Business-Government Understanding

Summary

Naval H. Tata, then President of the Employers’ Federation of India, delivers an address (originally given at the Mahratta Chamber of Commerce & Industries in Pune on 4 January 1984 and reissued as a Forum of Free Enterprise booklet on 14 February 1984) that diagnoses the strained, suspicion-laden relationship between Indian business and the Government three and a half decades after Independence. Tata argues that the working partnership the mixed economy presupposes has not materialised: businessmen complain of a cobweb of laws, unimaginative tax policies and licensing restrictions, while bureaucrats and public-sector heads in turn suspect industry of taking the Government for a ride. He calls on Chambers of Commerce to do their own soul-searching, to defend the legitimate role of large houses against populist campaigns, and to enlarge their membership base by absorbing small-scale units rather than letting an artificial small-vs-large quarrel be weaponised against the private sector as a whole.

The second half of the booklet is a concrete eight-point reform list addressed to the Government: relax penalties on units producing above ‘licensed capacity’, permit orderly closures and mergers of sick enterprises instead of nationalising them, revisit a ‘prices and incomes’ policy under which 9.6% of the labour force (the organised sector) captures 33.9% of national income, prevent the unorganised cotton-textile sector from throttling organised mills, soften the Industries (Development and Regulation) Act and the MRTP Act, and revive the Air-India formula of 51:49 joint-sector partnerships. Tata closes by insisting that ‘mixed economy’ is not incompatible with ‘free enterprise’, invoking the U.S. 19th-century example and India’s own Green Revolution in Punjab to show what flexibility and private initiative can achieve, and pleading for a meaningful dialogue in which the private sector is treated as a co-equal stakeholder in national policy-making rather than an object of suspicion.

Key points

• Frames the Chamber of Commerce’s primary duty as activating a working relationship between Government and business, and treats the prevailing ‘gulf of misunderstanding’ as the central problem of post-Independence economic management.

• Rejects the populist campaign against large business houses (the ‘money bags’ attack on apex chamber bodies) as misrepresentation, defending TELCO, Bajaj Auto and Birla/Mafatla/Tata-class firms as nurturers of small enterprise rather than predators.

• Argues India’s organised labour, far from being repressed, enjoys more freedom than in almost any Third World country; defends the National Security Act and Essential Services Act as analogous to U.S. enactments invoked by Reagan against the Air Controllers strike.

• Presents an eight-item reform list: penalties on ‘over-capacity’ production, mandatory continuation of insolvent units, the bar on merger-based rescues, the prices-and-incomes distortion, fiscal favouritism toward the unorganised sector, the IDRA, the MRTP Act, and absence of joint-sector vehicles.

• Cites L. K. Jha’s ‘Economic Strategy for 1980’ as authoritative criticism of the IDRA, arguing that the Act ‘regulate[s] development but does not encourage it’ and that taxation has reached self-defeating levels.

• Argues the organised sector, just 9.6% of the labour force (employers included), claims 33.9% of national income, calling for a prices-and-incomes review in the name of social justice to the rest of the population.

• Recommends a revived Air-India-style joint sector — 51% private equity with management, 49% government with a reserve right to 2% more — as a way to align public and private capital without nationalisation.

• Closes with a defence of the compatibility of ‘mixed economy’ and ‘free enterprise’, citing 19th-century Anglo-American agricultural prosperity and Punjab’s Green Revolution as evidence that flexibility and private initiative produce miracles when government refrains from obstruction.