Invest in trust to promote entrepreneurship

Business Standard     28th May 2020     Save    

Context: The Covid crisis provides an opportunity to build trust between businesses and government and institutionalise coordinated decisions to utilise the capacities of excellent entrepreneurs. 

Impact of COVID:

  • Innovation bubbling: As can be noticed through manifold increase in PPE/ventilators production by different biotech companies.
  • Crisis as an opportunity: Quit India (1942), Green Revolution (1964) and Liberalisation (1991) delivered dramatic opportunities for India. Crises excavate society’s hidden energy. 

Reasons for Business Failures:

  • Uncoordinated decision-making: due to dilution of formal communication channels and the absence of informal ones.
  • Absence of Centre-state dialogue leads to knee jerk reactions like suspending of labour laws etc. 
  • Woes of Doing Business (WoDB): Delays in justice systems lead to loss of legal fees and a decade of time. Adding to WoDB.
  • Reneged Promises: Supreme Court in Union of India vs VVF Company accepted the view that the government can withdraw from its promises in “public interest”. 
  • This goes against the principle of Promissory Estoppel underlying basic moral principle of trust.

Way Forward:

  • Needs of entrepreneurs: All they need are clear rules and coordinated decision making and when disputes arise, they are speedily resolved.
  • Consistent Judiciary: Clearly defining the “public interest” and thus balancing  between States and firms.
  • Purposeful bureaucracy: Avoiding administrative overreach which creates a trust deficit among entrepreneurs.