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Less than eight months ago when the Planning Commission set up a committee under Raghuram Rajan to suggest next generation financial sector reforms it could not possibly have envisaged how incongruous it would be to talk of reform when government is engaged in the very antithesis of reform: loan waivers. In such a scenario, the committee’s recommendations can be best described as an eloquent reminder of the contrast between ‘what is’ and ‘what could be’.

To its credit, the committee seems to have a keen awareness of the political economy considerations that govern any reform process in India. Hence, unlike previous committees on financial sector reform, the Gen-Next committee has taken care to suggest a broad macroeconomic framework within which its recommendations need to be anchored. This is important because many of the reforms needed to transform the financial sector into one befitting a 21^st century economic powerhouse that India hopes to become will be pointless unless they are undertaken in tandem with more broad-sweep macro-economic reforms.

Any attempt to develop the bond market, for instance, is futile as long as we do not have a risk-free yield curve. And a risk-free yield curve will not emerge as long as government borrowing is so large that it can only be met by mandatory preemptions like the statutory liquidity ratio (SLR) backed by some careful priming of the market. The reason is that corporate bonds are priced off the risk -free sovereign yield curve - corporates pay a premium over the sovereign (government) for comparable maturity, the precise premium being a function of their credit - rating. Hence the starting point for the development of a corporate bond market - the emergence of a risk-free yield curve - is that government must learn to manage its finances better (read, borrow less). In other words, the importance of a sound fiscal policy cannot be overestimated.

If fiscal policy is important, monetary policy is no less so, as it has wide ramifications for the financial sector. Here, the committee’s suggestion that monetary policy should target inflation rather than the exchange rate is based on sound logic. The events of the past few months have shown, quite convincingly, that targeting the exchange rate does not work. Far better than to use monetary policy to deliver what it is best suited to deliver- price stability; leaving exchange rates to the market.

Moving from the macro-economic framework to the more specific proposals, these are largely unexceptionable. The idea of freeing up branch and ATM (automated teller machines) licensing and easing entry nom1S into’ the banking sector will find few opponents.

Anyone who has seen the transformation in the telecom and civil aviation sectors will testify to the benefits of greater competition. However, it is less dear whether this objective will be best served by allowing more local area banks. It is increasingly becoming apparent that the benefits of competition and even of greater financial inclusion can be better achieved by bigger-sized banks that enjoy both economies of scale and have access to cutting edge technology solutions.

On the issue of revitalising PSBs, the committee has, perhaps, been excessively constrained by socio-political ground realities. As long as government remains majority owner, PSBs will forever be condemned to compete with one hand tied behind their backs. No amount of talk about improving the quality of corporate governance is going to make an iota of difference. There is no alternative to privatising banks if we are serious about improving their performance; the longer we beat around the bush looking for alternatives when there are none, the more time we lose. If countries like Pakistan and China can reduce/abolish state ownership of banks, so, can we if we are serious about next generation reforms.

On regulation, the committee has done well to steer dear of the ’single versus multiple regulators’ debate and suggest a financial sector oversight agency along with distinct sectoral regulators. This is akin to what we have at present in the form of the High Level Co-ordination Committee on Financial and Capital Markets. The oversight agency would merely formalise the existing arrangement; but with one key difference. All regulators would be on, an equal footing and the present anomalous situation with the RBI governor first among equals would give way to a more democratic, and hopefully, more efficient one.

Progressive expansion of ‘priority sectors’ has led to a situation where the priority sector obligation has not served the purpose for which it is intended - wider access to credit for the financially excluded. The committee’s carrot -and-stick approach is, therefore, an improvement over today’s toothless system I where not only is there no penalty for noncompliance but compliance is a bit of a farce.

For the rest, the committee has done a commendable job though its silence on cooperative banks is a bit puzzling. The full report is not yet in the public domain; hopefully we will I’ find some suggestions on revitalising tins sector, given that it is, perhaps, the best way to ensure financial inclusion.

It was the summer of 1988. A young man keen to become a writer and director was doing the rounds of producers in Mumbai, walking into offices that thousands had walked into before, and thousands would later. His name was Salman Khan and he was about to become one of India’s biggest movie stars.

Not too far away in the same neighborhood of Bandra, Aamir Khan had just zoomed to new stardom. Two other New Delhi men, outsiders in Bollywood, were preparing to begin their journey as actors. They were called Shah Rukh Khan and Akshay Kumar. Years later, those four men are still the crown of the small clique of stars of Hindi cinema. But the whirlwind of change in Bollywood has not left these icons of entertainment - untouched. They are adapting as well.

