The only superpower that is ruling the world right now is COVID-19. The pandemic has turned the whole world topsy-turvy. It has disrupted businesses, people and the global economy in the worst possible ways.
CHINA – THE OBNOXIOUS VILLAIN!
The world is blaming China for the outbreak. The US President openly called it the ‘Chinese Virus’ in a press conference. China failed to stop the illegal wildlife trade and contain an early outbreak. It even lied about the statistics regarding the disease, death and recovery rates.
Until December 2019, China was almost being seen as the global superpower, considering its influence over other countries in technological, cultural, military and political spheres. Its economic growth has beaten every other country at an average of 10% per year and US companies have been itching to somehow get involved in the China market.
As a result of the pandemic, the geopolitical & trade equations between the nations have started changing and evolving, and they now see political risks, tariffs and market share in China, in a negative light. Foreign businesses have not been doing well and they see further investments in China as a big risk.
China tends to favor state-owned enterprises to global companies and that is the reason Uber failed in China.
China also doesn’t have global support as it lacks business ethics. Hence, other nations don’t trust Chinese firms with collaborations and investments. Remember the biggest controversy of 2017? When Huawei, the Chinese smartphone company, stole designs and top secrets of network operator, T-mobile and violated US laws? The recent addition to the list is TikTok. Need we mention more?
Urbanization, Politics and Business: What’s wrong with China?
China is highly industrialized. Business and economy have always been the focus points. Years ago, farmers were forced to become industrial workers. China is a communist country, run by capitalist dictators. Its politicians control people as well as the media. They are always on secret missions and agendas. They don’t practice any human rights or morality. They don’t care about anything that does not mean business or money. China is very indifferent to other countries.
Its supply chain has been brutally disrupted due to COVID-19 outbreak.
Countries like Japan and Korea have already expressed their eagerness to move out of China and shift their manufacturing bases to India. Steel giant Posco and Hyundai Steel are already searching for 5,000 acres of land and port connectivity in Hyderabad. Many medium and small tech companies see India as a big investment destination.
Japan is already planning to spend $2.2 billion to get its companies out of China. If this happens, China will lose a large number of jobs. It’s high time it got a taste of its own medicine!
India is expecting a huge amount of foreign investment in the next 10 years.
Over 1,000 foreign firms from electronics, textiles, medical devices and smartphone industries are already in talks with the Indian govt. Indian govt. for setting up their production plants in India.
However, the bigger question is
Is it even realistic to think that India, a developing economy, can completely dethrone China?
Economy: The Status Quo
As of 2019, China stood 2nd and India stood as 5th largest economies in the world (nominal basis).
India is emerging as the fastest-growing trillion-dollar economy. It is 5th largest overall, with a nominal GDP of $2.94 trillion. India has already overtaken the UK and France.
China’s nominal GDP is $14.14 trillion. Phew! It’s way ahead of India.
THE VILLAIN HAS A POSITIVE SIDE TOO!
China supplies capital goods to Indian producers for manufacturing products for the Indian market. It is also the leading supplier of consumer electronics and solar panels.
People who have visited China for business reasons swear by their professionalism and dedication towards work regardless of power or position. As a community, the Chinese follow rules and regulations religiously and have a growth mindset. China is well developed in every way and safe for its citizens.
What’s wrong with India?
The problem with India is that people and government are more engaged in issues like religion, casteism, favouritism, corruption, molestation. Even the citizens have a laid back attitude. They believe in cynicism and ain’t law-abiding.
Areas in which India has an edge over China
In India the cost of labour is cheap, operating costs are low and infrastructure quite competitive. It has business-friendly policies and special economic zones (SEZs) that offer free exports, and incentives to boost domestic manufacturing.
India has cordial relations with Russia, Bangladesh, Japan, US, Afghanistan, Iran and other countries.
China looks isolated in the trade war with America while India is on cordial terms with them.
Foreign Direct Investment is the anwer
Recently, GOI imposed restrictions on foreign direct investment from the neighbouring countries by making govt. approval necessary. It is a sensible move to prevent the opportunistic takeover of Indian companies by foreign investors especially China, in these challenging times.
