Politics of slowdown

Jet Airways chairman Naresh Goyal’s very public outburst of emotion on October 16 when he revoked his company’s decision to lay off 1,900 employees was relevant both for what he said and what he did not—or could not. Even as Goyal claimed that the management had taken the decision without telling him, and that the staff was like family, what he did not spell out was how—and how much— political pressure had driven the U-turn. For a person adept at managing the political environment to further his business interests, this was a tacit acceptance of the fact that political environment had—at least on this occasion— become too tough to negotiate.

And it is obvious that, in these times of growing economic distress, business issues have gained political appeal. Ratan Tata, Chairman, Tata Sons, suffered because of this, although in a different vein, at the hands of Trinamool Congress leader Mamata Banerjee in Singur.

Union Labour Minister Oscar Fernandes, too, extracted political mileage from the unfortunate lynching of the CEO of an Italian company in Greater Noida by employees it had fired, and the trade unions. “It should serve as a warning for managements,” the minister had said before he was forced to apologise. Barely days before the Jet Airways’ drama, Uttar Pradesh Chief Minister Mayawati, too, tried to stall the Railway Coach factory to be built in Sonia Gandhi’s constituency, Rae Bareli, in her state.

Part of the trouble is the deep fracturing of the polity, and politicians’ search for virgin constituencies, especially as the country is gearing up for elections. “With caste, region and religion already colonised, economics is the new battleground for politics,” says Pradip Baijal, former Chairman, Telecom Regulatory Authority of India.

Goyal is not a man known to give in easily. As a hands-on promoter, he has lost senior staff because of his inability to stay out of even minor decisions. The gutsy NRI businessman had allegedly thwarted the mighty Tatas’ plans of entering the aviation business, and secured flying rights to the United States for Jet Airways, despite accusations of links with Dawood Ibrahim’s D-Company, questions by the US Federal Bureau of Investigation (FBI) and inquiries by Parliament.

And yet, last fortnight, he buckled in to pressure from a wannabe political leader. Goyal’s decision to reverse the sacking of 1,900 probationers and employees came 72 hours after threats of flight disruptions by wannabe kingmaker Raj Thackeray and his Maharashtra Navnirman Sena (MNS). Scores of Jet Airways’ sacked crew took to the streets in full regalia, and met the MNS chief. Civil Aviation Minister Praful Patel, whose first reaction to the sackings earlier had been a dismissive “It’s-a-business-decision”, hurriedly stepped in to rebuke Goyal.

The timing is another factor; general elections are around the corner, even as India is beginning to feel the heat of the global financial and economic crisis that has engulfed the West. With credit for industry disappearing and the export sector and others in danger, the country faces job cuts, pay cuts, lockouts and payment defaults. Politicians are unlikely to resist playing the saviour.

“In a democracy, it’s a politician’s job to represent people’s demands—whether right or wrong,” says Member of Parliament and FICCI President Rajeev Chandrasekhar. There is little evidence till now of business successfully warding off interference. “The company’s (Tata Motors, in which Tata Sons has a controlling stake) dream was shattered by an environment of politically motivated agitation and hostility that finally left us with no option but to withdraw the project from the state,” an anguished Tata wrote in an open letter published in Kolkata’s dailies after Banerjee forced the Nano plant out of Singur.

In fact, years of hobnobbing with the politicians for out-of-turn concessions and favourable policies has made the business class politically pliable. “If you want help from the political system, you become vulnerable to it,” says Chandrasekhar. Case in point: Goyal’s proximity to Maratha strongman Sharad Pawar, who is also Patel’s boss, is widely seen as a big factor behind the sweeteners that have swung Jet Airways’ way over the last few years and helped propel it to the top. Chief among these is the airline’s access to the lucrative Gulf routes, which the government defended by citing the national carrier’s inability to use all its flying rights to this market. “When it suited him, Goyal used the political dispensation to build his business,” says Ajay Dua, former Secretary, Department of Industrial Policy and Promotion.

An economic downturn calls for harsh choices by companies as they try to stay afloat till things begin to look up again. Nothing should be allowed to impair a company’s ability to make those choices. “The rising incidence of people mixing politics with business is very disturbing,” worries Patel. “It can create a situation where businesses will lose objectivity and shelve all hiring.”

So, though business itself is to blame for the mess, should it live in fear? “No one need fear political interference in his business strategy, if he is prepared to stand up and follow the rule of law,” says Chandrasekhar. True, but standing up is easier said than done. In Singur, Tata held up for nearly two years, putting up with a complete breakdown of law and order and the state’s inability to enforce rule of law, before giving up the fight. For India Inc. though, the lesson is clear: dance with the wolves and you end up becoming their dinner.