Actors are turning producers. Actors are turning directors. Actors are also writing films. They are turning businessmen - devising new, innovative ways to own the intellectual property of their films, from ownership of the film print to the ancillary rights like those related to the Internet and mobile phones. They are working with new directors and themes. 

“There was a time when we ourselves never used to watch bur own movies. But actors are now thinking - what to do next, what’s the kind of film I want. The game has become big … Audiences have changed. They have become impatient.” Salman Khan told in an interview.

“For an average filmmaker, it is very difficult to get a hero on board,” said director and music composer Vishal Bhardwaj. Bhardwaj has no such obstacles though- he is part of Bollywood’s elite league of directors who most actors and producers are desperate to work with.

That, too, is a reflection of the new Bollywood, with top actors keen to do unconventional themes with trend-setting directors like Bhardwaj. “Fees in Bollywood are slowly inching towards Hollywood levels - if a Shah Rukh Khan does a film he will take at least US$6 to US$7 million - in comparison, Johny Depp will charge US$20 million,” Bhardwaj said. “Every actor has his own production house and if you have to cast them, you have to co-produce or work for those production houses.” The top names - Amir Khan, Shah Rukh Khan, Suneil Shetty, Ajay Devgan, and most recently, Sanjay Dutt and Saif Ali Khan - all have or are set to launch their own production companies. Salman Khan - whose brother Sohail Khan is a producer thinks it is a bad idea. “Being a producer is a different thing altogether,” he said.

The top actors are rumored to charge between Rs. 25 crores and Rs. 30 crores per film, with other benefits to follow. But there are few options the shortage of saleable actors is so acute that there is a mad scramble whenever there is a new, promising face. Director Sriram Raghavan’s Johny Gaddaar threw up a new actor - Neil Nitin Mukesh, who was immediately snapped up by production houses, even though there are reportedly no scripts yet for most of them. “We are short of talent. We are surviving on a whole lot of incompetence. You cannot make films against gravity,” Salman Khan says.

Ram Mirchandani, senior vice-president with UTV Motion Pictures, one of India’s major production houses, is one of the men trying to push forward change. “The star system has got its own challenges. There are no more than 10 stars in Bollywood. And since there aren’t too many, prices have gone up,” he said. “The economies have changed and the waiting period has gone up.”At the same time, Mirchandani points out, many of these stars can be relied upon to steer a film through its crucial first week.

But the dynamics of star power in Bollywood still begin and end with male actors, a phenomenon that frustrates acclaimed directors like Sudhir Mishra. “This (boom) will last only as long as the realization among the promoters that the big star films is making big bucks. There is an absence of release-ability for non-star cast films,” said Mishra.

“In a country as huge as India, what I fmd ridiculous is that you cannot make a film with a female star. You can keep blaming the producers but the audience has something to answer for,” he said.

Milton Friedman wrote in the last century, “There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits.” Since there are many global problems which are continuously growing to impact our living atmosphere like growing global population’ changing climate and mounting stress on natural resources, business leaders who continue to define social responsibility so narrowly risk leading their businesses and our planet - down an increasingly unsustainable path. There is completely new set of expectations in the 21^st century. The earth is no longer sufficient to profitably provide a quality product or service. Thus, we need a new business model that puts business in a broader context. Beyond making a profit, serving a market and obeying the law, a successful business must, do three things at a minimum.

The first thing, there should be a consistent support from the business for the sustainability of the communities it serve.  A company of 21^st century should understand that if the communities which it serves to are not sustainable. A company’s sustainability work, however, should be relevant to its core business, or it will lose the support of its shareowners. As has been the case in the past, it cannot be seen as a philanthropic effort related to the CEO’s personal agenda for example, At the Coca -Cola Company, water is the main ingredient in all our beverages. Lack of public access to dean water is a serious problem in many communities.

Next on the second phase, there should be a collaboration between the businesses and the government and further with the civil society. Our planet is facing an urgent and complex challenge, which in fact is for government, business or NGOs to solve alone. Working together, however, we can create a multiplier effect that helps build sustainable communities and a more sustainable planet. The interconnected triad of business, government and civil society is key to accelerating sustainable development. Strong partnerships are already being formed around key social issues.

On the third stage, the business which is in both- perception and reality- successful should be functioning as a part of every community in which it operates. By creating jobs and enabling business we contribute to alleviating poverty in the communities we serve.

The health of living communities and the planet we live in has its future attached with the future of a 21st century company. There are leaders who consider sustainability work to be in a company’s “enlightened self interest“. I disagree. In ways that will determine our ability to achieve consistent, global growth and profitability, it is quite literal self interest.