The shift in the Budget towards privatisation of non-strategic public assets reflected a welcome departure from the economic orthodoxy of the socialist decades, which obliged governments to pay lip service to the public sector, notwithstanding its vastly diminishing returns. Fear of a public backlash held back ruling regimes from divesting in public sector undertakings even if these were deadweights on the public purse. Happily, this Budget showed how the government is no longer shy of talking of privatisation.
In this context, the Prime Minister’s reported remarks on Wednesday, enunciating the new thrust towards privatisation of dead and dying PSUs represent the clearest possible evidence that the change in economic direction is genuine. And, therefore, it may well succeed whereas previous attempts, including by this government, at even modest disinvestment, had come a cropper.
According to a report in a contemporary, Modi told a webinar on Wednesday that the government intended to ‘monetise’ as many as 100 public sector assets worth Rs 2.5 lakh crore. Talking with the zeal of a new convert, the PM said that it was “the responsibility of the government to support and encourage businesses and enterprises but it is not necessary for the government to run businesses or own them… that is why I say the government has no business to be in business”. This is correct.
Having largely missed out on disinvesting in dud PSEs, it was time for Modi 2.0 to make up for lost time and get the government out of non-strategic enterprises. The rationale advanced by Modi bears closest approximation to the reality of the economic model long followed in Japan. A long-standing bipartisanship in Japan has sanctioned an up-front ‘partnership’ between the government and business, without the latter actually investing or even owning a share in the private business. In short, the Japanese regimes create conducive conditions for private enterprise to prosper but within the well-defined and strictly-enforced regulatory systems.
Our apprehension is that if we allow our entrepreneurs to grow their businesses but within the four walls of a regulatory regime, there will be howls of protests from some of the biggest tycoons. The mounting troubles of foreign-owned e-commerce platforms, suspected to be at the behest of those belatedly keen to exploit this fast-expanding marketplace, is a case in point. When the government seeks to tilt the scales unfairly and unjustly in favour of one competing business against the other, it belies Modi’s assertion that a government has no business to be in business. Equidistance between competing businesses, be they Indian- or foreign-owned, so long as they operate lawfully, would enhance India’s credentials as a destination for greater foreign investment.
Meanwhile, at the webinar, Modi’s remarks on privatisation had a welcome caveat. “Government’s absence should not be felt in areas where it is needed, but its influence should not be felt in other spheres.” Defence, nuclear energy, space exploration, etc., are the handful of sectors in which governments can have a controlling share in the enterprises. The rest of the vast field can be left to the private sector to operate in but always under fair and transparent rules facilitating competition and growth.
Immediately, the success or failure of the government’s bold approach will be reflected in its ability to raise the targeted Rs. 2.5 lakh crore from privatisation/disinvestment in 2021-22. The experience thus far gives little cause for hope, though given the new-found confidence in embracing privatisation, we will keep our fingers crossed. As to the speculation about the reason for the change of heart vis a vis the private sector, the most charitable explanation is that in his second term, he can afford to take risks, especially since the doctrinaire of the left and the trade unions affiliated to it have been virtually rendered irrelevant.
Besides, the mainstream political parties no longer chant ‘samajwad’, since doing so has ceased to fetch votes. People are interested in economic and social welfare, not in any ‘ism’. If the private sector can run public transport, schools and higher educational institutions, healthcare facilities et al they would rather patronise them --- provided they have the means to do so. And, crucially, for them to have those means, the government and private sector must partner together so that the general income levels rise and financially empower our teeming millions to live a life of dignity and peace.