However, in the long run, India should attract all sorts of foreign investments including Chinese. After the implementation of FDI, almost all fortune 500 companies of the world have set up operations in India. Companies like Volkswagen, Hyundai, Microsoft, Amazon, GE, HLL, Nestle, Suzuki etc have dominated consumer goods or automobiles and in no way, they were a threat to the Indian economy.
Holding grudges against China at this point in time will not make any sense because a global recession is already on its way and going to cast a shadow over India too.
You can’t ignore the investments China has made in Indian startups
Eighteen of India’s 23 unicorns with over $1billion have investment from Chinese companies. Startups like OYO, Paytm, Swiggy, BYJU’s, MakeMyTrip are just some of them. Any foreign company which tries to indulge in a foul play should be debarred from any kind of participation, not just China. India today is in dire need of investments.
As per the reports, India will have to cover $190 billion output loss due to nationwide lockdown and to revive the economy, India needs funds from abroad.
Even RBI, in order to attract cash inflow, has liberalised foreign investment in bonds.
15 years ago, Japan was way ahead of China in terms of economy. In just 7 years it surpassed Japan and now it is 3 times larger. So if India works on its shortcomings and remains focused on productivity, chances are it can dethrone China but how soon this will happen, is unpredictable. The comparison of India with China is meaningless as of now.
WAKE UP INDIA – THE ROAD AHEAD!
Anti-China sentiments alone won’t fix India’s economic woes, for sure. It needs to rework on its labour laws, which at the moment are so complicated, that small organizations fear scaling up operations. Ease of doing business, shutting them and improving the conditions of its own labourers will go a long way in actually boosting the growth. This will also attract foreign companies more.
India is a people-oriented company. Industries are not set up at the cost of hurting people. The political leaders care about its citizens more than the economy. It is democratic in every sense and India’s primary asset is its people. Its current population is 1.3 billion.
Indians wouldn’t want India to dominate the world like China or US, but become self-reliant and attain a level of prosperity through socio-economic reforms, and by holding on to its strong cultural roots and value-based systems. The day this happens, India will automatically overtake China in more ways than one.
Be aware, China!
Truth Behind Gujarat’s Model of Development
Now you don’t need to “Kuch din to gujaro Gujarat mein”- to know what is the real story behind the wall
Modi’s “Trump” Card – The Wall
During the visit of the former US President to India in 2020, a wall was built on the streets of Ahmedabad. The convoy of the President was supposed to pass by this street.
This wall was allegedly built to hide the slums dotting the road that his convoy would use. This was an attempt to hide the poverty on the streets of Ahmedabad and protect the value of the brand “Modi”.
The BJP supporters and the local municipal corporation claimed that the wall was built to avoid encroachment and to provide safety to the US President.
The real story behind building the wall cannot be ascertained for now. We don’t know for sure whether it was a government of Gujarat’s deliberate ploy; or just an allegation by the opposition.
Whatever it may be; the most hilarious part here is that both these camps assumed that the President of a nation with the maximum number of satellites in space doesn’t have access to the top view of things. Hysterical indeed!
Do we as citizens of this country have the top view of what exactly is the real story behind “Gujarat- the model of development”?
A hoax or a reality?
Let’s climb up the wall to see for ourselves!
What Is The Gujarat Model?
Gujarat was the first state to run a tourism campaign on television of that magnitude. Amitabh Bachchan’s “Kuch din to gujaro Gujarat mein” ad flashed on the television very frequently, along with other ads.
The ad break between television shows started with Ambani’s Reliance handset’s tagline saying- “Kar lo duniya mutthi me” and ended with Amitabh Bachchan’s “kuch din to gujaro Gujarat mein”.
The idea of packaging Gujarat as a product, just like a mobile handset; in order to sell it in the future with the idea of gaining profits- monetarily or electorally; is what is the Gujarat model all about.
Gujarat was refurbished, packaged and displayed to the general public as if it were a product. Now, if it is a product, it will attract the attention of investors who would like to invest in it for profits.
Gujarat, the state of the public, was a private product now. And the public representatives were the private entrepreneurs.
The model of Gujarat which gained fame during the second term of Chief Minister Modi gathered full momentum by 2014. The Gujarat model was used as a prime campaigning point by the BJP during the 2014 Lok Sabha elections, which was won by the BJP.
This model of Gujarat became the model of India as Narendra Modi took charge of the nation in 2014.
