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Are we business-ready?

The anti-corruption movement that began with Anna Hazare has turned into a tsunami with Arvind Kejriwal turning the spotlight on Robert Vadra, Salman Khurshid and Nitin Gadkari. Across the Atlantic, we had another celebrity Indian, Rajat Gupta, taking the rap for 'insider trading' as he was sentenced to two years in prison in the US. The moral conscience is at a heightened state in India and so are expectations of governance.

Even if the law is unable to bring the guilty to book, the reputation index or stock price takes a beating. Take the case of IRB Infrastructure Developers. The company had become quite a favourite amongst investors as it had good road assets and was focused. Its stock price climbed to a peak of Rs 208 but then allegations of connection to the murder of an RTI activist and now the connection to Gadkari has cost the company close to Rs 4,000 crore in market capitalisation; its stock has plummeted to Rs 118. DLF stock also crashed from Rs 242 to Rs 200 after the Vadra allegations, losing Rs 6,000 crore in market capitalisation. Insider trading, considered a trivial offence in India, is beginning to cost companies dearly too. While Reliance Infrastructure and Reliance Natural Resources settled charges of breaching securities laws by paying Rs 25 crore each in 2011, Manoj Gaur, chairman of Jaiprakash Associates, his relatives and three senior executives were charged Rs 70 lakh for insider trading in the company's stock in 2008.

Investigations have to establish three basic elements. First, you need evidence of action in the market, whether a buy or sell. This is the easier part. Then, one has to prove that the insider had particular information others did not. Finally, the investigator has to establish that one caused the other. However, typically, SEBI orders are challenged in the tribunal or courts where they either drag on for years or end up going against SEBI. Recently, the order against Gaur was set aside by the Securities Appellate Tribunal for want of evidence. Yet, institutional investors watch these issues closely and such cases do derail chances of investment in the company's stock.

The Lokayukta Court in Karnataka has ordered a probe against three former Karnataka chief ministers - former prime minister HD Deve Gowda, External Affairs Minister SM Krishna and BS Yeddyurappa - and 27 others on a complaint alleging irregularities in the Bangalore-Mysore expressway project, which was awarded to Nandi Infrastructure Corridor Enterprise (NICE). So while 'coalgate', 'land-grab' and other scams occupy the front pages of our business newspapers, it is the action on the ground that the economy needs.

We need to focus on administrative reforms to jumpstart the execution process. The Indian government needs to accelerate the execution of project clearances by taking upon itself the task of incubation. Providing projects with necessary clearances can improve their feasibility and attract investors in droves. Recently, the Bihar Government's ambitious Rs 2,224 crore, 22 km, four-lane Ganga Expressway project, being built as a PPP, suffered a major setback as none of the selected companies participated in the final bid. Even the final three companies, Reliance Infrastructure, Gammon India and Navayuga Engineering Construction, backed out.

According to the 2013 edition of IFC's Doing Business study, which ranks countries on the ease of doing business, India retains its rank of 132, below Bangladesh at 129 as well as Sri Lanka (81), China (91), and Brazil (130). Further, India is not amongst the 10 economies that have improved the most. China is ranked 12 amongst the top improvers while India ranked 27. Evidently, India has much to improve to become more attractive to investors.

Improvising closer home, the 7th CW Architect & Builder Awards held on October 12 in Mumbai offered a refreshing change with the theme of 'Youth', where several young architects and builders made their mark along with the stalwarts. A note of hope for the future!

The anti-corruption movement that began with Anna Hazare has turned into a tsunami with Arvind Kejriwal turning the spotlight on Robert Vadra, Salman Khurshid and Nitin Gadkari. Across the Atlantic, we had another celebrity Indian, Rajat Gupta, taking the rap for 'insider trading' as he was sentenced to two years in prison in the US. The moral conscience is at a heightened state in India and so are expectations of governance. Even if the law is unable to bring the guilty to book, the reputation index or stock price takes a beating. Take the case of IRB Infrastructure Developers. The company had become quite a favourite amongst investors as it had good road assets and was focused. Its stock price climbed to a peak of Rs 208 but then allegations of connection to the murder of an RTI activist and now the connection to Gadkari has cost the company close to Rs 4,000 crore in market capitalisation; its stock has plummeted to Rs 118. DLF stock also crashed from Rs 242 to Rs 200 after the Vadra allegations, losing Rs 6,000 crore in market capitalisation. Insider trading, considered a trivial offence in India, is beginning to cost companies dearly too. While Reliance Infrastructure and Reliance Natural Resources settled charges of breaching securities laws by paying Rs 25 crore each in 2011, Manoj Gaur, chairman of Jaiprakash Associates, his relatives and three senior executives were charged Rs 70 lakh for insider trading in the company's stock in 2008. Investigations have to establish three basic elements. First, you need evidence of action in the market, whether a buy or sell. This is the easier part. Then, one has to prove that the insider had particular information others did not. Finally, the investigator has to establish that one caused the other. However, typically, SEBI orders are challenged in the tribunal or courts where they either drag on for years or end up going against SEBI. Recently, the order against Gaur was set aside by the Securities Appellate Tribunal for want of evidence. Yet, institutional investors watch these issues closely and such cases do derail chances of investment in the company's stock. The Lokayukta Court in Karnataka has ordered a probe against three former Karnataka chief ministers - former prime minister HD Deve Gowda, External Affairs Minister SM Krishna and BS Yeddyurappa - and 27 others on a complaint alleging irregularities in the Bangalore-Mysore expressway project, which was awarded to Nandi Infrastructure Corridor Enterprise (NICE). So while 'coalgate', 'land-grab' and other scams occupy the front pages of our business newspapers, it is the action on the ground that the economy needs. We need to focus on administrative reforms to jumpstart the execution process. The Indian government needs to accelerate the execution of project clearances by taking upon itself the task of incubation. Providing projects with necessary clearances can improve their feasibility and attract investors in droves. Recently, the Bihar Government's ambitious Rs 2,224 crore, 22 km, four-lane Ganga Expressway project, being built as a PPP, suffered a major setback as none of the selected companies participated in the final bid. Even the final three companies, Reliance Infrastructure, Gammon India and Navayuga Engineering Construction, backed out. According to the 2013 edition of IFC's Doing Business study, which ranks countries on the ease of doing business, India retains its rank of 132, below Bangladesh at 129 as well as Sri Lanka (81), China (91), and Brazil (130). Further, India is not amongst the 10 economies that have improved the most. China is ranked 12 amongst the top improvers while India ranked 27. Evidently, India has much to improve to become more attractive to investors. Improvising closer home, the 7th CW Architect & Builder Awards held on October 12 in Mumbai offered a refreshing change with the theme of 'Youth', where several young architects and builders made their mark along with the stalwarts. A note of hope for the future!

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