speech by dr veerappa moliy by mtPjMYC


									                           Speech of Dr. M. Veerappa Moily
                          Union Minister for Corporate Affairs
                             “Challenges of Governance”
                                  PUNE- 26-03-2012

The concept of governance was decisively shaped by the freedom movement led by

Mahatma Gandhi and the aspirations of founding fathers of the Constitution. Every nation

is guided by certain values which are shared by the people and the government. National

commitment to such values greatly influences the content and the quality of governance.

These values in the Indian context at the time of the inauguration of the Republic were

those of nationalism, democracy, secularism, non-alignment and mixed economy.
“As human beings, our greatness lies not so much in being able to remake the world - that
is the myth of the atomic age - as in being able to remake ourselves”
                                                                         Mahatma Gandhi
These core values of nationalism, democracy, secularism, non-alignment and mixed
economy were forcefully articulated by national and state level political leaders,
academicians and journalists in the context of building a new India.

Citizens all the world over look up to the nation-state and its organs for high quality
performance. When good governance is guaranteed, citizens go about their personal
business and pursuits with enhanced expectations. Good governance helps create an
environment in which sustained economic growth becomes achievable. Conditions of good
governance allow citizens to maximize their returns on investment.

Ever since independence, India has been one of the front-runners in the comity of nations

that cherish principles of civil society. India sought to redeem the pledge taken in this

behalf by evolving a Constitution that dreamt of establishing an egalitarian society based

on principles of equality, fairness and justice, one characterized by the belief that all

people should have equal political, social and economic rights. Our system of governance

is founded on the lofty principle of rule of law, wherein the State power is divided amongst

three chief organs, each under a duty to conduct itself in a manner that subserves the

common good of all and achieve the objectives of a welfare State. The checks and

balances were put as inherent safeguards designed to ensure compliance with the maxim
“Be you ever so high, the law is above you”. The dicta of the Constitution is crystal clear;

namely, the goal of good governance.

After having seen the way our polity works on the demands of the civil society, the

Government of the day had set up, in 1966, a Commission of Inquiry that came to be

known as the Administrative Reforms Commission. The recommendations of the said first

Administrative Reforms Commission brought about qualitative changes in the system of

governance in our country focusing, in the process, on issues as wide ranging as the

structure of the administrative machinery, decentralization of powers & functions, revamp

of financial management and, of course, the issue of dealing with corruption, a subject that

has been the mother of all issues from times immemorial.

Much water has flown down the Ganges ever since. India has come a long way in many

ways. The population of the country has multiplied geometrically; the expectations of the

people of India for social justice and guarantee of their fundamental rights today are far

more acute and vociferous than ever before, in particular in matters concerning equality of

status, equality before law, equality in the matter of opportunities for public employment,

equitable distribution of resources and national income etc.

India is no longer an impoverished State always looking for financial help even to feed

millions of its population living in inhuman conditions below poverty line. We are today a

modern State having taken giant strides in the spheres of development and economic

progress. Ours is an economy that is perceived even by the developed nations of the west

as one on the springboard for being catapulted into the position of a global power in near


In 1835, Lord Macaulay did admit before the British Parliament: “I have travelled across

the length and breadth of India and I have not seen one person who is a beggar, who is a

thief. Such wealth I have seen in this country, such high moral values, people of such

calibre, the very backbone of this nation, which is her spiritual and cultural heritage”. But

Macaulay’s Report was a product of the times.

At the time that the Committee reported, British political supremacy in India had matured

into a paramount sovereign power capable of imposing its will through its bureaucratic

agency. From Wellesley through the Marques of Hastings to Dalhousie, the political

authority of the British in India kept growing; and the scope of operations of the Empire

had increased substantially. Clearly, the services of the best and brightest were called for

to sustain the Empire, maintain its territorial integrity and impose order.

As a result of liberalization, the role of public functionaries has gradually been undergoing

a change. Strict State controls are yielding place to regulatory mechanisms. Generally

speaking, a sense of synergy pervading all stakeholders has been perceptible across the


The holders of public offices still treat the authority in their hands as one bestowing, upon

them, the status of a ruler rather than one in public service. Criminalization of politics and

politicization of bureaucracy firmly block the passage for attitudinal change, resulting in

nepotism, non-responsive conduct, apathy and degeneration at all levels. The hydra of

corruption in public life remains our constant companion.

After elapse of almost four decades since the first Administrative Reforms Commission

concluded its task, it was in the fitness of things for the Government of India to constitute

another Administrative Reforms Commission, particularly with the object of achieving “a

pro-active, responsive, accountable, sustainable and efficient administration for the

country at all levels of the Government”. The inclusion of this objective in the terms of

reference only rekindles the hope that India is still alive to the goal of clean governance

that we had set for ourselves through the Constitution adopted in 1950.

In its most simplified form, the expression “Governance” simply means the process of

decision-making and the process by which decisions are implemented. It entails, as

described by the Human Development Report, “the exercise of power or authority –

political, economic, administration or otherwise – to manage a country’s resources and


From this perspective, it encompasses “the mechanisms, processes and situations
through which citizens and groups articulate their interests, exercise their legal rights,
meeting their obligations and mediate their differences”. As a necessary corollary to the
above, the act of governance involves “the interface through which citizens mediate and
interact with the State”. This indicates that quality of governance depends largely upon the
indulgence shown by the subjects. Speaking on basis of experiences of medieval period
and the times of colonial rule, in particular in the continents of Africa and Asia, some
political scientists would use sarcasm in describing the system of governance in the words
that I quote: “the marvel of all history is the patience with which men and women submit to
burdens unnecessarily laid upon them by their governments”.

evolution of “Good Governance”, as opposed to mere governance, as the umbrella
concept embracing within a system of governance that is able to unequivocally discover
the basic values of the society where standards concern economic, political and socio-
cultural issues including those involving human rights, and one that follows the same
through an accountable and upright administration.

Good governance is not a mirage or a utopian concept. It only signifies the way an

administration ameliorates the standard of living of the members of its society by creating,

and making available, the basic amenities of life; providing its people security and the

opportunity to better their lot; instills hope in their hearts for a promising future; providing,

on an equal & equitable basis, access to opportunities for personal growth; affording

participation and capacity to influence, in the decision-making in public affairs; sustaining a

responsive judicial system which dispenses justice on merits in a fair, unbiased and

meaningful manner; and maintaining accountability and honesty in each wing or

functionary of the Government.
Baseness and depravity in governance and public life has been a cause of unease even in
advanced societies at different times in their history. In a quote that has been attributed to
Abraham Lincoln, it has been said: - “I see in the near future a crisis approaching that
unnerves me and causes me to tremble for the safety of my country…………an era of
corruption in high places will follow, and the money power of the country will endeavour to
prolong its reign by working upon the prejudices of the people until the wealth is
aggregated in a few hands and the Republic is destroyed.”
As per the United Nation’s Commission on Human Rights, the key attributes of good
governance    include   transparency,   responsibility,   accountability,   participation   and
responsiveness to the needs of the people. Good governance is thus linked to an enabling
environment conducive to the enjoyment of Human Rights and promoting growth and
sustainable human development. The world community endorses ‘rights based approach’
to development and tests the track record of each member State on its anvil. The
expectation of every civil society of its Government is that it would fulfill its commitments
and provide an equitable atmosphere conducive for individual’s growth. A Government is
expected to be fully accountable to its people and transparent in the employ of public
resources. It enforces the Human Rights including economic, social & cultural rights and
has no place for corruption of any kind since dishonesty is anathema to economic well-
being as it transmits public money allocated for development unjustly into private coffers
depriving the citizenry of its use for their welfare. This is the prime reason why the World
Bank views good governance and anti-corruption measures as central to its poverty
alleviation mission.