The Indian Model Inspired by Gujarat
Narendra Modi began by branding himself to the world through frequent visits to other nations. He introduced a new India to the world, attracting foreign companies to invest in India.
The policies of privatization of the top Indian government companies fast-tracked disinvestment. This allowed private investors from India and abroad to buy the government stakes.
The growth plan had three key components:
- major jump in infrastructure to facilitate inflow of corporate investment
- significant jump in governance to address the requirement of corporate elements
- unprecedented increase in incentives and subsidies on investments to the corporate sector in order to attract investments
Infrastructure development focused majorly on roads, airports and power. Governance concentrated on swift disposal of investment propositions, easy accessibility to bank credit. The concentrated departments were aggressive in accelerating the procedures to facilitate investment flows.
These government stakes and contracts were offered to the rich, making them richer. The gap between the poor and the rich widened.
The gap between the top and bottom 10% of asset holders in rural India are 500 times. The same in urban-India stands at about 50,000 times
The Adani & Ambani Ends At The Modi Stadium
If you don’t follow cricket, you might wonder where this is coming from.
The recently inaugurated cricket stadium in Ahmedabad, considered the biggest stadium in the world, was named after the Prime Minister of India, Narendra Modi. And you know what? The two ends of the stadium are named Adani & Ambani ends.
Just like this stadium, Adani and Ambani are the two extreme ends of the economy of Gujarat. But we need to see what lies between these two ends. Is the common man able to contribute substantially to the economy of Gujarat?
But Let’s Know the Real Story
There has been an impact of the significant jump in corporate investments on the economy of Gujarat. After the massive incentives to corporate elements, the government is left with limited funds to spare for education, health, environment and employment for the public.
Gujarat spends less than 2% of its income on education (the usual is 5-6%). As a result, 45% workers in Gujarat are illiterate or have studied only up to class five with a poor quality of education. The quality of higher education is resulting in an increased number of unemployed engineers and science graduates.
The rich are not only getting richer, they are getting educated as well. Roads, bridges and laptops are reaching the villages; but professional education doesn’t make its way there.
Though Gujarat has seen an immense growth in infrastructure, the workforce carrying this out is categorized as informal workforce. Around 93-94% workers are informal. They do not have wages above the stipulated laws of minimum wages and do not get benefits of being employed like social security, provident funds, etc.
The wages in Gujarat are almost the lowest amongst the major states of India, declining rapidly over the last decade.
The politicians of Gujarat boast about the highest workforce participation in India. But that is what they want to project in the media; hiding the fact that they cannot create productive jobs with decent income levels for the youth.
The expenditure on health is 0.8% of the state income, way below the usual 4-6%. Gujarat is slowing down very quickly in almost all health indicators. 45% children in the state of Gujarat are malnourished and the maternal mortality rate is increasing, leading to the state’s poor rank.
Although 40-45% households in Gujarat are dependent on natural resources for their livelihood (farming, animal husbandry, forestry, fishery, dairy etc), the depleting and degrading resources have reduced the productivity and incomes in these sectors. Due to the heavy industrialization, pollution is affecting the ecosystem as well.
Relaxation of most of the environmental clearances for setting up factories for a few industrialists has been another major cause of increased pollution.
Capitalist approaches and the quest for “state-of-the-art” technology have deprived a few parts of the society of their basic necessities. The tribal people who are not usually associated with development are affected the most. Most of them are forced to migrate to beg on the roads or live in huts in rural areas with no basic amenities.
It is not surprising that the Gujarat high court has told off the state government frequently, asking them not to forget that they are also a part of the state’s population.
The Hollow Hype
Japan was once hailed by the world for good governance as it continued towards development even after so many natural and human disasters. Countries around the world were keen to understand the Japanese model of governance and development, which was surely worth emulating.
But Japan is now struggling economically, and overall quality of life has degraded significantly.
There are a few good aspects of the governance of Narendra Modi in Gujarat, and the Gujarat model is an innovative version of neoliberal politics.
But tagging him as the superstar PM and the model of Gujarat as the bible of governance is not the correct way of opinionating things.
Every state must take the good from this model; just as Gujarat needs to take from every other state.
Khalistan Factor – Pakistan’s Pet Project – a Trial to Demolish India
Are the Pakistani Khalistanis trying to destroy India?
