Return Of License Raj

THE SIGNS ARE everywhere: the Licence Raj is back but with a new set of clothes.

- Minhaz Merchant

Three respected business leaders – Uday Kotak, Rahul Bajaj and Anand Mahindra – have spoken out recently on how over-regulation across taxation, markets, banks, pharmaceuticals, telecom and other sectors is reversing some of the gains made by economic liberalisation. They complain of the “proliferation of regulations in business” that compel them to follow the letter, not the spirit, of regulations.

Kotak Mahindra Bank Vice-chairman and Managing Director Uday Kotak didn’t mince his words: “When one takes a view that let’s follow the spirit, and the letter is not clear, you get a push back (saying) ‘this is the rule: have you followed it or not’. You get a slap back. If you play for spirit, you run into problems. I’ve no ability to question spirit (so) let me follow rules. We are living in this world where we are going in a transition from principles to rules.”

Kotak – who ironically has been appointed by the government to head the Infrastructure Leasing & Financial Services (IL&FS) board and clean up a fraudulent entity that has created a liquidity crisis in the financial sector – launched a broadside on the government’s tendency to over-regulate: “In the early days of my career, I was very comfortable to hit the ball on the line. I’ve now come to a view (to) make sure you hit the ball inside the line. If it hits the line, then it is the umpire who decides whether it is outside or inside, so make sure that, come what may, work towards following the rules but hit the ball clearly inside the line. If you look at reputational risk, you are first hung in the court of media well before you go out to the real world.”