Mr. R. Venkataraman, former President of India said that a good Government is one that
“is stable and truly representative of the majority of the people; maintains its territorial
integrity and national sovereignty; accelerates economic growth and development;
ensures the welfare of all sections of people; and renders justice without delay”.

Since human rights are also designed to attain human development, good government
has the protection of human rights as the top most priority on its agenda. Good
Governance, in nutshell, entails effective participation in public policy-making, the
prevalence of the rule of law and an independent judiciary, besides a system of
institutional checks & balances through horizontal and vertical separation of powers, and
effective oversight agencies. Researchers at the World Bank Institute have similarly
distinguished amongst the main dimensions of good governance, key attributes including
political stability; Government effectiveness, which includes the quality of policy making
and public service delivery; accountability; civil liberties; rule of law, which includes
protection of property rights; Independence of the judiciary; and control of corruption. The
views evolved in UN Economic & Social Commission for Asia & the Pacific are almost
identical. It holds that “Good Governance has 8 major characteristics.

It is participatory, consensus oriented, accountable, transparent, responsive, effective and
efficient, equitable and inclusive and follows the rule of law. It assures that corruption is
minimized, the views of minorities are taken into account and that the voices of the most
vulnerable in society are heard in decision-making. It is also responsive to the present and
future needs of society.”

All these expressions convey theories pregnant with time-tested concepts. The
“participation” in order to be effective, needs to be informed & organized and, therefore,
depends upon the availability to the subjects “freedom of association & expression” on one
hand and existence of “an organized civil society” on the other. This necessarily is a
pointer to “representative democracy”.

The attribute of “rule of law” inheres as prerequisites “fair legal frameworks” that are
enforced impartially and particularly “full protection of human rights”, especially of the
vulnerable sections of the society. The factor of “transparency” requires that information is
freely available and the decisions are taken or enforced in a manner that adheres to the
rules and regulations. The attribute of “responsiveness” necessitates that all public
institutions and their processes strive “to serve all stake holders within a reasonable time

Good Governance depends upon endeavour to work out a broad consensus in the society

so as to achieve sustainable human development. This factor again underscores the

significance of representative democracy as the form of Government best suited to provide

good governance. Such form of Government only can claim inclusiveness and assure an

environment that offers equity and optimum opportunities for improvement and growth. Of

course, the output would depend upon the efficiency in the sustainable use of resources

that are available. The goal of good governance, however, would elude a society if its

system of governance does not have in place the mechanism to hold the persons wielding

State power accountable.

Clearly, the absence of rules is not the problem. One cannot mandate honesty. The rule of
law can only defeat the perverse mind. However, it cannot defeat the perversity of the
heart. In to the words of Aleksandr Solzhenitsyn: “The line separating good and evil

passes not between states nor between classes… but through the middle of every human
heart”. We have no destinies other than those we forge ourselves. He who administers
government by means of his virtues may be compared to the Pole star which keeps its
place and all other stars turn towards it. When the ruler himself is right, the people
naturally follow him in his right course. If governance is by men who are derelict, the
governed will suffer. We have to keep in mind Plato’s injunction:

“The punishment suffered by the wise who refuse to take part in government, is to suffer
under the government of bad men” Good governance must be founded on moral virtues
ensuring stability and harmony.
Confucius described righteousness as the foundation of good governance and peace. The
art of good governance simply lies in making things right and putting them in their right
place. Confucius’s prescription for good governance is ideally suited for a country like
India where many of our present day players in governance do not adhere to any principle
and ensure only their own interests.

Confucius emphasizes the righteousness for life and character building. This is in
conformity with Dharma or righteousness as taught by all religions in the world and
preached in Buddhism very predominantly in its fourth noble truth. He also emphasizes
that man himself must become righteous and then only there shall be righteousness in the
world. This is comparable with what Gandhiji said, “Be the change you wish to see in the
Democracy, liberty and the rule of law together represent the troika that is universally
accepted now as the index of a civil society. Democracy signifies a government of, by and
for the people. The protection of individual liberties follows the notion of democracy as a
natural corollary. This entails the espousal of a methodical configuration of laws by which
society might be regulated and different conflicting interests can be harmonized to the
fullest extent. This is why “the rule of law” is indispensable. It envisages the pre-eminence
of law as opposed to anarchy or capricious dictates. In involves equal accountability of all
before the law irrespective of high or low status.

Democracy has been evolved through centuries of experience amongst the people, who
care for human person, dignity & rights as the best and most acceptable form of good
governance. It is a concept that occasions the idea that all citizens have a right to
participate in the decision-making processes that lead to adoption of policies that are
applicable to the societies. It also means that there are some limits on majority decision-
making and, hence the inevitability of certain basic rights being protected. It rests on
maintaining a necessary equilibrium between the numerous competing interests,
demands, constrains and compulsions that exist in any civic society eager for

‘Responsibility is the price of greatness,’

Raghunath Mashelkar (former Director General, Council of Scientific and Industrial
Research) often says we fight a constant battle between our mind which is the engine of
problem solving, and our mindset which is a set of beliefs and dogmas. Effective public
governance requires a laser focus on the customer.

A strong value system is essential for effective public governance. Every nation is in a
global competition to attract strategic resources-human resources and capital. A good
value system can be a competitive advantage for governments. A value system is based
on fairness and equity in policies, transparency and honesty, avoiding nepotism, abiding
by contracts and discharging obligations on time. At Infosys, our value system is reflected
in our belief that ‘the softest pillow is a clear conscience’.

Accountability is an important factor in creating trust in public governance. Unlike the
private sector, accountability is often not the strong point of the public sector. The private
sector has the advantage of a self-correcting market mechanism.

The objective of technology is to reduce cost, reduce cycle time, simplify work, improve
productivity, improve quality of implementation and enhance customer satisfaction. Who
needs these more than the poor? Hence, technology is crucial in delivering basic services
to the poor in India. Technology has to be embraced enthusiastically by governments both
the state and federal levels.