Do you know what January 26 means to any Indian? It’s the day India officially became recognized as a legitimate democratic republic. Usually, this day is marked by great jubilee and stunts by the Indian army trying to show off its might and valor. But 2021’s Republic Day was different.
It started off as an innocent protest by Punjabi farmers
That’s right, the police were greeted by angry Punjabi farmers who were protesting three newly tabled laws that they felt were unjust. They (farmers) decided to show their anger by engaging in official and permitted (by the Delhi police) tractor protests which plied through approved roadways.
But then things went deadly wrong
Well, what was intended to be an organized and peaceful tractor demonstration by the Kisans soon ended up turning into an all out war against the police and Delhi itself.
These farmers used the tractors as weapons when they tried to destroy the barricades that were designed to protect and separate the citizens of Delhi from the protestors.
They also ‘got physical’ with the police. Everyone, including the police and farmer leaders were shocked and ‘running for their lives!’
There were many victims and even a few casualties. In fact, over 100 police personnel were injured in the attacks and clashes.
It didn’t start off this way
Indeed, the demonstrations had started over two months earlier. Back then there were peaceful protests by the (mostly Punjabi) farmers. The demonstrations took place near and on the outskirts of Delhi. After all, the farmers wanted the central government to know their displeasure with laws that they felt were ‘unfair!’
States that bordered Delhi also witnessed some of these peaceful protests. These states were Haryana and Uttar Pradesh. There is over 60 kilometers of land that separates these states.
But, alas! Protests and demonstrations that start out peacefully almost always end up being hijacked by malicious and violent external elements and entities. The peaceful farmers’ protests were no exception.
Enter the Khalistanis
The Delhi police should have seen it coming.
After all, the Khalistanis and their (banned) organizations and groups always hijack peaceful protests. These are protests that Punjabi farmers initiate against the central government. It happened earlier in 1984.
And how did the police know that the Khalistanis were behind the attacks? Well, the fact that some of the farmers raised the Khalistani flag was a dead giveaway. This was obvious since the Delhi police had footage of this on video!
Had the police been smarter, the rampage on the capital by the miscreants on tractors could have been completely avoided. So could have the broken bones and ribs that the police sustained!
What made matters worse was the fact that these miscreants hoisted the Khalistani flag on some buildings that have historically symbolized the pride and autonomy of both the Indian government and nation!
One of these buildings was the Red Fort. Some of these farmers hoisted both the Indian national flag and the Khalistani flag. It was almost as though they wanted to agitate both the Indian government and the Delhi police. And do you know what?
It almost worked.
The Delhi police really began to feel the heat
The Delhi police was indeed baffled and taken completely by surprise. After all, they had been expecting the farmers to peacefully protest and not try to siege the capital with Khalistani separatist agendas!
Now they were faced with the less than enviable task of identifying and arresting the guilty persons – the Indian government and people of Delhi were demanding this and mounting pressure on the Delhi police to do this!
The police did make some progress to this end, but it wasn’t what they either wanted or were looking for. They wanted to find all of the parties responsible for the attacks. What they ended up doing instead was identifying a few of the guilty – one was a noted Punjabi actor with an arrest warrant.
The issue goes to international audience
What started as a protest at home, became a human rights violence, thanks to international celebrities chipping in to voice the plight.
Many international celebrities and personalities came to the defense of the protesting farmers.
One noted personality was Greta Thunberg. She made a tweet on February 3 that changed the nature (and perhaps the destiny) of the farmers’ protests permanently.
Thunberg is one of those enthusiasts from the Nordic nations (Sweden) who is never tired of being vocal about climate change and the havoc that it’s wreaking on the global climate.
Thunberg legitimized the farmers’ actions
Well of course, Greta would support the farmers. After all, from her standpoint, they were helpless victims who were unjustly facing the wrath of the Indian government and Delhi police.
But oh, if only she knew the entire story! Her tweets did more than just justify the farmers’ protests, it took the entire protests on the international stage.
Thunberg gave the Khalistani factors the ammunition they needed
Well, in case you were wondering how she managed to do this, the answer is simple. She used a social media Toolkit which was created by Mo Dhaliwal.
This is where things got interesting as Mo Dhaliwal is the founder of the PJF Khalistani organization. Greta credited Khalistani factors for the protests that took a sudden and violent turn. She did manage to delete the initial tweet, but alas, till then the damage was done!
