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Eye on India: T. N. Ninan Weighs In on India and Its Prospects

By Deepa Agarwal Email By Deepa Agarwal
December 2017
Eye on India: T. N. Ninan Weighs In on India and Its Prospects

A report card, of sorts, from one of India’s leading newspapermen. In an interview with Khabar, the well regarded veteran business journalist provides his candid, balanced, and seasoned views on demonetization, GST, corruption, and a lot more.

T.N. Ninan, the current Chairman and Editorial Director of the Business Standard Limited, publisher of India’s second largest business daily, is one of the most widely respected business journalists of our times. As the former mastermind editor of The Economic Times, largely responsible for its success, and the former executive editor of India Today, Ninan has shaped and transformed business journalism in India.

Over the course of his remarkable career, Ninan has had the coveted front-row seat in the tumultuous roller-coaster ride of the Indian economy.

He was recently in Atlanta as part of Emory University’s Sheth Lecture Series in Indian studies, where he spoke about “The Challenges of Being a Latecomer: When the Rules Have Changed”. As in his 2015 book, The Turn of the Tortoise, Ninan discussed the successes and failures, the strengths and weaknesses, and the past and future of the Indian economic story. The following are excerpts from our interview after his talk.

There is a view that, especially, large media houses in India have an unholy alliance between commerce and content. We have heard of special interests being able to buy content. What’s your take on it?
That is true and it is most regrettable. I think it began when the leading business houses started completely underpricing the end product. You get newspapers in India at a lower price than anywhere else in the world, other than free newspapers. Even today, most of these papers are available in India for less than 10 cents, even as low as 5 cents or less. This creates huge dependence on advertising revenue which can put the advertiser in the driver’s seat. So that is part of the problem. But increasingly, the smaller and medium-sized newspapers are raising their cover prices. If that process continues, then this dependence on the advertiser will go.

But I think fundamentally, our publishers have to bear responsibility for not holding true to the values of the profession and for being primarily businessmen more than publishers. It’s a real problem when your first objective is to make as much money as you can and the objectives of the media are treated as secondary. The reader has to make a choice and say, I will go with the guys whom I can trust. But, you know, all markets have stickiness. You have an established, distinguishing structure, you have a presence in the market, and it is hard to replace that.

Readers tend to favor media outlets that are in sync with their opinions. As a result, do you see a rise in opinion-based journalism? We see that, in the U.S.
Right, a person who watches MSNBC would not watch Fox. So that manifests itself in India, too. But less so with newspapers, because newspapers don’t take such hard positions where you will see a “Fox” kind of newspaper. You get broad spectrum newspapers that tend to cater to all needs. They have a certain slant or they may have a set of opinions which you may or may not like. But “The Hindu kind of reader” in India is different, let’s say, from “The Hindustan Times kind of reader.” And “The Telegraph kind of reader” is different from “The Times of India reader,” and “The Indian Express reader.” So, readers also choose what they want, and what they like. They should.

India topped the World Bank’s growth outlook for the first time in 2015-16 when the economy grew by 7.6 percent. However, this optimism is not reflected in foreign direct investments in India. And most Western companies seem to have grievances with India with regards to obstructionist policies. You see these promising numbers but they don’t translate into increased confidence for investors, specifically. To what do you attribute that?
I don’t think I agree with the proposition itself. There is no shortage of foreign investment. We’re running at 40-45 billion dollars a year which is not small. I don’t think there are that many emerging markets which get that kind of money every year in relation to GDP. Our economy is not short of dollars. Our reserves are climbing all the time; in the last one year they’ve climbed a lot, actually.

I was thinking in terms of Walmart, and Carrefour, the French retail giant, which had so much trouble opening in India a few years ago.
The rules are the same for everyone. Those are not different for foreign investors from domestic investors. If you say there is discrimination, then you can say Walmart has a complaint. But when [Indian companies like] Reliance or Tata want to do something, the rules for them are exactly the same as for Walmart. There are rules about single brand retail, rules about multibrand retail, where you can go, what you can do. But Walmart is coming in, Ikea is coming in, several large retailers are coming in.

India Inc.’s strong performance numbers don’t seem to have translated into a better standard of living for the masses. Most common people in India still have to struggle with an infrastructure that is not so great, a public health system that is not so great, a public school system that is not so great…So there seems to be a disparity between these encouraging numbers and life, in general, for the regular people.
Ok, I understand what you are saying; it’s all true and valid. But you are talking of an economy with a per capita income of about 1800 dollars. You are comparing it with whom? You’ve got to understand that despite India’s rapid growth over the last quarter century, it is still essentially a poor economy. There are about 180 countries in the world. But just 40 large economies account for 90 percent of the world GDP. India is 6th or 7th largest among them. But we have by far the lowest per capita income among those 40 countries. Number 39 is the Philippines, and the Philippines has a 50 percent higher per capita income. So, when you are the poorest economy among the Big 40, you will have shortages of infrastructure, you will have problems with your public institutions. You’ve to recognize that despite the growth, India is still essentially a poor economy.