One aspect of quality of service is timely delivery. On-time delivery demands that there
are no delays in the decision or value addition chain. The best way to eliminate delays it
to document the entire workflow of the decision or value addition chain, use technology to
automate the workflow, and bring transparency to the whole process.

Thus, the key principles that constitute the foundations of a modern democracy wedded to
the concept of “welfare state” and that of the theory of “good governance” are common;
namely full participation of all stake holders in the decision-making process ensured
through free and fair elections; guarantee of basic rights conducive for growth of individual
& society including freedom of speech and press, equality before law and of opportunities;
rule of law and independent & effective judiciary. From this perspective, “true democracy”
is synonymous to “good governance”.

The Constitution makers in India were wary of the caution in the words: “When the
legislative and executive powers are united in the same person or body, there cannot be
liberty... ...where the power of judging joined with the legislature, the life and liberty of the
subject would be exposed to arbitrary control”, and further, “where the power of judging
joined to the executive power, the judge might behave with all the violence of an

Thus, in order to ensure that the basic structure of the Constitution is not eroded; that the

Fundamental Rights are not abridged; that the rule of law always prevails; and that the

Constitution remained “supreme lex”, the fundamental and paramount law of the land, the

concept of judicial review has been planted as the instrumentality and the Constitution has

been declared to be the touch stone of validity of all acts of each organ. Further, in order

to guarantee that the rule of law would inure to, and for, everyone and the promises made
by the Constitution would not remain mere paper promises, the Constitution makers made

provisions for independence of the judiciary.
One of the most important principles of just democratic governance is the presence of
constitutional limits on the extent of government power. Such limits include periodic
elections, guarantees of civil rights, and an independent judiciary, which allows citizens to
seek protection of their rights, and redress against government actions. These limits help
render branches of government accountable to each other and to the people. An
independent judiciary is important for preserving the rule of law and is, therefore, most
important facet of good governance.

But then, it takes more than strong courts to ensure that a nation’s laws are enforced
constantly and fairly. The law must willingly bind all branches of government. The rule of

law also is the basis for business formation and the establishment of capital markets,
which underpin economic development. Citizens, directly or through their elected
representatives have to be involved in all levels of lawmaking. Participation in this process
gives people a stake in the law and confidence that the law will preserve their personal
and property rights.

The judicial system has an important role to play ultimately in ensuring better public
governance. There may be introduced a plethora of regulations, rules and procedures. But
when disputes arise, they have to be settled in a court of law. There could be, of course,
alternative dispute resolution mechanism like arbitration. Ordinarily, however, it is the
judiciary that must first step in and ensure that healthy practices prevail.

Governance is being increasingly recognized as an essential component of sustainable
and equitable development. There are many ways in which good governance contributes
to economic development. Governments make decisions on macroeconomic and social
policy that have a direct impact on the long-term health of the economy. Governments
provide critical goods and services, such as infrastructure, health and education that
determine the competitiveness of the economy. Governments foster an enabling
environment for private sector growth and regulatory structures that balance objectives of
growth and equity.

It is a matter of universal acknowledgement that corruption renders governance into a

state of “non governance”. It would be fruitless to narrate, once again, the instances of

corruption in different walks of public life in our country. The stories of defilement at all

levels in our institutions, public or private, float around at regular intervals. Certain

overzealous and highly charged sections of the media have made it a matter of routine for

sting operations to lead to exposé of corrupt practices in almost each rung of the

administrative hierarchy that governs us. I must hasten to add here that the methodology

adopted in such sting operations at times is subject matter of ongoing debate. Be that as it

may, this by itself can never condone the misdemeanor that has been bared to the public

glare by such efforts adding to the disgust and revulsion felt by law-abiding citizenry. The

cases of corruption by public figures are not limited to taking of paltry financial gains as

illegal gratification for doing or abstaining from doing the official duties. They would extend
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to brazen abuse of office or authority for unjust enrichment of self or of the kith and kin,

personal gain rather than financial rules dictating the award of public contracts or state

patronage, favouritism on considerations of caste, creed etc., use of discretion for

extraneous considerations, use of public sector enterprises as personal chattel, protection

of the corrupt by their superiors thereby indicating, almost openly, community of design

and so on and so forth.

The discretionary powers with which public authorities are vested by the administrative

rules are perhaps the biggest source of unethical practices. It is not that the entire work

force in the civil services stands compromised or has sold its conscience on account of

extraneous influences. The difficulty stems from the fact that those who refuse to bow

down to the dictates of unscrupulous elements, out to abuse the authority of the public

office to secure a favourable action, are easily marginalized while such public servants as

treat the authority vested in them akin to a saleable commodity manipulate the process so

that they are able to oblige and amuse the powers-that-be and, in the bargain, shift their

career graph into fast track mode. No wonder, in this scenario, “transfer industry”

mushrooms and functions as a highly productive unit in different Government

departments. No wonder, an unholy politician-criminal-bureaucrat nexus evolves and

thrives. No wonder, certain institutions in our polity are not stirred to function unless proper

palms are greased.

Jawaharlal Nehru was ‘quite sure’ in 1934 that ‘no new order can be built in India so long

as the spirit of the Indian Civil Service pervades our administration and our public

services’, it being therefore ‘essential that the ICS and similar services must disappear

completely’. Yet in the years afterwards the ICS tradition not only survived, it prospered. In

the spring of 1964, Nehru was asked at a private meeting by some friends what he

considered to be his greatest failure as India’s first Prime Minister. He reportedly replied, ‘I

could not change the administration, it is still a colonial administration’. Nehru then went on

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to elaborate his belief that the continuation of that colonial administration ‘was one of the

main causes of India’s inability to solve the problem of poverty’.

Prime Minister Indira Gandhi was even more critical. Replying to the debate on the
President’s address in the Parliament in March 1966, she said, “what India needed today,
was a ‘revolution in the administrative system’ without which no enduring change could be
brought about in any field”. In an interview she gave to a news agency on completing 100
days in office, she observed:

“The problem of administration has added to the difficulties of the country. All along the
line, administration has deteriorated – at the Centre, in the States, and even in the lower
rungs of the governmental set up. Toning up would have to be done, new procedures
might have to be evolved, and even fresh recruitment at all levels would have to be

In her convocation address to the University of Roorkee in November 1967, she noted
that, “Administrators sometimes lag behind the situations they are supposed to administer.
If a large proportion of the investment we have made under the plans remains unutilised,
the cause is to be found in administrative shortcomings”.

While we all know that cancer of corruption has seeped into the blood stream of our polity,
the million dollar question that stares us in the face is what can be done other than what
we have been doing in the name of combating this evil all along. If a part of human body
suffers from gangrene, doctors might advise surgery. When gangrene spreads to all nooks
and corners, probably surgical amputation cannot be the mode of management. The
punitive methods in the form of criminal law on corruption and disciplinary action for
breach of conduct rules of the public servants on one hand and preventive measures in
the form of pro-active vigilance on the other may need to be strengthened and the
loopholes plugged. But, to my mind, this may not suffice. As history shows, unscrupulous
elements have always been one step ahead of the law. We need to do something over
and above law enforcement.

