second nature to them. Governance then becomes something to enjoy talking about and doing. Then, ensuring the right thing is done and seen to be done, first becomes a conviction, then an action, over time a habit and eventually corporate culture.
Directors must, now more than ever before, lead from the front – speak of good Governance and walk their talk! And, where they see Government not practising what it preaches, they must ask their Business Associations to speak loudly, demand implementation and get it! The more CII, FICCI and ASSOCHAM and the like get vocal, the more responsive Government will be.