Growing consumption a bane for India - Cost Management

Growing consumption a bane for India - Chandran Nair.I was reading this interview that
appeared in the Economic Times, Mumbai Edition today with great interest.

"Author and think-tank founder Chandran Nair is a second-generation Indian-origin

Malaysian based out of Hong Kong . He made news in India a few years ago at a conference in
New Delhi, where he took on American political scientist Francis Fukayama over what he calls
the latter's "odd view of the world based on an inherent belief in American exceptionalism".

Nair advocates a new model of capitalism for Asian economies .constrained capitalism--that
particularly wants governments to regulate the use of natural resources, and therefore the
nature of consumption, through a range of policy tools. In his new book, Consumptionomics,
he argues that the consumption-led Western economic model , which is based on under-
pricing resources and externalising the true cost of goods and services, won't work in
resources-constrained Asia.

He says that governments in the region must start reshaping capitalism by making resource
management, and therefore the pricing of these, the centre of all policy-making. But to do
this, we must reject the existing Western model and stop being in denial. He has named his
think-tank GIFT, short for Global Institute for Tomorrow, and among other activities it offers
leadership development programmes which are "both experiential and based on an Asian
worldview". "It is, in fact, not a think-tank, I rather call it a think-to-do-tank," he tells Ullekh
NP in an interview. Edited Excerpts :

How do you look back at taking on Francis Fukayama in India?

I did not see my role at the conclave organised by India Today in New Delhi as one of taking
on Fukayama as such but more of trying to share with the mainly Indian audience a sense of
how intellectual subservience had resulted in even delusional ideas from the West being hardly
questioned or openly challenged in Asia.

What are the failures of the Western model of development and why do you think it
won't work in emerging economies such as India and China?

It is now a model of an entrenched political and economic ideology and at the same time has
historical underpinnings based on colonialism and therefore global privilege with access to
unlimited resources (example: colonies such as India, African nations or frontier land such as
Australia). As such it does not belong in the 21st century where all the scientific evidence
points to limits being surpassed on numerous fronts as the global population is set to exceed 9
billion in 2050 (it was only over 1 billion in 1900). It does not believe there are limits and this
is simply a lie or, kindly put, "being in denial". It will not work in India and China because the
pursuit of "more" at any cost will bring about catastrophic failure simply because there are far
too many Chinese and Indians (India's population was slightly over 300 million at
Independence 62 years ago and has increased almost four fold since then). For those who are
not in denial, that is already all too obvious. But I must stress here as I do in the book that it
does not mean they must remain poor. In fact, the book argues that the current trajectory is
likely to shatter the dreams of hundreds of millions of the poor for a better life.

You have warned the world of what you see as the worst-case scenario: Indians and
the Chinese trying to consume like the Americans. As an antidote, you bring in a
concept called constrained capitalism. Could you please expand on it?

I am not suggesting that we get rid of capitalism which some have lazily assumed. Nor is the
book saying that the West has a free pass and Asians must now be poor. The book is very
clear on this and it argues that capitalism has many elements that can be further refined for a
crowded 21st century. But modern capitalism has morphed into something that seeks to
benefit and thrive at every turn by under-pricing everything. You could look at the origins of
capitalism in the US and argue that it even under-priced basic labour by using slaves. To
various degrees that continues today in different parts of the word given how migrant labour is
exploited in Asia. The focus of the book is on resource use. I am proposing that Asian
governments start to reshape capitalism by making resource management the centre of all
policymaking and to do this by putting in place the necessary frameworks and policies to price
things properly. In a constrained world this is a fundamental shift that is needed and requires
rejection of the Western consumption-led growth model where everything can be traded and
has a price, but is actually under-priced to suit the needs of vested interests, industry and its
lobbyists.

What are the reforms required for the new model?

Making access to resources and the maintenance of their vitality the centre of all polices is the
first step. I believe this is only possible if we have strong governments which are willing to
stand up to vested interests and also the mainly Western-led international bodies which are
wedded to the notion of the "globalisation of everything and anything" through free markets,
free trade, the power of technology and the leveraging of finance. "

Mr.A.N.Raman CCM ICWAI and President of SAFA was discussing how Integrated Sustainability
Reporting has taken a center stage and how it was one of the main pillars of discussion in the
recent IFAC - PAIB Meeting held in Melbourne, Australia.

To me all that is said by Chandran Nair and Raman squarely falls under Cost / Resource
Management. Cost Accounting and Audit's scope need to be enlarged. It needs to bring in
Sustainable Reporting within its gamut. I really cannot see Sustainability as another concept
but only as an extension of of Cost/Resource Management Reporting.

Indian visionaries had it in them to bring Cost Accounting and Audit. It now needs to
incorporate Sustainable Reporting within the Cost Reporting and Audit Framework.
Till now under cost accounting and cost audit and reporting framework, the reporting was
limited to resource consumption within an enterprise for manufacture of a single product
vertical. Through the EGR it now needs to be for the entire Enterprise.

Going forward what now needs to be incorporated is managing resource availability externally
with its internal consumption and paving the way for its sustained availability.

What also needs to be done is to take Indian experience in Cost Accounting, Auditing and
Reporting framework to the world. It provides the much needed platform for integrated
sustainable reporting.