Industry is thrilled with Prime Minister’s comments in Lucknow, which called out the hypocrisy around wealth creation.
Prime Minister Narendra Modi is bringing ‘Minister without Portfolio’ Arun Jaitley back to his beloved finance ministry by late August after a three-month-long hiatus during which he was recovering from a kidney transplant. This means that Piyush Goyal, who was holding interim charge, will revert to his old ministries of railways and coal without a murmur.
Jaitley’s return to Number Two position in the Modi cabinet was a given. He is too senior, has been in the BJP for too long, and perhaps is the only man in the party who has good relations with the opposition – the quintessential Dilliwallah with an enormous network of friends, family and acquaintances.
Herein, however, hangs a longer tale that has long been whispered in the corridors of power. Jaitley will certainly be back, but in his absence, Goyal is said to have been encouraged to move the pieces so as to undercut his own mentor-predecessor.
Certainly, this could not have happened without the protection offered to Goyal by Prime Minister Modi and BJP president Amit Shah.
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The first move came in early July when Goyal introduced a scheme to reduce bad loans in banks, called ‘Project Sashakt’. Led by the chairman of Punjab National Bank, Sunil Mehta, the panel recommended a variety of ways to reduce these non-performing assets, including inter-creditor arrangements.
Now this would all be very well, except that Jaitley had two years ago introduced the pathbreaking Insolvency and Bankruptcy Code (IBC) to encourage loss-making companies to sell themselves. The idea was to exhort both companies and employees to move on and not be stuck in the miasma of bad money, incompetence and even self-hate.
Bhushan Steel, now being bought by Tata Steel, is the best-cited example of the success of the IBC. All sides win here. The company losing money gets a fair share, the bank that has loaned the money to the losing company gets its loan back, and the company buying out the loss-making outfit is happy it got a good deal.
The IBC’s transparent procedures allowed both sides to state their cases in front of a tribunal and the move was much applauded by the industry.
So the question that industry is now asking is, why upset the applecart? Fact is: Goyal’s ‘Project Sashakt’ essentially unravels Jaitley’s IBC.
Here’s another straw in the wind. Even as the PM’s remarks in Lucknow a few days ago, saying he was “not scared of standing next to businessmen,” were being widely welcomed by the industry, other questions began to surface.
First, what was the need for ‘Project Sashakt’ when the IBC was already doing a good job? And, did the PM’s remarks mean that the government would now look at businesspeople more kindly than in the last four years?
There are several problems with Goyal’s pet scheme, not the least that it has been proposed by a panel led by the PNB chairman. Considering the PNB is in the throes of recovering losses worth several thousand crores from diamantaire Nirav Modi, who has simply fled abroad, the guidance is hardly encouraging.
Second, the proposal opens the door for banks to be directly involved in a three-tier repayment of loans. So if the banker likes your face, or more importantly if s/he gets a phone call from a certain powerful someone saying, ‘Iska thoda paisa maaf kar do,’ or please give him a discount on his debt, the banker may have no choice but to agree.
The charge of cronyism has begun to attach itself to ‘Project Sashakt’. The questions are refusing to go away. In contrast, the IBC left it to the buyer and seller to decide how they wanted to cut the coat according to their cloth.
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Murmurs in the industry, that goalposts are being shifted because of the coming state and national elections, are becoming louder.
As for the PM’s remarks in Lucknow, industrialists are certainly thrilled that at last someone is calling out the hypocrisy over the creation of wealth. The PM had tweeted at the time:
India is proud of our industry and industrialists. They contribute greatly to national growth.
Some people publicly abuse industrialists but privately expect industrialists to kowtow in front of them.
I am happy to engage with industry and work with them for India’s prosperity. pic.twitter.com/COh7Htmjyq
— Narendra Modi (@narendramodi) July 29, 2018
To which, industrialist Anand Mahindra replied:
A much-needed vote of confidence at a time when only one unfortunate face of industry was being perceived…धन्यवाद @narendramodi https://t.co/jZMpb5C7vC
— anand mahindra (@anandmahindra) July 29, 2018
According to the Association of Democratic Reforms, a think-tank which tracks political funding, the BJP has received Rs 991 crore in corporate donations since it came to power in 2014, compared to Rs 173 crore to the Congress party.
The PM is right. It is so much better to say who is funding whom, upfront.
But some industrialists and entrepreneurs are also wondering whether the PM’s Lucknow comments are a vote for Goyal and ‘Project Sashakt’ and thumbs down for Jaitley’s IBC.
As the PM moves the chess pieces in the last year before general elections are called, both the industry and the general public are closely watching Jaitley’s impending return to the finance ministry – and how he’s going to deal with the changes that have taken place in his absence.