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The predicament that we face today reminds me of a Chapter from Mahatma Gandhi’s
autobiography “My Experiments with Truth”. Bapu had established, in 1911, an institution
that became famous by the name of Tolstoy Farm in South Africa. Taking it to be his filial
patrimonial duty to organize education for the children of the inhabitants at the farm, he
made certain arrangements leading by example, as always, himself assuming the role of a
schoolmaster. He was confronted with the issue as to what kind of education would be
appropriate for the young children taken under his wings. Expressing his thought process
on the subject, the foremost of which mandated that the instruction must lead to spiritual
growth of the young minds, he conceived a teacher as a person who would represent an
“eternal object lesson” for his pupils. He expounded on this further in the words that I
quote: -

“It would be idle for me, if I were a liar, to teach boys to tell the truth. A coward teacher
would never succeed in making his boys valiant, and a stranger to self-restraint could
never teach his pupils the value of self-restraint”.

It has been said in Brihadaranyka Upnishad:-

        “You are what your deep, driving desire is.

        As your desire is, so is your will.

        As your will is, so is your deed.

        As your deed is, so is your destiny.”

In Ramayana, Maharshi Valmiki has underscored a very basic principle of governance in

simple words “Yatha Raja Tatha Praja”. The message is loud and clear. The general

erosion in values, ethics morality or integrity that is seen in a society only mirrors the

character of those who run the affairs of that society.

What I am trying to lay stress on is that if any paradigm change has to come in the matter
of ethics in governance, it has to come from the top in every section of our society. Like
charity, may be more than that, sense of morality also must begin from the door of the
leader who preaches it. When those wielding power of governance, whichever wing of the
State they may belong to, set about standardizing norms for conduct, they must first do so
for themselves.
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In the face of prevalent circumstances, some of which have been highlighted by me, our

efforts at combating corruption suffer for three basic reasons: -

(i) Absence of a basic or minimal code of conduct that applies uniformly to every holder of

public office or authority, irrespective of the wing of the State to which he belongs;

(ii) A procedure that offers escape routes, at every step of the way, to the delinquent; and
(iii) Lack of will or initiative on the part of authorities in catching the bull by the horns.

India is not alone in the quest for clean governance. The then Prime Minister of United
Kingdom had set up a Committee on Standards in Public Life in October 1994 which came
to be known as the ‘Nolan Committee’. The Nolan Committee submitted its first report in
May 1995 focusing its attention at that time on the code of conduct for members of
Parliament, Ministers and Civil Servants etc. as this, in the views of the Committee, was a
matter of “the greatest public concern”. The Committee examined the issues with a view to
suggest adoption of measures to reinforce public confidence in the holders of public
offices. It took note of cases of bribery, abuse of office, impropriety, rewards for past or
future favours, states largesse etc. It observed that instances indicating slackness in
observance and enforcement of high standards on the part of certain public figures, whose
cases get publicized in the media, generate widespread suspicion that more misconduct
occurs than comes to be revealed to the public gaze. The Committee was of the view that
if corrective measures were not promptly taken, there was a danger that anxiety and
suspicion would give way to disillusionment and cynicism. The Committee evolved seven
general principles of conduct that underpin public life, the maintenance of which can
restore the public confidence.

To my mind, these seven general principles are of great merit and significance for our
purposes. They include the following: -

        1.     Selflessness:

               Simply put, this means holders of public offices are expected to conduct
               themselves such that they subserve public interest, as against interest of the

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        2.     Integrity:

               The concept is well known. A public authority must insulate itself from
               extraneous influences in matters concerning official duties.

        3.     Objectivity:

               The duties of public office vest, in the holder, authority to take decisions
               including making appointments, awarding contracts, recommending benefits
               etc. The choices cannot be allowed to be made on any criteria other than
               merit. The decisions must be based on reasons free from the vice of caprice.
               The executive can take a leaf out of the book of judiciary by suo motu supply
               of reasons for every action. The requirement of recording reasons is by itself a
               great safeguard that inhibits the decision maker from being subjective.

        4.     Accountability:

               Any public office is an office of trust. Therefore, public figure exercising any

               state function, and this includes members of the legislature, is accountable for

               all actions taken in performance of the functions of that office. It naturally flows

               from this that every act of commission or omission has to yield to scrutiny,

               whether by way of internal or external audit mechanism. I am using the

               expression “audit” not in the narrow sense of audit of accounts but appraisal of

               the causes or consequences of every state action.
        5.     Openness:

               There is no better disinfectant than sunlight. Transparency has to be the
               mantra of all official acts. Judiciary follows this scrupulously by conducting its
               proceedings in the open. Transparency brings along inherent checks. The
               introduction of “Right to Information” regime has indeed set the administrative
               set up in our country on the right course.

        6.     Honesty:

               In Judiciary, we follow the rule that justice is not only to be done but must be
               seen to be done. The rules of natural justice that govern judicial ethics require

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               essentially that a person cannot be a Judge in his own cause. It is a travesty of
               the concept of honesty if an administrative authority is taking decisions in
               matters which involve private interests of those closely connected with the
               authority. In this view, it is essential that holders of public office must be
               obliged to declare their private interests so that they can always be held
               accountable in case there has been any conflict involving their public duties.
               This also means the assets and liabilities of public functionaries must be a
               matter in public domain. The mandatory declaration at the time of entry in
               public office and periodically, thereafter, would only ensure the kind of probity
               we would like to be in place.

        7.     Leadership:

               This principle is articulation of the same idea as I referred in the context of
               Mahatma Gandhi’s Experiments with Truth. A true leader will always lead by
               own example. If a leader is honest, sincere and committed to the task
               assigned to him, the vibes created percolate down the hierarchy cleansing the
               system that he controls.

I referred to politicization of bureaucracy and criminalization of politics. These two
phenomenon together seem to constitute the major cause of all that ails in our polity today.
Vested interests tend to control State actions by offering pelf or using arm-twisting tactics
through the aegis of their henchmen in political executive, which acts through
compromised sections of the bureaucracy. It is common knowledge that civil services
consist of various lobby groups. Every time there is a change in the political climate of a
State the group of bureaucrats loyal to the new political party in power takes over positions
of authority at appropriate levels. The undue and unholy loyalty to political masters reflects
in the decisions taken by such civil servants. It is commonplace to see senior bureaucrats
vying with each other for political patronage, offices of profit, rewards, awards and post-
retiral settlement, at times in constitutional authoritative positions. Take for example, the
eminent office of Governor. It was conceived in the Constitution as one to be filled by a
detached non-partisan person. Sarkaria Commission had, in fact, recommended that an
aspirant for such a position should be a person who has not taken too great a part in
politics generally and particularly in the recent past. In practice, however, the office of
Governor is connected by a revolving door with two passages, one leading to civil services
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and other to active politics. No wonder, senior loyal bureaucrats assume responsibilities of
governorship immediately after laying down the offices of civil servant or are ready to enter
politics by way of nomination to the legislatures.