Then, are we being overly optimistic about India when we flaunt its growth numbers?
No. You have to look at the rate of change. Let’s say that 10 years ago, 30 percent of an age group of students were in school. Today it’s 90 percent. Is that progress? Yes, it is. What is the quality of our schools? Not very good. But you have to tackle each problem as it comes along. It’s a process of time. And it takes half a century for a country to get somewhere. And we have started later than the others. Korea, Taiwan, Malaysia, Thailand, they all started speeding up in the 1950s and 60s. We started in the 1990s. China began accelerating in the 70s. So, we are fifteen years behind them. Give it fifteen years, and then you see. Almost any metric you can see… 1980, what was India’s literacy rate? 40 percent. Today what is it? 70 percent. If your starting point was very low, then it will take a longer time to get up there. And at each stage, you are dealing with a new problem. You can’t say overnight that all problems will be solved. Should we solve our problems faster, should we improve our schools faster, should we improve our public hospitals faster? Yes, of course. Does it take time? Yes, it does.

What’s your opinion on the demonetization experiment?

You think so? It was supposed to account for all the black money.
Did it? Did it? Wrong decision, badly executed without planning for it. So, no currency notes available, wrong size currency notes, nobody’s prepared for it, they hadn’t thought through the economics of it. Most black money is not held in cash. Everybody knows it, knew even last year, that most black money is not held in cash. Even if you deal with the cash, that’s just the stock of cash at that point. But black money is generated every day through transactions. There is a stock but there’s also a flow. So, demonetization doesn’t affect the flow, it only deals with the stock and stock is only a small part of the problem. And within stock, cash is a small part of the stock. So, bad decision.

That brings us to the other issue, corruption. I guess that is one of the big reasons why India has not done as well. What will it take to curb corruption?
Let me say that you are right. Most countries have gotten away with [certain levels of] corruption because the man on the street doesn’t have to face corruption every day in the normal transactions with government. But increasingly even in India you don’t. You can apply for a passport and get it, like I did, in 48 hours. Everything is digital. Just go there for getting your stuff put on to the page. There was a queue. But you wait and you’re out of there in two hours, and two days later, the passport was delivered to me at home. You want a driving license? You don’t have to pay any money, it’s all digitized. You want to pay property tax? You can do it digitally at home from a computer, which I do. Earlier, to get any of this done, you required an interface with some official at one point, but today you don’t! You can pay your income tax digitally. The scrutiny is done by somebody in some other city. So he can’t ask you for money. The digitization process has helped to get away with a lot of retail, petty bribery that people had to do. It hasn’t gone away completely. You still have issues with tax officials and policemen particularly, but it is very much less than before.

The big corruption will continue whether you hear about it or not because political funding depends on unaccounted money. As to business level corruption, I think this government is cleaning up. It’s never complete, never fully successful. Nowhere, in no country, is it fully successful. But I think, once again, I focus on the rate of change. You can say there is a problem. But has it gotten better? It’s like a still snapshot and then you take a moving camera. You see that as the camera moves, the situation has gotten better.

What is your opinion on the national Goods & Services Tax (GST) that the Modi government introduced recently?
I think they should have waited a little bit and made sure their systems were properly tested and in place before they launched. They had time till 1st September to launch. I think they did it in a hurry to launch on 1st July. The system was not fully tested; the software packages were not fully in place. The capacity of the system to deal with all the applicants was not enough. So, you have this whole problem of people struggling to upload and failing to upload. As a newspaper, we kept saying the government should go slow, make sure the systems are in place before jumping into it. They jumped in too early, so we’re paying the price in terms of operational glitches. It will sort itself out within 3-4 months. There were compromises also made on multiple rates of taxation, which is a problem, but they are saying they will bring it down over time. It has been introduced in a messy fashion. Hopefully, having started in a messy fashion, they’ll clean it up.

Bangladesh and Vietnam, which are far smaller than India, enjoy much more trade than India with countries like the USA. So, though globalization has helped India, why is it falling behind smaller countries in these important markers of growth?
Bangladesh wages are two thirds of ours. Our wages are 1.5 times Bangladesh. So, in a labor-intensive segment like garment manufacture, they will be cheaper. And they get privileged access to the European Union market at lower duty rates because they are considered least developed. We are not least developed, we are considered lower middle income but they are considered least developed, so the Europeans give them privileged tariff-free access. So that also helps their exports.

But I take your point. Your questions are all valid but I don’t think that we can compete with Bangladesh on costs. You have to compete on some product differentiation or some additional design element. And our labor laws don’t help. So, we have lost out on the garments business. We used to be bigger than Bangladesh, now they are much bigger than us. So we have to deal with these issues—and we don’t deal with them as quickly as we should! But I also want to add that the Chinese are outstanding. They are the world’s leading manufacturer and world’s leading exporter and we are nowhere in comparison. But if you take exports in both goods and services, then in relation to our GDP, we export more than China does. Each country has its own strengths.

Deepa Agarwal is part of a Peabody Award-winning team at CNN International, where she is a freelance Planning Producer and was formerly a full time Editorial Producer.

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