Rotarians gain insight into the financial revolution in India
Nasser Munjee
Educated in the UK and the US, Nasser Munjee’s entire career has spanned the creation of financial institutions in India.
His career began with the creation of the first mortgage company in India — the Housing Development Finance Corporation (HDFC) — with which he was associated for 20 years, rising to be its Executive Director. Munjee was appointed on the executive committee of the International Union of Housing Finance Institutions and was the editor of its flagship journal Housing Finance International for five years.
Munjee expressed his pleasure at being amid friends and familiar faces. He said, “Ladies and gentlemen, this is a real homecoming. I feel rather sad that I am not a part of Rotary any longer, which is why when Shailesh invited me to speak here, I readily accepted. The topic I chose is a broad but personal one. With the change in government, it was the first time that India had seen a right wing government post Independence. We have always had a socialist legacy; it is a part of our Constitution. For the first time, we have somebody with a pro-corporate approach. So it is very interesting to see what this would mean. This has also given us a huge opportunity to reappraise India in its 60 to 70 years of development and see what we needed, how we would move forward.”
Munjee expressed his opinion of a country always being only as strong as its institutions and how India measures up based on the power of its institutions. He explained, “If we start appraising our institutions, we must ask ourselves if their present condition will get India to a better place. My own answer is no, it will not. If you look at two concentric circles; one is a core and the other, a periphery. The core of our institutions is being designed for a planned economic environment. Entirely for central planning and control, that is what it is about. India has emerged as a market economy. In a four quadrant diagram, one I call a fox and one a hedgehog, and on the vertical axis, I have rigidity and fluidity, bottom and top, you find India in the rigid hedgehog quadrant. Hedgehog means one central idea, and a rigidity that drives the idea through, which has been the Communist and Soviet style of functioning. So, this is what we have had as far as the institutional arrangements are concerned. India operates in the fox quadrant with fluidity, whereas the government operates in the hedgehog quadrant with rigidity. The question is, can we move India from this rigid quadrant to support the rest of India in the other quadrant making things happen; the synergy of doing this would be phenomenal. We would emerge as a powerful country in the world. However, we do not have the institutions that are designed to help that process.”
He elaborated on the concentric circle theory and explained how India has been working in the outer circle for a long time now. He said, “India transforms itself on the edges, never gets to the core. Even the economic reforms you see are all about how we eat away at the edges, which is good but we have not yet gotten ourselves to the core. Narendra Modi, even before he took office, announced the merging of ministries. This was the first time we were looking at consolidation and bringing things together. India, for example, has 12 infrastructural ministries, none of which talks to the other which is why we do not have integrated infrastructure in India. We build a port but it takes ten to fifteen years to build a railway line or roads that lead to the port. This is because of the rigidity in behaviour that I was speaking of. Modi merged the energy industries; coal and power now talk to each other. He managed to get everybody together and begin a dialogue. He started taking a realistic evaluation of the economy.
“The initial pronouncements of the government have been wonderful. I have seen such citizen-friendly and simplified processes weed out archaic rules and laws from the 1870s. He has put states in the forefront of policy because the states are where everything happens; not central planning coming down to the states. He has let the states work together with the central government. He has cut the rigidity of centre control, bringing institutions more in line with where India really functions.”
In closing, Munjee said, “A lot of good things are happening and a lot of things are not happening at all. The bad things that are happening are pushing us back into the rigid framework we are coming from. India still changes at the edges and it changes all the time, so if you accumulate everything that changes from the beginning of the year to the end of it, there is a lot of change taking place and those who say that there are no changes in the system do not know what they are talking about. The pace of change has accelerated, but what we look for is cumulative change of proportions, and we have to do that quickly. Strong leadership is in evidence, but is it focused and doing what it needs to be doing is the question. Finally, the core is not changing and it must. If the core remains the core, then everything will be in form by what is at that core. So we need to get a lot of work done on the core and for that we will need much more in-depth introspection.”