The difficulty with our system is that we tend to engage ourselves more in debate than real
action. One example that I can quote in this context is the subject of police reforms, in
particular reforms concerning accountability of police forces to the public at large and to
rule of law on one hand and insulation of investigative police agencies from political
interference on the other. Reforms have been suggested on almost identical lines, over
the last three decades, by various Commissions and Committees. Yet, we continue to be
governed by Police Act that was given to us by the aliens in 1861, in the initial years of
British Rule in India.

An efficient, effective and democratic government is the best guarantor of social justice as
well as an orderly society.
What is ‘good’ governance in the Indian context? The central challenge before good
governance relates to social development. In his famous ‘tryst with destiny’ speech on 14
August 1947, Jawaharlal Nehru articulated this challenge as ‘the ending of poverty and
ignorance and disease and inequality of opportunities’. Good governance must aim at
expansion in social opportunities and removal of poverty.
Good governance is, among other things, participatory, transparent and accountable. It is
also effective and equitable. And it promotes the rule of law. Good governance ensures
that political, social and economic priorities are based on broad consensus in society and
that the voices of the poorest and the most vulnerable are heard in decision-making over
the allocation of development resources.
Governance has three legs: economic, political and administrative. Economic governance
includes decision-making processes that affect a country's economic activities and its
relationships with other economies. It clearly has major implications for equity, poverty and
quality of life. Political governance is the process of decision-making to formulate policy.
Administrative governance is the system of policy implementation. Encompassing all
three, good governance defines the processes and structures that guide political and
socio-economic relationships.

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Governance encompasses the state, but it transcends the state by including the private
sector and civil society organizations.

The institutions of governance in the three domains (state, civil society and the private
sector) must be designed to contribute to sustainable human development by establishing
the political, legal, economic and social circumstances for poverty reduction, job creation,
environmental protection and the advancement of women. The challenge for all societies
is to create a system of governance that promotes, supports and sustains human
development - especially for the poorest and most marginal.

The civil society is increasingly more concerned with public sphere issues and government
intervention is considered necessary to provide welfare schemes to cover social safety
needs, upgrade health-care to protect children, and help provide opportunities for women
and the minorities.

Characteristics of good governance defined in societal terms remain elusive. The following
are the main characteristics:
• Participation - All men and women should have a voice in decision-making, either directly
or through legitimate intermediate institutions that represent their interests. Such broad
participation is built on freedom of association and speech, as well as capacities to
participate constructively.
• Rule of law - Legal frameworks should be fair and enforced impartially, particularly the
laws on human rights.
• Transparency - Transparency is built on the free flow of information. Processes,
institutions and information are directly accessible to those concerned with them, and
enough information is provided to understand and monitor them.
Responsiveness - Institutions and processes try to serve all stakeholders.
• Consensus orientation - Good governance mediates differing interests to reach a broad
consensus on what is in the best interests of the group and, where possible, on policies
and procedures.
• Equity - All men and women have opportunities to improve or maintain their well-being.
• Effectiveness and efficiency - Processes and institutions produce results that meet needs
while making the best use of resources.

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• Accountability - Decision-makers in government, the private sector and civil society
organisations are accountable to the public, as well as to institutional stakeholders. This
accountability differs depending on the organisation and whether the decision is internal or
external to an organisation.

• Strategic vision - Leaders and the public have a broad and long-term perspective on

good governance and human development, along with a sense of what is needed for such

development. There is also an understanding of the historical, cultural and social

complexities in which that perspective is grounded.

If a government does not function efficiently and effectively, scarce resources will be

wasted. If it does not have legitimacy in the eyes of the people, it will not be able to

achieve its goals or theirs. If it is unable to build national consensus around these

objectives, no external assistance can help bring them about. If it is unable to foster a

strong social fabric, the society risks disintegration and chaos. Equally important, if people

are not empowered to take responsibility for their own development within an enabling

framework provided by government, development will not be sustainable.

The weak institutions of governance make an adverse impact on service delivery. Poverty

reduction depends on improvements in the quality and timely delivery of services to poor

people of basic education, health, potable water and other social and infrastructure

The major challenge is to put in place institutional arrangements for service delivery that
are workable in a particular district or a region and are made to function in a manner that
are intelligible to the local people and that also encourages them to participate. Such
institutions would be responsive to the citizenry and reasonably efficient in the delivery of
public services.
The focus should be on e-governance and systemic change. An honest system of
governance will displace dishonest persons. As Gladstone so aptly said, “The purpose of a
government is to make it easy for people to do good and difficult to do evil”.
I quote an ancient Subhashit (good message) –

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“Rivers do not drink their waters themselves, nor do trees eat their fruit, nor do the clouds
eat the grains raised by them. The wealth of the noble is used solely for the benefit of
Any machinery is as good as the man working it. The widespread corruption that we notice
all around only mirrors the general erosion of morality and ethics in our society. H.M.
Seervai, in his address as part of Sir Chimanlal Setalvad Lectures series in 1970, had
observed: -

“The ultimate guarantee against abuse of power, legislature, judicial and executive, lies in

the political and legal safeguards against such abuse, in a vigilant public opinion, and in

the sense of justice in the people generally.”

If we want to reform, attitudinal reforms will have to be first brought about even in our

private lives. I would conclude by borrowing the words of Andre Beteille. He said: -
“A Constitution may indicate the direction in which we are to move, but the social structure
will decide how far we are able to move and at what pace”.

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                                   Speech of Dr. M. Veerappa Moily
                                     Union Minister for Corporate
                                        Corporate Governance
                                          Pune- 26-03-2012

I welcome the participants and the captains of the industries in this Conference on Corporate
Governance. Pune is the cultural capital of Maharashtra, is holding this Conference signifies the
growing influence of the Corporate Governance in the growth of economy.

As emerging markets peak, Indian players in several sectors will be exposed to more intense
competition. Cost, quality, innovation, and pricing will hold the key to future success.

Social issues, such as employment, inclusive growth, climate change, have taken on
unprecedented financial implications. A more integrated and coordinated capital market of large
investors and stakeholder groups have emerged as a new source of pressure on companies.

According to an earlier estimates, 95% of the listed companies and almost 100 percent of the 42
mn unlisted companies in India are family-owned businesses. These companies collectively
account for over 70 percent of the market capitalization, 75 percent of the GDP and 57 percent of
the employment in the country.

In highly developed markets like the US too, family owned businesses account for over one-third of
the S&P 500 and Fortune 500 companies and employ over half of the American workforce.

Since the demarcation of ownership and management in owner-managed companies is not
specifically drawn, corporate governance assumes greater significance in the context of
sustainable value creation. As Indian businesses globalize, it is important to approach governance
challenges holistically. Achieving desired competencies requires focus on structures, processes
and people.

