The Future of Corporate Sector in India

By J. D. CHOKSI, S. L. KIRLOSKAR

Summary

Issued as a Forum of Free Enterprise booklet, ‘The Future of Corporate Sector in India’ gathers two contributions on the place of private industry in late-1960s India. Part I, ‘The Corporate Sector & Political Parties’ by J. D. Choksi (based on a talk delivered under FFE auspices in Bombay on June 20, 1968), is a wide-ranging indictment of government over-regulation of business; Part II, ‘The Stock-Holders and the End of the Managing Agency’ by S. L. Kirloskar, defends the managing agency system against the imminent legislative move to abolish it. Both pieces argue that economic decisions are being driven by political motive rather than economic logic, and that India’s corporations should be placed above politics yet subject to the law. The rendered pages contain the whole of Choksi’s part and the opening of Kirloskar’s part.

Essays

The Corporate Sector & Political Parties

By J. D. CHOKSI

J. D. Choksi, writing as a ‘non-political industrialist,’ argues that twenty-five years after independence India’s political leadership has shown ‘almost complete amnesia’ on economic matters, and that professionals and industrialists erred in leaving government and economic policy to politicians. He surveys the damage done by indiscriminate licensing, price controls, and constant amendment of the company law, taking the steel industry and the J.P.C. price-fixing machinery as his central illustration of how government distribution policy paralyses a basic industry. He defends the managing agency system as a sound organisational structure that the Company Law already adequately restrains, calling its proposed abolition ‘an amazing instance of the complete waste of public funds and public time.’ Choksi closes by turning to the proposed ban on corporate contributions to political funds, arguing for a transparent, audited system of election funding rather than a ban that merely drives money underground, and insisting that corporations be placed above politics but always subject to the laws of the nation.

• Twenty-five years of independence have produced economic ‘amnesia’ among India’s political leaders; industrialists share blame for ceding the field.
• Indiscriminate licensing, price controls, and incessant company-law amendments have set the economy back.
• Steel is the central illustration: government price-distribution policy and the J.P.C. mechanism leave the industry ‘suspended in mid-air.’
• The managing agency system is a legitimate organisational structure already curbed by Company Law; its abolition is a waste of public funds and time.
• On political funding, a transparent, audited system is preferable to a ban that drives money underground (‘black money’).
• Corporations and industries should be placed above politics but always subject to the laws of the nation.

The Stock-Holders and the End of the Managing Agency

By S. L. KIRLOSKAR

S. L. Kirloskar, described as ‘an eminent industrialist,’ opens his contribution by questioning whether it is even worth re-arguing the managing agency case when the abolition bill is already ‘on the anvil’ and Parliament is swayed more by political expediency than economics. He observes that a younger, post-war generation conditioned to accept economic restraint as natural is gaining ascendancy, and that the social and economic thought of the fifties and sixties has been hostile to institutions like the managing agency. He insists that no decisive case has actually been made against the system itself — the Monopolies Commission and a recent government committee both failed to clinch it — and that the move to abolish it is ‘chiefly, perhaps even wholly, political’ rather than driven by economic logic. He begins to re-examine the ‘core’ of the system as a historical response to two scarcities — of venture capital and of entrepreneurial talent — warning stockholders not to be misled by the apparent present-day availability of capital. The rendered pages capture only the opening of his argument.

• The managing agency abolition bill is already ‘on the anvil’; Parliament is driven by political expediency over economics.
• A post-war generation conditioned to economic restraint is rising and is hostile to institutions like the managing agency.
• No decisive case has been made against the system; the Monopolies Commission and a recent committee both failed to clinch it.
• The drive to abolish it is ‘chiefly, perhaps even wholly, political,’ not grounded in economic logic.
• The ‘core’ of the system was a historical answer to scarcity of venture capital and of entrepreneurial talent.

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