Missing link between regulations and ground realities

A recently held seminar on Public and Corporate Governance, organised by Indian Merchants Chamber, highlighted the link between the two.
Compulsions of politics often results in policy which is bad for business, thus impacting the economic performance of the country and hence its stock market performance.
India is not the only country to witness such bad policy making.Several rust belt industries in the US, including its auto, airline and steel industries, are living on artificial life support systems provided by the government.
Unionised labour had, in the sixties, got these companies to agree to several benefits, including pension benefits which are now driving these companies into bankruptcy.
Three US firms earn less than cost of capital and the market recognises this. GM''s market capitalisation/sales is 0.13, Ford''s is 0.15 and Daimler Chrysler''s 0.24.
There is excess car making capacity globally, but Americans can''t shut down uneconomic plants because it would add to their pension woes.
Besides, no government can allow this certainly not one two months away from elections.
At times, such obligations lead to bankruptcy. United Airlines has recently declared it would stop contributing to its pensions plans.
The US agency that guarantees pension payments, PBGC (Pension Benefits Guaranty Corp) is, itself, having a deficit of $9 billion or more and could become bankrupt by 2020.
According to an article on the Coming Pensions Crunch in Business Week (September 15), the total shortall in all corporate pension funds is estimated at $279 billion.
Companies don''t contribute to pension plans, diverting the money to their business instead, leading to poor corporate governance and erupting scandals.
Consider broadband industry. Thanks to the protection afforded by US telecom regulators to the baby Bells, and to the broadcasting industry, growth and penetration of broadband in the US is slower than, say Japan or Korea.
In these two countries, the regulator has forced incumbents to allow start-ups use their networks, at reasonable prices set by government.
In India we have our own quirky and poor public governance. In the textile sector, we are about to squander the opportunity for huge exports (post abolition of quotas) because of inflexible labour laws.
Arvind Mills, for example, can procure export orders and treble its workforce from the current 20,000, but won''t because, should the business dry up it will not be able to downsize.
It is thinking of setting up a powerloom park to be owned and managed by individuals with technology support and quality assurance from Arvind.
Is this best way for an export oriented, job providing, industry to develop? Sensex climbed 191 points last week to hit 5561, reaching levels it was at before change in government. A small correction may occur, on profit-booking.