The Collapse of financial markets in late 2008 has invited renewed questions about the
governance, compliance, and ethics practices of firms throughout the US and global economies. In

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the post Enron & Satyam, post financial crisis world of 2010, the oversight responsibilities of
corporate directors are evolving rapidly.

The great recession resulted in the loss of trillions of dollars of consumer wealth, record
foreclosures and personal bankruptcies, double digit unemployment in the Unites States, and the
collapse of major financial institutions and of key manufacturing business.

Trillions of dollars of taxpayer money was employed to offset frozen credit markets, as well as lack
of consumer spending and business investment.

The world is getting better, but not fast enough and not for everyone. Great advances in
technology therefore make inequity worse. About a billion people are left out. For example, climate
change will impose the worst effects on those least responsible for it.

Creative capitalism is a system where incentives for both profit and recognition motivate both self-
interest and caring for others.

Under creative capitalism governments, businesses, and non-profits work together.

“This hybrid engine of self-interest and concern for others serves a much wider circle of people
than can be reached by self-interest or caring alone.”

“What unifies all forms of creative capitalism is that they are market-driven efforts to bring solutions
we take for granted to people who can’t get them.”

Corporations should allow “top innovators” to spend part of their time on issues facing people too
poor to be customers. This “takes the brainpower that makes life better for the richest, and
dedicates it to improving the lives of everyone else.”

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In areas where the government is weaker, creative capitalists can be most effective by filling in for

the missing state. In this regard, Herbert Hoover is one of history’s most effective philanthropists.

During World War I, the wealthy engineer adopted the cause of feeding a starving Belgium. After

the war, he led a relief effort that fed ten million people in the Soviet Union. Hoover’s efforts were

hardly government-free-they relied on U.S. congressional largesse-but he insisted on direct

administration of relief, without the interference of Lenin’s revolutionary government. Hoover’s

American Relief Administration became a substitute of failed government.

Creative capitalism creates challenges for traditional governance structures, but those challenges
are not insurmountable. They just require a bit of creativity.

“The case for creative capitalism is based as much on the failures of governments as on the
failures of private business.”

By most estimates, the United States needs to create at least 10 million to 12 million jobs to repair
the damage that d devastating recession has inflicted, even if that recession is technically over. As
of September 2010, some 14.9 million Americans who wished to find employment could not do so-
and roughly half of them have been out of work for more than six months, a level not seen since
the Great Depression in the 1930s. This employment vacuum must be filled, or millions of
Americans will find their living standards plummeting further downward and their American Dreams
slipping into reverse. Trillions of dollars of wealth have evaporated, leaving behind a deadly pile of
consumer debt and foreclosures.

One poll revealed that 61 percent of Americans believe the country is one the wrong track, up from
48 percent a year earlier.

“The model is how America took the research from the labs and fed the world,” he says.

The burning imperative is not agricultural growth but rather using technology to create jobs and
wealth. “What America has done in recent years was to move funding for innovation from private
labs to universities,” he argues. It’s true that major companies have cut back on their research. “So

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now we have these large research universities, which have offices of technology transfer and
commercialization,” he notes. “How do you take the innovation to create wealth?”

I recall that the term Corporate Governance was used more in the form of legalistic word or from

the academic point of view prior to 1991. The 1991 is and year of great divide. I always call an era

prior to 1991 and era of licence term Quota Raj where stringent provisions, regulatory measures

and Inspector Raj governed the corporate. After 1991, we adopted the model of LPG which is

nothing but liberalisation which will lead to privatisation and privatisation will ultimately lead to

globalisation and there is no choice left with us but to think globally, act globally and adopt global

principles not only to strengthen the economy but to strengthen the corporate too.

The growth of 9% be achieved when governance becomes the engines of growth which is not
possible unless we are in a position to compete globally and we have an export surplus to reduce
our dependency on imported goods. The geographical barriers of the nation are broken.

Good corporate governance is essentially about effective and responsible leadership, which calls
for integrity, transparency and accountability. Leaders need to define strategy, provide direction
and establish the ethics and values that will influence and guide practices and behavior to achieve
sustainable performance.

What are the ingredients of Good Governance?

       Principles based not rules based: Practice not rhetoric
       Values clearly set out, and practiced in every day decision making
       Transparency in all that enterprise does
       Maintaining the reputation is one of the highest priorities
       A Board that demands accountability from the CEO & Executive Leadership Team
Codes of Practice

    At best these are limited Quality Control Checks
    We have to look beyond box-ticking and see that Good Governance must Add Value in a
    Risk Assessment and Risk Management is essential to minimise exposure to large financial &
     business threats
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    Internal Mechanisms to Correct Governance Deviations eg. Routine Compliance, Quality &
     Financial Audits

Key Challenges

         Access to capital to finance expansion
         Implement new projects successfully
         Manage risks effectively across projects and verticals
         Achieve operating cost efficiencies
         Effective integration post acquisition
         Improve and sustain quality
         Build brand and reputation


         Hiring the right people
         Succession planning
         Mapping competency gaps
         Performance management systems

         Governance structures aligned to growthneeds
         Reliable assurance
         Risk Management aligned to strategic priorities


         Standardised processes across operations
         Effective IT architecture to support information requirements
         Strong Finance function
         Managing compliance requirements holistically
         Robust reporting systems

The process of value creation is a complex one involving many facets. Corporate governance is a
two sided coin and it depends on the ability of the board and management to work together on a
common mission and strategy.

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“What is good for society has to be good for business and what is good for business has to be
good for society.”

                                                                                Indra Krishnamurthy Nooyi

The essential elements to assess the overall competitive environment are:

a)      a stable and effective political environment;
b)      a regime based on the rule of law
c)      a free and open macroeconomic environment;
d)      abundant market opportunities;
e)      positive policy towards private enterprise and competition;
f)      positive policy towards foreign investments;
g)      no foreign trade and exchange controls;
h)      a transparent investment and tax regime;
i)      easy access to financing;
j)      a sophisticated labour market;
k)      transparent and fair labour and immigration policies;
l)      a strong physical infrastructure; and
m)      Free flow of information.

Companies need to realize that market growth and competitiveness are not won merely on
the back of selling more products and services more profitably than anyone else. Instead,
long-term sustainability of operations will matter increasingly, and will rely on intangibles
such as building and maintaining a good reputation, trustworthiness, ability to innovate and
responsiveness to all stakeholders including society and the environment.

Stanford economist Paul Romer: “A crisis is a terrible thing to waste.” There is much to be learned

from the circumstances that contribute to the financial debacle and related business scandals of

recent years.

