Two years ago, when the UPA government-induced economic malaise was threatening to ruin and reverse the hard-won gains of the past decade’s boom and spoil India’s image as an investment destination, it was commonly assumed by all and sundry that India Inc somehow had the financial wherewithal and the strategic gumption to take big bets.

Pundits who criticised the government did so thinking that all that was needed to change the mood was a change of guard in New Delhi. The media which lampooned the ineffectiveness of the UPA administration paid scant attention to the ability and the health of the industry to make big investments or grow their profits. Investors who drove up stock prices sky-high did so in the foolish belief that the black economic clouds will be dispelled by a sudden rush of investment and a surge in demand once a new government comes in.

One year later, the party is over, the music has stopped and the hangover has begun. Indian industrialists are falling over each other to blame the government for not doing enough to reform the economy, speed up investments and improve demand. Deepak Parekh, chairman of HDFC said in February that the government’s attempt to ease the rules for doing business has not changed anything on the ground. Others, especially from heavy industry and infrastructure sector, are saying the same thing. AM Naik, chairman of L&T, echoed Mr Parekh’s sentiments in an ET interview in March.

All this is a little amusing and hilarious. Mr Parekh and Mr Naik are fine gentlemen and capable industrialists. They have created immense wealth for their shareholders and they do have a point in saying that well meaning words and actions have not translated into anything concrete on the ground.

But the general anti-government clamour and complaint, reflected also in a very fine ET article two days ago by Rohini Singh, has to be taken with a very large bucket of salt. Not that the industrialists are lying, but that there is a tremendous effort to pass on the buck for their failings on to the government.

KV Kamath, chairman of ICICI Bank and one of the doyens of Indian banking industry hit the nail on the heads in a devastating ET interview on Friday. “There is no policy paralysis,” Kamath said in the interview. “I can say this explicitly. I have had clients in the first six months come and tell me there is nothing pending in Delhi. These were large clients who always had something pending. This time there is no external shock. (It is) their own domestic woes in terms of bottom line, or debt. That I clearly see in their balance sheets. That, I see as the clear reason. All other reasons are imaginary reasons.’

Note the second half of the sentence. The fault lies with industry for the way they have managed their finances and their strategy. For the past eight years, Indian businessmen, especially from manufacturing, metal and heavy industry sectors have gorged on debt and spent their money buying up companies in all parts of the world from Latin America, to Africa to Europe, UK and the United States. That debt has only been climbing and has stubbornly refused to climb down.

A Standard Chartered report published in ET on says that all companies of the BSE 500 index have debt of Rs 24.3 lakh crore. Yes!, you heard it right. The debt is more than three times the annual direct tax collections of government of India. It has grown 20% from 2008-09 while profits in that period grew only 9%. One-fifth of the companies don’t have enough cash to pay interest. They are in many ways like indebted households who cant rustle up money for monthly EMIs.

The debt burden is not a fault of the government. Companies have brought this upon themselves through recklessness and greed.

ET analyst Kiran Kabta Somvanshi reported last year that many companies who paid big bucks for large overseas purchases ended up destroying shareholder value. Many infra, metal and heavy industry firms have applied for loan restructuring; One airline has gone bankrupt forcing its owner to sell his crown jewel.

Some public sector bank officials have been accused of fraud in granting loans to ineligible firms. Promoters of two companies have lost full control of their firms due to debt forcing a sale to domestic white knight and a multinational.

Is the Modi government somehow responsible for all this? Is the government to blame if India Inc does not have money for expansion? Shouldn’t we be happy that banks and investors are taking a cautious and sometimes negative approach to spending plans of companies? At Least that is the way things should work.

Some industrialists blame the government for not doing enough to spur demand. They point to the worsening demand scenario in rural India. Many finance, auto and consumer companies depend a lot on rural sales and there is no doubt that they are hurting. Now, rural demand is driven by a number of factors. Unseasonal rains in March have destroyed a lot of crops. Below normal monsoon this year threatens agri output and demand could slide further in June-September if rains are bad.

But demand is also bad because of a number of decisions taken by the Modi government. MSP increases have been limited, subsidies to farmers and workers are being paid through bank accounts and not through middlemen. This has upset a powerful rural clique which has always depended upon siphoning money from these schemes. Consequently, demand is also likely to slow down because spending by the powerful clique was responsible for much of the demand in the past few years. Shouldn’t the Modi government be credited by trying to bring about this transformation? One of the industrialists quoted in the ET article by Rohini Singh acknowledged that corruption has come down but still blamed the government for not doing enough. One wonders which world these industrialists are living. Corruption is India’s biggest bane.

Like inflation, it hurts everybody but especially the poor, the downtrodden and the small industrialists. There is enough anecdotal evidence to show that the Modi government is taking a tough stance on corruption. Businessmen are not spotted in corridors of power pleading their case with ministers and bureaucrats and a stiff no-nonsense approach is being taken to deal with the nexus between corrupt politicians, bureaucrats and ministers. But many industrialists have thrived in such a scenario before and can’t make out how to operate in the changed circumstances. They have used bank loans as equity thanks to pliable bank chairman, inflated cost of their projects and secured natural resources for free thanks to corrupt politicians. That regime has ended. Auctioning of natural resources whether it is coal, spectrum or minerals is the new norm and these industrialists can’t stomach the transformation. They can’t accept the fact that it is difficult for them to make oodles of money any more without spending anything. Bitching and complaining are their only weapons now.

India needs investment and new projects but only in select areas. We don’t need new power plants, steel plants or refineries at least in the near future. There is enough surplus capacity. Many companies are operating at capacity utilisation of 70-75%. Their first job is to use up the existing capacity which will give them operating leverage and then build new capacities when demand recovers. This is sound strategy. There is no reason to feel bad about this. Many companies also have surplus land which they are using to expand at the same location.

This will lower costs and improve returns. Reliance Industries, India’s biggest private sector company by revenue, is in the midst of a $40 bln capex plan. It will spend $15.5 bln on petrochem and refining projects at existing locations. Other companies are doing something similar though on a small scale. Dont let anybody fool you into thinking that nothing is happening on the ground. It is time to call the bluff of complaining and prejudiced industrialists.