Use CAG Reports to Push Reforms: India Inc

Industry captains say inter-institutional fights will further dent investor confidence in India's growth story

    India Inc wants the government to frame a mature response to the three audit reports by the Comptroller and Auditor General of India (CAG) that have severely indicted its policies on allocation of natural resources and public private partnerships in the infrastructure sector, instead of resorting to a blame game and leveling accusations against the country's official auditor. 
Over the long weekend, ministers have accused CAG of "sensationalism", "adding zeroes" to notional loss figures and "crossing its constitutional mandate" after three separate audit reports accused the UPA of giving away national assets at a loss of . 3.8 lakh crore. 
While industry captains admit that the audit findings will further dent an already waning investor confidence about the Indian growth story, they believe the government could use the reports to push through necessary reforms like creating independent regulators and using transparent processes. "These (CAG reports) are about the past, we need to look at the future," said HDFC chairman Deepak Parekh, who felt that the numbers cited in the audit reports may be exaggerated and must be examined closely before he could make a more elaborate comment. 
Parekh's call for a forward-looking reaction to CAG findings is strongly backed by Rajya Sabha MP Ashok Ganguly. Both Parekh and Ganguly are members of the Prime Minister's Council on Trade and Industry. "We need a mature, objective and point-bypoint response to the CAG reports instead of the government crying foul and pointing fingers at its auditor. We are constantly lowering growth expectations and this kind of blame game won't help us move forward," Ganguly told ET, warning that India could become a laughing stock in the world if this persists. 
"Investor confidence will dip further, not because the government is right or wrong, but due to the inter-institutional fighting which reflects dissonance in the system and creates uncertainty," said Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry (Ficci), who feels that denigrating democratic institutions like CAG won't help business sentiment. Kumar warned that decision-making in the government could slow down further after these reports, a fear shared by others. "The PM's office or ministerial groups are now taking decisions that individual ministries should be taking. We will be condemned to the Hindu rate of growth if such paralysis continues," said Ganguly. 
Ganguly also stressed the need to look at the larger picture without condoning the wrong procedures that may have been followed for coal block allocations. "Maybe if these coal supplies were not opened up, the permanent power shortages could have got worse," the Rajya Sabha MP said. For instance, the stock market scam in the mid-90s masterminded by Harshad Mehta was used by the Narasimha Rao government to push through capital market reforms with a fully-empowered stock market regulator. "Forget the values, but take the message seriously and push a clean-up reform agenda for the future," suggested Ficci's Kumar. 
Vinayak Chatterjee, chairman of infrastructure consultancy firm Feedback Infra, said though investor sentiment may plummet for some sectors in the short term, the CAG reports could actually boost confidence about the long-term sustainability of India's growth story. 
"CAG's role as a watchdog must be encouraged as it shows that India is not a banana republic, but one with vibrant and fearless regulatory institutions that can put the government and industry on the mat for instances of crony capitalism," Chatterjee said. He, however, added that there's a need for clarity on CAG to pass value judgments on policy matters. 
Videocon group chairman and president of industry body Assocham, Venugopal Dhoot said the CAG reports may impact foreign investors' confidence in the India story to some extent. "… But domestic investors have already discounted these risks and we are confident that the government will be unfazed by this and complete its reform plans over the coming months," said Dhoot.

These (CAG reports) are about the past, we need to look at the future 
DEEPAK PAREKH 
Chairman, HDFC

Investor confidence will dip further, not because the govt is right or wrong, but due to the inter-institutional fighting which reflects dissonance in the system 
RAJIV KUMAR 
Secretary General, Ficci

CAG's role as a watchdog must be encouraged as it shows that India isn't a banana republic, but one with vibrant and fearless regulatory institutions that can put the govt and industry on the mat for instances of crony capitalism 
VINAYAK CHATTERJEE 
Chairman, Feedback Infra