Trust is fragile in nature and by definition it is fragile, it takes years of efforts to build trust but only a

few acts to completely destroy it. Once it is broken it is even harder to rekindle and rebuild. While

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laws can address the regulatory and legal level and the changes in the structure of the board can

address the issues of their independent functioning, no act by itself can guarantee a fickle


According to the World Economic Forum, more than two-thirds of people globally believe that the
current economic crisis is a crisis of ethics and values. Other survey data confirms substantial
scepticism about public trust in business.

A well implemented compliance and ethics program doesn’t spring from the void ex nihilo- it
requires a strong leader to engage others in the organisation, including powerful senior managers,
to surface and resolve issues and challenges and to make a culture of transparency, accountability
and responsibility a reality.

All these possibilities will require continuing vigilance on the part of financial watchdogs. Like the
Red Queen in Alice through the Looking Glass, the regulators will always have to keep running just
to stand still.

Corporate sustainability and good governance are intricately linked.

     Ensuring the basis for an effective corporate governance framework :-

        The corporate governance framework should promote transparent and efficient markets to
        be consistent with the rule of law and clearly articulate the division of responsibilities among
        different supervisory, regulatory and enforcement authorities.

     Rights of shareholders and key ownership functions

The corporate governance framework should protect and facilitate the exercise of
shareholders’ rights. Basic shareholder rights should include the right to:
                 Secure methods of ownership registration
                 Conveyor transfer shares

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              Obtain relevant and material information on the corporation on a timely and
               regular basis
              Participate and vote in general shareholder meetings
              Elect and remove members of the board
              Share in the profits of the corporation
Under corporate law, the basic responsibility of directors is the duty of care, with its judicial
corollary, the business judgement rule. In essence, the notion of duty of care suggests that
the responsibility of directors goes beyond mere loyalty and the avoidance of self-dealing
and includes an obligation to act with the requisite degree of care in managing the
corporation’s affairs.

A recent Blue Ribbon Commission report issued by National Association of Corporate
Directors highlights the critical role of board responsibility in risk governance.

With this in mind, directors should consider the following tips when approaching issues
associated with ethics or ethics and compliance programmes.
       Consider whether the company’ risk management system- including people and
        processes- is appropriate and has sufficient resources
       Work with management to understand and agree on the types of risk information
        the board requires
       Encourage a dynamic and constructive risk dialogue between management and the
        board, including a willingness to challenge assumptions
       Closely monitor the potential risks in the company’s culture and its incentive
        structure. How does senior management demonstrate its commitment to an
        appropriate corporate culture
       Assess the board’s risk oversight process and include necessary board education
        and training regarding risk.
       Creating a Compliance Savvy Board

Disclosure and transparency:-
The corporate governance framework should facilitate the timely and comparable
disclosure on all material matters regarding the corporation, including the financial

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situation, performance, ownership and governance of the company. Disclosure should
include, but not be limited to, material information on:
       Financial and operating results of the company
       Company objectives
       Major share ownership and voting rights
       Remuneration policy for members of the board and key executives, and information
        about board members, including their qualifications, the selection process, other
        company directorships and whether they are regarded as independent by the board
       Related party transactions
       Foreseeable risk factors
       Issues regarding employees and other stakeholders
       Governance structures and policies, in particular, the content of any corporate
        governance code or policy and the process by which it is implemented

Values of an organization form the core DNA which determines the organizational behaviour

Kautilya’s fourfold duties of a king enshrined in Arthashastra are:

Raksha – literally means protection, in the business context it can be equated with the risk
management aspect.

Vriddhi – literally means growth, in the corporate context it can be equated to stakeholder value

Palana – literally means maintenance/compliance, in the business context it can be equated to
compliance of the law in letter and spirit.

Yogakshema – literally means well being and in Kautilya’s Arthashastra it is used in context of a
social security system. In the business context it can be equated to corporate social responsibility.

Kautilya asserts that “A king can reign only with the help of others; one wheel alone does not
move a chariot. Therefore, a king should appoint advisors (as councilors and ministers) and listen
to their advice.”

Some key guidelines have been issued by MCA from time to time:

    a) Corporate Governance Voluntary Guidelines, 2009

    b) Corporate Social Responsibility Voluntary Guidelines, 2009

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    c) National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of
        Business 2011

The Guidelines have been articulated in the form of nine (9) Principles with the Core Elements.


The objectives of this policy are to provide guidance on inclusion of corporate governance
practices to:

      Priority areas of reforms;

      inculcate a strong culture of core values, ethics, integrity, reliability and fair dealings
       amongst corporates;

      achieve a balance between providing protection to investors and fostering fair and efficient
       capital markets and confidence in capital markets;
      promote sustainable and inclusive growth of the corporate sector; and

      recognize that corporate governance is evolving in respect of

              Adequate disclosures and effective decision making

              Transparency in business transactions;

         Commitment to values and ethical conduct of business

This Policy is inclusive one and not intended to be prescriptive. The corporates are encouraged to

consider this policy in developing their own corporate governance policy/codes.

The MCA has initiated a step for affecting Corporate Governance and a committee under the

Chairmanship of Adi Godrej has been formed recently to formulate new guidelines on Corporate

Governance particularly on concept paper on National Corporate Governance Policy prepared by

ICSI. It is meant to facilitate public discussion and in ascertaining views of all stake holders and

suggesting policy document by the committee.

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These corporate governance measures are not left only to the voluntary wishes of the corporate
but the same has been embraced by the government by way of introducing Companies Bill,
2011. These provides by providing a code for Independent Director, enhanced disclosures,
adherence to globally accepted accounting standards, defining key managerial personnel,
making rotation to strengthen the quality and frauds corporate measures and ensuring XBRL
filing by the corporate of its annual accounts so that regulatory mechanism is strengthened in
order to fight the menace of corporate frauds. The government has already established a serious
Fraud Investigation Office and it proposes to give us statutory recognition to this office by way of
Company Bill 2011.

Sustainability Report

     1. Economic Performance
     2. Environmental Performance
     3. Social Performance
     4. Value Statements
     5. CSR Initiatives

Basic shareholder rights which should be provided by every organization include the right to:

1)      Secure methods of ownership registration;

2)      Transfer ownership of shares;

3)      Obtain relevant and material information about the corporation on a timely and regular

4)      Participate and vote in general shareholder meetings;

5)      Elect and remove members of the board; and

6)      Share in the profits of the corporation.

Responsibilities of Institutional Shareholders:-

Holding additional meetings with management specifically to discuss the specific shareholders
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The corporate Boards must integrate strategy, sustainability and control (integrated governance),
and establish the values and ethics that underpin sustainable practices.

As countries brace up to face these developmental challenges, innovation and scientific

development will prove to be the corner-stone what will impact sustainability in the coming years.

Whereas in 2002, 220 patents were filed by the Indians which is considered good by third world

standards, 198,339 patents were filed in the US and 371,495 were filed in Japan. The number of

journal articles published by Indians in 2001 was 11,076; the figures for US and Japan were

2000,870 and 57,420 respectively. Although, there is a lot of scientific work happening in rapidly

developing countries like India, the challenges lies in building global collaborations that are

capable of converting these opportunities into sustainable ventures.

