MUMBAIâ€" Adi Godrej is the chairman of The Godrej Group, a privately held, 116-year old Indian consumer goods conglomerate.
World Economic Forum, via European Pressphoto Agency Adi Godrej at the World Economic Forum in New Delhi on Nov. 7, 2012.With a net worth of $3.6 billion, Mr. Godrej ranked sixth on the most recent Forbes list of Indian billionaires. A graduate of the Massachusetts Institute of Technology, Mr. Godrej was recently president of the Confederation of Indian Industry, an industry lobby group, and is chairman of the board of the Indian School of Business.
Last week, he received the “Entrepreneur of the Year†award for his contribution to Indian industry at the Asian Awards in London. Mr. Godrej lives in Mumbai with his wife, Parmeshwar, and three children â€" Tanya, Nisa and Pirojsha. He spoke with India Ink about his views on the Indian economy, the need for better corporate governance practices and India’s entrepreneurial culture.
Do you think that the Indian economy can return to a higher growth rate?
Over the last six months the economy has been improving. I think the budget proposals were growth oriented and to my mind the growth in this financial year will be much better than that in the last financial year.
The government has taken some steps towards bringing in more foreign direct investment and more foreign institutional investment. There are also steps being taken to clear more projects. The Cabinet Committee on Investment has been formed and has been steadily clearing projects that have been stuck for a while. The Goods and Services Tax is the most important reform step and there has been some discussion on that. If that is passed, I believe we will see a 2 percent increase in growth, all other things being equal.
What are other important policy steps needed to accelerate growth and ensure it is sustained?
First of all, the government should make disinvestment a top priority so that the fiscal deficit comes down. Secondly, the government needs to liberalize the rules for foreign direct investment and foreign institutional investment, and many steps have been taken by the finance minister towards this aim. Thirdly, there are many projects currently being held up because of environment and defense clearances, and a cabinet committee has been created to look into this. Lastly, there have been certain steps taken against multinational companies that have harmed the perception of India in the eyes of foreign investors and this issue must be addressed.
In several instances, the Indian government has applied retrospective legislation recently, creating anxiety in the international business community. What steps should the government take to improve investor confidence?
Any retrospective amendments must be done away with entirely. The finance minister has said that once this Vodafone case has been wrapped, he will put an end to it. I think that in itself should do a great deal to improve investor confidence in India.
The government is currently looking into a report on corporate governance by a committee you headed. What does the report recommend?
People should be encouraged by things like awards given for corporate governance practices. The market is already rewarding this through better price-to-earnings ratios. The guidelines for corporate governance should be very clear, and this is something that the committee has asked for.
However, at the same time guidelines that are too detailed and entail too much interference do not have good results. Not everything can be done through rules and laws. Corporate governance should be done more through principles than rules.
Some of these principles are fair dealing with non-promoter investors, transparency in dealings, clear mention in the annual reports of companies on various aspects of the business, standard accounting procedures should be followed.
What are the challenges to fortifying accountability and transparency in governance?
The formation of a Lokpal or an ombudsman is important because all forms of malfunction and corruption must be exposed. But in the long term that is not enough.
The government must also reduce, as much as possible, the case-by-case method of passing projects. In all countries across the world this has been proven as a step that reduces the opportunity for corruption. Politicians and bureaucrats must learn to stay away from the day-by-day functioning of business.
In what ways can industry and government work more closely together to bolster growth in India?
Industry has made many suggestions to the government and the government has heard industry, and is taking these suggestions into consideration. However, industry also has a role to improve India’s image. Industry should work with the government to remove negative perceptions about India. There is no use of talking about the country’s negative aspects. We need to start changing things.
What can be done to improve the environment for entrepreneurship in India? What can companies such as Godrej do to create opportunities for entrepreneurship?
India has always had a very big entrepreneurial culture that has often been the driver for growth in the country. India has a lot of latent entrepreneurial talent that should be encouraged.
Angel capital should be made available to entrepreneurs who are at the starting stage. For those reasonably established entrepreneurs, venture capital is already available. However, angel capital, which is one of America’s great strengths that has allowed entrepreneurship to flourish in the country, is a little weak in India.
India ranks very poorly on various indices for the ease of doing business, our ranking in the World Bank ratings has recently fallen even further. Improving the ease of doing business is extremely important for encouraging entrepreneurship.
Also, larger companies need to allow “intrapreneurship†â€" that is, entrepreneurial ideas within big firms â€" to take root. The latent entrepreneurial nature is present. It just needs to be allowed to bloom.
What impact is the upcoming election having on current economic policy reform?
I think reforms are going ahead at a strong pace despite the fact that the elections are about a year down the road, and I don’t foresee any stoppage in the near future. Over the last six months the government has been pursuing its reform policy quite strongly and it has said again and again that it will continue to do so. I am quite optimistic about India’s future.
(The interview has been lightly edited and condensed.)
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