DARE - Because Entrepreneurs Do

DARE Webinar’s second day had Sandeep Parekh Founder and CEO of FinSec Advisory Firm.

Sandeep Parekh spoke on regulations and its impact on businesses. He would like the Government and Government regulations to regulate the market as opposed to controlling the market. He conducted few objective tests on current stands of India and the areas where the reforms are required. Sandeep took references of "Global Competitiveness Report 2010-11" of the World Economic Forum. He discussed each of the issues where we are going wrong and the way we can rectify them. He said, “Hopefully we will able to improve on those areas by discussing them.”

Sandeep read out the few pages from the Global Competitiveness Report where he particularly mentioned the following sentences: India’s performance remains quite stable, falling two positions to 51^st but with a small improvement in score. India’s competitiveness is based on its large market size and good results in more complex areas including financial markets (17^th), business sophistication (44^th), and innovation (39^th).

On the other hand, India has failed to improve significantly on any of the basic drivers of its competitiveness. It ranks 104^th in the health and primary Education pillar, with high rates of communicable diseases and high infant mortality. Indeed, life expectancy in India is 10 years shorter than in Brazil and China. And although primary enrollment is becoming universal, the quality of primary education remains fairly poor (98^th). Higher education also remains a weak point, with low enrollment rates at the secondary and tertiary levels. Infrastructure (86^th) is in need of upgrade, especially with respect to quality of roads, ports, and the electricity supply, with India falling 10 places in this area this year. The macroeconomic environment continues to be characterized by persistent budget deficits, high public debt, and high inflation. Labor markets are also in need of greater efficiency and flexibility (92^nd).

He cited examples from the report where he referred to a chart showing comparative analyses of India’s performance in comparison to the developing Asia countries. The chart shows how other countries are doing significantly better than India including the last 2-3 years. As per the report, India has achieved only in having bigger market size. This, as per Sandeep is more of function of population of India rather than how well we are doing.

The report actually breaks down competitiveness into 12 pillars. He discussed each pillar. Before elaborating the micro issues he discussed the most problematic factors that are hindering doing business in India. The finding is taken from World Economic Survey. As per the survey the most problematic sector is inadequate supply of infrastructure. The second most problematic issue is corruption which is linked to inefficient Government bureaucracy. Access to finance, Sandeep says, “India has serious problems in access to finance and financial inclusion. In tax regulation, India has high taxation.” He stressed on the policy instability which again goes to instability in the policy framework and the regulatory framework. Sandeep said, “So it’s very clear that all these issues are related to regulatory and efficiency issues in the Government.”

Next Sandeep talked about the 12 pillars. He said each of these pillars relates to today’s discussion. From these 12 pillars Sandeep picked up the issues where India ranked fairly low. He said property rights and intellectual property rights are ranked 60 and 61 respectively comparing to other 139 countries that depicts India’s position in terms of competitive advantage is fairly low. He said no business can particularly run without proper intellectual property protection. Next issue he picked up was the irregular payments and bribes. He said because of this bribe giving and taking many regulations are brought in mainly to control this scenario and that’s the only purpose of these regulations. But most of the regulations are useless and these regulations make easy to collect bribes.

The health and primary education is the next issue. Sandeep felt need of a healthy population to have quality output is obvious and also there is a need of high quality of education. He said, “You can not build on a weak foundation, so the primary education is very important. So we are clearly doing extremely bad in terms of quality education of all kinds of education-be it primary, tertiary education which means that we are stealing from the future”. The happiest outcome of the survey is the financial market development that is impressive in India.

Sandeep shared, “I think India is a fantastic market to access to capital which means you don’t need to go abroad and acquire capital. You can get it here and scale up which many companies have done”. As per the report, India has achieved good position in business sophistication and innovation parameter. The outcome of the survey in this segment is quite impressive and which only shows how hungry Indian entrepreneurs are. The subheads like local supplier quantity India ranks 7^th in the world out of 139 countries, in state of cluster development India ranks 29^th, in value chain breadth India’s position is 42, and in producer process sophistication 43^rd.

Sandeep concluded the discussion by saying, “Lot less control has to be put in place, there has to be single window clearances for business. Clearly there has to be roles for regulations, as we can not have pollution, we can not have another Vopal Gas tragedy but given those regulatory safeguards I think the Indian entrepreneurs needs to be set free. Less impediments to availability of capital and technology and I think the Indian entrepreneurs are hungry to capture the world so I hope the regulations don’t come too much in a way.”

Questions:

Q. We have ranked so low in primary education so how we can make a difference?

A. Let there be for-profit educational institutes that we are opposed to in last 40- 50 years. Let capital chase the best quality and hopefully in the next 10-15 years we will be able to see the private sector institution creating the right educational institutes that will affect our technology, economy and on innovation and on how better Indian business economy becomes.

Q: Tell us how regulatory environment is affecting your businesses?

A. I realize the issues from my clients’ perspective and as I run a financial advisory firm, I see that in service industry, India is doing very well. In this segment regulatory issues are substantially low. I would say I am in the happy situation of the regulation where very few regulations exist and the service sector is not very affected by Indian regulation. So I will not be able to say in terms of goods and manufacturing sectors.

Read the reports of previous Eweek Webinars here.

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