Arun Jaitley, India’s Finance Minister when asked about disinvestment targets not being met for the State owned enterprises said, “Always remember that privatization is the art of the possible. Therefore it is an exercise which has to be transparent, it has to be acceptable to a cross section of political and public opinion, it is an exercise that must result in a better performance.”
This argument seems false as to provide better infrastructure and build a new and better India, it can only be financed by allowing all state owned companies to go public. His wishing to time the market, and wait for an opportune time, may never come, as markets go up and down randomly in cycles. To presume that the current bureaucrats at the Public Sector enterprises are doing better, at managing their affairs, when compared to other International companies, in the same sector; it seems like smoke and mirrors. The Public sector needs modernization and investments in technology, logistics and global supply chains. He should let his older babies go, as the capital raised from their sales, will help fund the nascent projects of tomorrow.
The legacy of Nehru and Indira for nationalizing and reserving huge economic areas, allowing State Enterprises to have a virtual monopoly in Banking, Finance, Oil, Coal, Energy for so many years. As the Private Sector has grown in India it has taken up the challenge, to meet the consumer needs with more efficiency. The money can be put to more productive use and the more Jaitley can put to work the better it will be for him. It is time for the Modi government to show, how it will pull the Indian economy out of its slump. Regarding disinvestment “the art of the possible,” may be just swallowing ones pride, and letting the Market forces take over. Let the Government get back to governance of its governed, rather than be distracted in running large businesses; best left to the private sector, to grow.
A new trust has to be established where disinvestment of some sectors of the economy, yields investment in Highways, Cities, Logistics, Airports, Railways, Mass Transit and the list is endless. With India needing huge improvements in sanitation, drinking water, electricity and broadband there have to be huge public and private partnerships for improvements. The 11 B disinvestments are not going to be able to fund existing ambitious plans of the different ministries. I am advocating to go for broke and raise 100 B and maybe 200 B over three years and really impact the economy. The digitization of Adhar and direct deposits, is an easy way to share some of these funds, with the poorest of the poor. The ones who need it the most, may also provide the largest productivity gains if they become consumers. We need a helicopter economy.
Global rating agencies are following closely the adherence to the 3.2% deficit financing target and so far Mr. Jaitley has obliged, to a great extent. With his options dwindling he may have to bring all tools in his arsenal to bear. “We are all conscious of the fact that there is importance of the kind of fiscal prudence that is required in the economy,” Jaitley said. “At the same time we are also conscious of the need in such situations of spending and finding the balance between the two.” With GST rolled out and its implementation in progress and it is a game changer, from the previous state and local taxes on distribution. Making India into one market for taxation makes sense and its benefits will be shared with the States. The laws have to be enforced and systems automated and simplified with AI to ensure collection and auditing of the taxes owed and encouraging the growth of the formal economy.
With timely disinvestment it appears that Mr. Jaitley can open the spigot, to be able to spend on Defense and other BJP priorities. The Indian economy has more than enough room to grow for this century, with its young and dynamic youth. Somebody has to become the enabler, of all the Micro to the Macroeconomic needs, of India. Such great opportunities come rarely and only action is required, in the Parliamentary sessions, to take them forward. The Markets have their own mechanisms to provide the price for Assets and these exercises need to start, in a far larger manner that we see today.
Investments in Infrastructure and human capital, provide rich rewards, as seen in the case of China. Education, health and human well being need major investments and the sooner the better. Increasing the productivity of India’s billion people will yield a virtuous spiral upwards, for the poor. It needs fire and fury to awaken the forces of nature on a gigantic scale, which only a modern India can achieve. This talk of balance and improvements in performance sounds good, but it is not the action required on the ground. Speedier and better implementation is the need of the hour and good leaders should be working towards these goals for improving Indian humanity.