Emerging economies like India has seen an average growth of 7-8 percent offering huge potential
to th world at large. With a growing middle class expected to comprise about 40 percent of India’s
population by 2025 and world’s largest working population by 2030, the question of demographic
dividend is at the centre of the discourse in India’s growth story. Infrastructure building and strong
vibrant and responsive regulations are the real answer to these emerging challenges. All our
efforts should be transformational.

Indian companies have started making huge investment on agriculture in African countries. In
Ethiopia alone it comes to around $ 2 billion in recent years. It is shocking true that not even 6% of
our food produce have been processed or any value added. This cannot go on and corporate
should respond to these challenges.

According to a recent study by Citi Bank Group, India will be the world’s largest economy within 39
years. Indian GDP in 2050, measured by purchasing power parity (PPP), will be $85.97 trillion.
China, in second place, will have a GDP of $ 80.02 trillion and the US $ 39.07 trillion. At such a
point, the stage is set for second-generation economic reforms that will turn our democratic

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institutions into assets for long-term economic and social growth. We now need a culture of high
productivity, efficiency, innovation or competition.

As per Ernst & Young Report on ‘Doing business in India’ 2012, Overseas investment in Asia's third-
largest economy rose for the first time in three years in 2011 as global investors put their faith in
rising salaries, an expanding middle-class and a large and cheap labour force.

India is the second most attractive destination for foreign investors. The Indian economy successfully
weathered the global financial crisis, thereby proving its resilience and depth. This, along with the
India's liberalized foreign exchange regime, has attracted large MNCs to invest in the country.

The total foreign institutional investors (FII) inflows for the calendar year 2010 stood at US$ 39.5
billion as compared to US$ 18.5 billion in 2009.

Overseas investment in Asia's third-largest economy rose for the first time in three years in 2011,
the report noted, as global investors put their faith in rising salaries, an expanding middle-class and
a large and cheap labour force. Foreign direct investment (FDI) in India rose 13 percent to $50.81
billion in the first 11 months of 2011 from a year earlier, while the total number of projects rose 25
percent to 864.

India is the second most attractive destination for foreign investors. The savings rate of India is about 37%

that contributes to the requirements of the various investment sectors. Top five cities in India

attract 43% of the investment projects, 34% of the jobs created by FDI and 26% of the value of FDI

in India.

By 2020, Indian IT-BPO industry will provide 10 million direct and 20 million indirect jobs. The study

suggests that the aerospace and defence industry is an emerging market in India, with the Indian

military expected to spend roughly US$80 billion over the next four to five years. About 65–70% of

India's defence requirement is imported from global aerospace and defence companies.

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India could emerge as the world's third largest economy by 2030, benefiting from strong
domestic demand and favourable demographics. India is likely to grow faster, than China
over the next two decades. It should be recalled that very few nations have sustained
higher growth rates in the long run and even those who did - like the East Asian Tigers -
are now suffering from prolonged recessions like that in Japan.

Hence, there is no room for complacency as maintaining the present level of high GDP

growth rate over the next two decades would certainly be no easy task as it requires

several critical sectoral reforms requiring strong political consensus cutting across parties

and regions in the larger interest of the country.

The majority of companies surveyed by E&Y were confident in the long-term prospects for

investment in India, given sluggish growth in the United States and debt problems in

Europe. Almost 70 percent of 382 international companies surveyed said they plan to

increase or maintain their operations in India, said the report, which was prepared for the

World Economic Forum gathering in Davos, Switzerland.

Around 90% of the liquidity in Indian capital markets comes from around 10 cities and 100 listed


In spite of a well-developed regulatory and financial system, the corporate bond market in India is

only 3.3% of GDP. In contrast to a mature equity market, the bond market in India is relatively

under-developed as compared to other Asian economies and developed nations. The share of

corporate bonds to GDP is 10.6% in China, 41.7% in Japan and 49.3% in Korea.

The social science research is more crucial as more than 70 percent of the research innovations
has still not gone out of the laboratories, the reason being economic viability of research
innovations in addition to farmer acceptance which is a function of socio cultural and socio
economic factors.

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We have arrived at a time in our history when we are equipped with the strength of knowledge, the

power of globalization and the convenience of technology to accomplish seemingly impossible

goals-elimination of poverty, hunger and disease form this world. Let us derive the best out of free

markets and open competition and, at the same time, show compassion to the less fortunate in this

world. Let us proudly stand up and proclaim, and Anita Roddick has done, ‘That’s what I want to do

to the business world-nurture a revolution in kindness.’ Let us make this a time, in David Korten’s

words, ‘filled with hope for a new millennium in which societies will be freed from the concerns of

basic survival to pursue new frontiers of social and intellectual advancement.’ This is the only way

we can continue to grasp the incomparable advantages that capitalism can offer. Let

compassionate capitalism flourish.

Let us analyse where India stands today. Our social indicators have improved in the past few
decades. The proportion of the population below the poverty line declined from 45 per cent in the
early eighties to 26 per cent in 2000; the literacy rate increased from 43 per cent of the population
in 1980 to 65 per cent in 2001. However, we still have a long way to go. Around 50 per cent of the
population do not have access to essential drugs; 69 per cent still do not have access to adequate
sanitation. Life expectancy is only sixty-two years as compared to seventy-seven in the USA.
Forty-seven per cent of our children are underweight, as compared to 10 per cent in China. Around
190 out of 100,000 people are afflicted with malaria, as compared to forty in neighbouring
Bangladesh. We are ranked 124th on the Human Development Index (out of 173 nations).

The idea of professional foundations in the USA underpins today’s philanthropic work there. Indian
philanthropic groups should spearhead the evolution of philanthropy from private acts of
conscience into a professional field. They should meet their obligations to create value. The need
of the hour is to bring entrepreneurial acumen to philanthropy, demanding measurable results and
carefully assessing social investments. Use of management ideas and information technology
tools to create sound management systems is another aspect of professionalization of
philanthropic groups.

Today, the role of a donor in India is slowly graduating from a ‘giver (of funds) to an investor in
social change. However, change cannot be obtained through charity alone. Charity is important

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and necessary, but it only soothes. We must move from charitable care to developmental
assistance. Consequently, we should focus on empowerment and developmental assistance. I am
reminded of the twelfth century Jewish philosopher Maimonides who said, ‘Give a man a fish and
you feed him for a day. Teach a man to fish and you feed him for a lifetime.

The challenge and opportunity for attaining sustainability thus lies in new generation entrepreneurs
being able to align the scientific & technological advances achieved by developed economies with
the potential that exists in developing countries thereby seeking to generate equitable socio-
equitable socio-economic growth.

I am sure that you all would agree with me that Government and the Corporate has to work on
PPP Model to achieve the concept of developed India by 2020 for which I am of the firm view
adherence of Corporate Governance would play a pivotal role.

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