The poster boy of Indian entrepreneurs of the 21st century, Narayana Murthy, is back in business at Infosys – the third biggest Indian tech firm – with a renewed mission to reverse the slide that had happened in his absence. Of course the economic slowdown had its own role to play, but the Infosys slide has been mainly engineered by a rising attrition rate, probably because of eroding values of employee welfare; values that were initially laid down by Murthy himself. The catchword of ‘employees first’ resonating with equal importance to ‘customers first’ was pioneered in India by Infosys, not just as a business strategy to foster higher revenues but also higher happiness levels of its workers. You can call it altruism, but trust me, despite some new-age philosophies preaching against this construct, it is better than the ‘me only’ capitalist doctrines. Even the heartland of United States that was built on the ideals of ‘survival of the fittest’ and showed little sympathy for those who couldn’t make it, has been eventually forced to acknowledge the pain, frustration and miseries of the weak as was evidenced through the Occupy Wall Street campaign and President Obama’s second term.
Barack Obama is often castigated by the Conservatives and media for being a socialist, and hence labeled as weak – a typically stereotyped capitalistic prophecy – only to find out that the overwhelming middle-class voters are behind him, despite his belonging to a racial minority. That’s leveling scores of socialism with capitalism, which many thought is indispensable. Without any doubt, capitalism forms the backbone of almost any economy; and centrally-controlled government planning or equal wage distribution based on principles of communism alone cannot take a country far and on the path of being economically prosperous. But an equitable distribution of wealth is as much important in an economy as ‘wealth creation’ per se is. And Narayana Murthy understood this perfectly, an understanding that set the standard for ESOPs in Infosys. He distributed Rs.50,000 crores among his employees and made all of them shareholders of Infosys. Even when he founded Infosys with his and his wife’s savings, in a first ever in India, he made his top employees top shareholders of Infosys, making many multi-millionaires. That’s socialism at its best – upholding dignity and ownership from the topmost to the lowermost in a flat employee structure. But that doesn’t mean he did not pursue capitalism – Murthy created wealth through capitalism and prudently distributed it to his people as an exemplar of socialism. His motto of following capitalism in his mind and socialism in his heart was thus fulfilled. Truly, this set the pattern for many others in similar businesses; and Indian entrepreneurs, at large, now follow his exemplary principles as Murthy showed that it is possible to build a business empire with socialist values.
If it can be done at the micro-level of a firm, is it impossible to do the same at the macro-level of a country? Although the picture of an economy is more complex than that of a firm, clusters of firms do make an industry, clusters of industries do make a sector and sectors do make an economy. Countries like China, Brazil or even Japan are live examples of more or less successful economies based on the capitalist model but with a socialist face. And that is where India made a mess of it. After liberalization in 1991, India’s economic policies attempted to mimic those in Western economies and thus wholeheartedly were capitalist in nature. Even though factors like labour laws, tax breaks of primary sectors, farmers’ subsidies et al still have the socialist bend, our focus has still been completely redirected towards wealth creation at the expense of the interests of the labour class and farmers. Consequently, the primary and secondary sectors have been largely neglected, leading to a lopsided growth trajectory. The divide between India and Bharat hasn’t been more conspicuous, with a rapid flux of rural migrants flocking into the streets of the metropolises, forced to live in the most inhuman conditions to make their living.
The question remains: why are people of hinterlands forced to migrate in the first place? Even in capitalist states like United States, the geographical distribution of wealth is much better than is the case in India! The Human Development Report (HDR) brought out by the Indian Planning Commission (in the year 2011) admitted that Indian wealth distribution is highly skewed, contributing to an ever increasing gap between the rich and poor. A research carried out by the government affiliated Institute of Applied Manpower Research (IAMR) on the indicators of consumption expenditure, education and health revealed that the top 5 per cent of all households in India represent 38 per cent of assets while the bottom 60 per cent represent only 13 per cent. The gap is more vivid in urban centers where the lower 60 per cent of households account for just 10 per cent of wealth. The sustained neglect of agriculture and manufacturing sectors has had its cost, with farmers and casual labourers being at the base of asset possession classes. India’s Gini Coefficient, a factor that measures wealth inequalities, is at a precarious 0.669 as compared to China’s 0.550 and Japan’s 0.547 (the higher the coefficient – which varies from 0 to 1 – greater is the inequality between the rich and poor). China, for instance, is a classic model of taking the best of capitalism and socialism. It opened up its economy in 1978 to ensure a spur of capitalist ventures, domestically as well as from outside; yet, their policies kept control of the investment patterns geographically and of their effect on various social groups. China has, till date, kept the core industries under government control; and even till date, around 41 per cent of the industrial capital is held under SOEs (state owned enterprises). Contrary to the travails gifted by Indian economic policies, there has been much public sector growth in China in various strategic industries – like oil, coal, telecom, transport and equipment.
Chinese public sector firms are making their presence felt even in non-strategic sectors like textiles and paper, and are literally spread out in every nook and corner of the nation. They have proved that SOEs can work and make profits and can even compete with multinationals; whereas in India, we have given up the prospect of depending on public sector undertakings hands down, ever since foreign investments crept into our system, leading to the previously mentioned lopsided growth, along with rising stress and reducing happiness levels in our society. Further, agriculture reforms have been utterly neglected with little emphasis on modern farming techniques and micro-finances to farmers, forcing them to migrate to urban centers looking for menial jobs. Often tagged as the long term cure for an economy, China’s spending on education is many light years ahead of us. While in 2010, China spent $12 billion in funding universities alone, India’s corresponding budget was limited to $860 million. In emerging economies, India’s literacy rate is one of the lowest among the countries with high social spending, like China and Brazil, which are quite a distance ahead of us. While India’s literacy rate is pegged at 73 per cent (which too is quite questionably high a figure), China’s rate is hovering around 94 per cent and Brazil’s at 90 per cent. In healthcare too, India’s sordid story continues – Russia spends $1043 per capita (5.6 per cent of GDP) in purchasing power parity terms, South Africa spends $930 (9.2 per cent), China $347 (5.1 per cent) while India languishes at $124 (4.2 per cent) – being at the bottom of the table here as well.
Thus, India’s empathy deficit on welfare of the masses has been a major hurdle to its economic progress. It doesn’t, however, take away windfalls of economic growth that lifted as many as 200 million out of the poverty rut in the last two decades and created a landscape of neo-middle class that has been a potent engine for our march forward. Still, poverty is relative and the increasing gap between the affluent and underprivileged is bound to create an undercurrent of resentment and deep-down frustration in India’s socio-economic paradigm. A soothing effect of an evenhanded wealth, income and growth spread – a la the benchmark of Infosys – can leverage long-term sustainability and accountability of our progress graph. As the vision in Infosys percolated from the top, so should our Prime Minister roll down a humane economic model and breed a culture that is just and compassionate. Narayana Murthy ensured that biased and partial appraisals of his employees were checked at all cost. As ups and downs are part of life, the underperformers in our society should be given a fair chance to redeem themselves. India’s socio-economic mores should inculcate similar values and the drive has to come from the top. Unfortunately, we are moving away from the vision of Mahatma Gandhi who taught similar principles of life – a mad rush towards growth, revenue, profits and bottom lines alone is not going to produce a just and happy society. It is time enough that our main political parties realize the importance of India’s social wellbeing alongside its economic advancement.
- 06 June 2013 |
- Dr. Arindam on Indian Economy