<p>Why is India’s growth story less powerful than it could be? Individual companies fight their own battles and many do so with skill. But what is often missing is collective action. Many of India’s constraints cannot be solved by one company, one sector, or one leader acting alone. They require a business community that can organise, advocate and build public support for reform. The starting point, in the discussion led by Parth Shah, Founder of the Centre for Civil Society, a libertarian think tank, was Adam Smith. Mr Smith’s answer was logical – prosperity needs peace, easy taxes and a timely administration of justice. Much of modern economic and political thought has been an attempt to understand how societies can achieve those conditions. Four broad theories have tried to explain why some nations become rich and others remain poor.</p><p>The first is the theory of resources. Countries with oil or other natural endowments should, in theory, become rich. But Singapore and Hong Kong show that resources are not destiny. The second is geography. Climate, location and disease burden matter and they explain some historical patterns of prosperity. But geography cannot explain everything, especially the success of countries that overcame difficult locations. The third is institutions. The work of economists such as Daron Acemoglu and his colleagues has shown that the quality of economic, political and social institutions matters. The crucial distinction is between extractive and inclusive institutions. Extractive institutions allow a small group to benefit from society’s wealth. Inclusive institutions give ordinary citizens a chance to participate, compete and prosper. The fourth explanation goes deeper still. It asks what a society honours. Who are its heroes? What forms of enterprise does it encourage? Societies that value enterprise and risk-taking are more likely to grow. A country’s moral imagination matters. If business is seen as suspect, profiteering or morally inferior, the economy pays a price.</p><p>This is where India faces a problem. There was a time when business leaders were role models. Today, in many classrooms and public conversations, it is harder to find young people who name a businessperson as someone they admire. In entertainment, sport and politics, heroes are visible. In business, the effort behind the product is invisible. People see the finished good, but not the imagination that created it. That invisibility has consequences, since business creates value, employment, tax revenues and social mobility. Yet it is often not defended publicly. This contradiction is visible even in education. Most middle-class parents choose private schools for their children. They understand the value those schools provide. But when private schools are attacked publicly, often on the issue of fees, parents rarely defend them. They benefit from the institution but hesitate to speak for it.</p><p>The same challenge exists for business more broadly. India’s entrepreneurs and private institutions need a stronger public argument in their favour. They need not merely operational excellence, but also intellectual and moral defence.</p><h2>Markets and the three Ps</h2><p>Before discussing regulation, the session paused to ask a basic question – what is a market? A market is not merely buying and selling. Buying and selling happen only when three underlying conditions are present. The first is property rights. People need to know what is owned, who owns it and what is being transferred. Where property rights are unclear, markets work poorly. Air pollution is an example. Air is a common resource – nobody owns it individually and therefore everyone has an incentive to overuse or damage it. The second is prices. Prices convey information. They tell producers and consumers what is scarce and what is abundant. When prices are distorted or prevented from adjusting to demand and supply, markets lose their signalling function. Rent control is one example. When the price of housing is not allowed to reflect scarcity, the housing market itself becomes distorted. The third is profit and loss. Profit rewards good judgement and value creation. Loss disciplines poor judgement. But there are sectors where this mechanism is interrupted. Banking is the classic case. When banks make profits, the gains are private. When they make large losses, the public is often asked to rescue them because they are considered too big to fail. This weakens the discipline of the market. These three Ps offer a simple way to diagnose market failure. When a market is not working, ask which of the three is being distorted or suppressed.</p><h2>Regulation is not only what government does</h2><p>One of the most interesting arguments in the session was that regulation is not only a government function. Private systems often regulate quality more effectively than the state. The example used was Holiday Inn. In the franchise model, the hotel may be owned and operated by an independent party, but the brand is owned by the corporation. The brand owner must ensure that a Holiday Inn in one city meets the same basic standards as a Holiday Inn elsewhere. The guest must be able to trust the name. How is this done? Through contracts, standards and inspections. The franchise contract can run into hundreds or thousands of pages. It specifies details such as the quality of linen, soap, towels and room standards. Inspectors visit properties anonymously and without warning. The purpose is to protect the brand by ensuring consistency.</p><p>In that sense, the market itself creates regulation. It creates standards, enforcement mechanisms and penalties. The private sector does this every day, even if it does not call it regulation.</p><h2>The problem of over-regulation</h2><p>The session then turned to government regulation. India’s regulatory burden remains immense. Companies spend large amounts of money and management attention simply to comply. Many violations have historically carried criminal penalties. A small compliance failure could, at least in theory, put a promoter, CEO or director at risk of prosecution. The real issue is not whether regulation is necessary. It is. The issue is whether regulation is proportionate.</p><h2>Regulation as a public good, or public bad</h2><p>Good regulation is a public good. It benefits all firms and all citizens. Bad regulation is a public bad as it raises costs, creates uncertainty and weakens trust. Because regulation affects entire sectors, it cannot usually be changed by one company acting alone. Reform requires collective action. But collective action must move beyond occasional meetings with ministers or senior officials. One of the strongest interventions in the session made this point clearly – many companies think policy advocacy means that an important person meets a minister or a secretary. That is not how serious reform happens. Real advocacy requires research. It requires a white paper and evidence. It needs identifying the right constituencies inside government, Parliament, the bureaucracy and civil society. It may involve deposition before parliamentary committees. It often takes two to four years before a meaningful change occurs. Policy work is a professional discipline and cannot be reduced to access.</p><h2>Business, role models and history</h2><p>One participant asked why Indian role models tend to come from entertainment, sport and politics rather than business. The answer lies in history. India’s textbooks have celebrated rulers, warriors and political leaders, but have often ignored merchants and business families. Yet merchants funded armies, supported political movements and created trade networks. During the freedom movement, the Congress party was supported by merchant and business families. Jamnalal Bajaj, GD Birla and others provided financial and logistical support. Yet after Independence, many of these very business communities were seen as profiteers, black marketers or monopolists. The licence system clamped down on them. India paid a price for that distrust. Countries such as South Korea, which respected and harnessed business groups, moved into a different orbit.</p>
<p>Why is India’s growth story less powerful than it could be? Individual companies fight their own battles and many do so with skill. But what is often missing is collective action. Many of India’s constraints cannot be solved by one company, one sector, or one leader acting alone. They require a business community that can organise, advocate and build public support for reform. The starting point, in the discussion led by Parth Shah, Founder of the Centre for Civil Society, a libertarian think tank, was Adam Smith. Mr Smith’s answer was logical – prosperity needs peace, easy taxes and a timely administration of justice. Much of modern economic and political thought has been an attempt to understand how societies can achieve those conditions. Four broad theories have tried to explain why some nations become rich and others remain poor.</p><p>The first is the theory of resources. Countries with oil or other natural endowments should, in theory, become rich. But Singapore and Hong Kong show that resources are not destiny. The second is geography. Climate, location and disease burden matter and they explain some historical patterns of prosperity. But geography cannot explain everything, especially the success of countries that overcame difficult locations. The third is institutions. The work of economists such as Daron Acemoglu and his colleagues has shown that the quality of economic, political and social institutions matters. The crucial distinction is between extractive and inclusive institutions. Extractive institutions allow a small group to benefit from society’s wealth. Inclusive institutions give ordinary citizens a chance to participate, compete and prosper. The fourth explanation goes deeper still. It asks what a society honours. Who are its heroes? What forms of enterprise does it encourage? Societies that value enterprise and risk-taking are more likely to grow. A country’s moral imagination matters. If business is seen as suspect, profiteering or morally inferior, the economy pays a price.</p><p>This is where India faces a problem. There was a time when business leaders were role models. Today, in many classrooms and public conversations, it is harder to find young people who name a businessperson as someone they admire. In entertainment, sport and politics, heroes are visible. In business, the effort behind the product is invisible. People see the finished good, but not the imagination that created it. That invisibility has consequences, since business creates value, employment, tax revenues and social mobility. Yet it is often not defended publicly. This contradiction is visible even in education. Most middle-class parents choose private schools for their children. They understand the value those schools provide. But when private schools are attacked publicly, often on the issue of fees, parents rarely defend them. They benefit from the institution but hesitate to speak for it.</p><p>The same challenge exists for business more broadly. India’s entrepreneurs and private institutions need a stronger public argument in their favour. They need not merely operational excellence, but also intellectual and moral defence.</p><h2>Markets and the three Ps</h2><p>Before discussing regulation, the session paused to ask a basic question – what is a market? A market is not merely buying and selling. Buying and selling happen only when three underlying conditions are present. The first is property rights. People need to know what is owned, who owns it and what is being transferred. Where property rights are unclear, markets work poorly. Air pollution is an example. Air is a common resource – nobody owns it individually and therefore everyone has an incentive to overuse or damage it. The second is prices. Prices convey information. They tell producers and consumers what is scarce and what is abundant. When prices are distorted or prevented from adjusting to demand and supply, markets lose their signalling function. Rent control is one example. When the price of housing is not allowed to reflect scarcity, the housing market itself becomes distorted. The third is profit and loss. Profit rewards good judgement and value creation. Loss disciplines poor judgement. But there are sectors where this mechanism is interrupted. Banking is the classic case. When banks make profits, the gains are private. When they make large losses, the public is often asked to rescue them because they are considered too big to fail. This weakens the discipline of the market. These three Ps offer a simple way to diagnose market failure. When a market is not working, ask which of the three is being distorted or suppressed.</p><h2>Regulation is not only what government does</h2><p>One of the most interesting arguments in the session was that regulation is not only a government function. Private systems often regulate quality more effectively than the state. The example used was Holiday Inn. In the franchise model, the hotel may be owned and operated by an independent party, but the brand is owned by the corporation. The brand owner must ensure that a Holiday Inn in one city meets the same basic standards as a Holiday Inn elsewhere. The guest must be able to trust the name. How is this done? Through contracts, standards and inspections. The franchise contract can run into hundreds or thousands of pages. It specifies details such as the quality of linen, soap, towels and room standards. Inspectors visit properties anonymously and without warning. The purpose is to protect the brand by ensuring consistency.</p><p>In that sense, the market itself creates regulation. It creates standards, enforcement mechanisms and penalties. The private sector does this every day, even if it does not call it regulation.</p><h2>The problem of over-regulation</h2><p>The session then turned to government regulation. India’s regulatory burden remains immense. Companies spend large amounts of money and management attention simply to comply. Many violations have historically carried criminal penalties. A small compliance failure could, at least in theory, put a promoter, CEO or director at risk of prosecution. The real issue is not whether regulation is necessary. It is. The issue is whether regulation is proportionate.</p><h2>Regulation as a public good, or public bad</h2><p>Good regulation is a public good. It benefits all firms and all citizens. Bad regulation is a public bad as it raises costs, creates uncertainty and weakens trust. Because regulation affects entire sectors, it cannot usually be changed by one company acting alone. Reform requires collective action. But collective action must move beyond occasional meetings with ministers or senior officials. One of the strongest interventions in the session made this point clearly – many companies think policy advocacy means that an important person meets a minister or a secretary. That is not how serious reform happens. Real advocacy requires research. It requires a white paper and evidence. It needs identifying the right constituencies inside government, Parliament, the bureaucracy and civil society. It may involve deposition before parliamentary committees. It often takes two to four years before a meaningful change occurs. Policy work is a professional discipline and cannot be reduced to access.</p><h2>Business, role models and history</h2><p>One participant asked why Indian role models tend to come from entertainment, sport and politics rather than business. The answer lies in history. India’s textbooks have celebrated rulers, warriors and political leaders, but have often ignored merchants and business families. Yet merchants funded armies, supported political movements and created trade networks. During the freedom movement, the Congress party was supported by merchant and business families. Jamnalal Bajaj, GD Birla and others provided financial and logistical support. Yet after Independence, many of these very business communities were seen as profiteers, black marketers or monopolists. The licence system clamped down on them. India paid a price for that distrust. Countries such as South Korea, which respected and harnessed business groups, moved into a different orbit.</p>