Thunberg’s initial tweet had ‘let the cat out of the bag!’
Okay, so in case you were wondering how she did this, she hinted towards a devious and sinister plan that certain Khalistani elements both in India and Pakistan had been hatching all along to try to disrupt the protests and hijack them.
The tweet had another unintended consequence – it helped Delhi police identify three culprits behind the protests turned violent on Republic Day. One of these was Disha Ravi, an environmentalist activist in Bangalore.
The other two were a lawyer named Nikita Jacob and an engineer named Shantanu Muluk respectively.
And what did the police find them guilty of? Well, they were charged with helping to design the toolkit. This toolkit essentially was a smear campaign that was designed to make India look bad on the national and international stage.
But if only this was all the toolkit did!
It also used the farmers as a pawn in the attempt to launch a war on India’s national economy and fight with the central government.
The police have acted
Well, if you really wanted to know, Disha has been arrested and is currently detained at a Delhi police station. The other two are in the process of being released on bail by the Mumbai High Court.
But the police didn’t stop there. They have asked for information that will help them identify 70 members who participated in a Zoom meeting organized by the Poetic Justice Foundation (PJF.)
Now before you furl your brow in shock, know that Pakistan has actively tried to engage in actions that were designed to destabilize India in the past.
After all, Pakistani terrorist organizations have repeatedly tried to raise a real ruckus in Jammu and Kashmir multiple times. Also, Pakistan did fight two wars with India – one in 1965 and one in 1971. Both were over national sovereignty.
The reality is that Pakistan wants to do more than just give the Indian government and its citizens a real headache.
It wants a part of Indian territory. After all, various Pakistani political parties have never ceased to argue to the international audience that all of Jammu and Kashmir rightly belongs to Pakistan.
Does Pakistan have deep sympathizers in India’s Punjab?
Well, all roads that start in Jammu and Kashmir go to one place. Do you know what that place is? It’s Punjab! And guess what? Pakistan influences those roads and the organizations (Khalistani) that operate on them.
This gives Pakistan huge leverage to influence and manipulate the Punjabis, especially the youth, to ‘work’ for them!
Did General Zia Ul Haq open Pandora’s box?
Ah yes, that corrupt guy. Ok, so what else is new in Pakistani politics or with the Pakistani government?
Well, Ul Haq got tired of Zulfiqar Ali Bhutto messing Pakistan up with his bad policies and governance so he overthrew him (Bhutto.) UL Haq then renovated Sikh places of worship and invited many Sikh pilgrims.
In case you were wondering what this has to do with Pakistani involvement, be patient, that’s coming up! Many Sikhs shared the element of a hatred towards India in common with Pakistan. They (like Pakistan) wanted to be separate from India. Khalistan was to the Sikhs what Kashmir was to Pakistan.
Pakistan stoked the fire
So if you were wondering how it accomplished this, the answer is simple. It began a program of actively recruiting unemployed Sikh youths in India. Once these youth had crossed over into Pakistan, the government would train them and fund them in launching terrorist attacks against both India and the Indian government!
Pakistan has ulterior motives in India
Indeed, Pakistan may be more than just an observer in the violence that recently took place in India during Republic Day. Pakistan has deep territorial claims in India. This may be why the Pakistani government may have actively (though discreetly) played a role in helping to launch the terrorism that drove the violent acts that occurred on January 26, 2021!
What Happens Next After the Top Indian Government Companies Are Sold?
For India to grow, it’s time to shut the old businesses and embrace newer approaches. Privatization, keeping the public’s interest in mind, is the way for India’s development.
On my recent trip to Delhi from Agra, I drove through the Yamuna Expressway, and it felt I was driving on Formula 1! I was in awe of our NHAI (National Highways Authority of India) when my wife told me that NHAI has got nothing to do with it!
She told me the road was constructed by a private investor and not the government of India. But just as I got a positive feeling about the privatization of the road and transport sector in India, I was stunned at the unreasonable amount of cash the toll booth operator demanded, which made me think otherwise.
Privatization is the way to Vikas!?
The Modi government is taking affirmative steps to sell the public sector companies by way of privatization.
The IPO (Initial Public Offering) of Indian railway finance corporation is raising Rs. 1541 crores for the government and the OFS(Offer For Sale) of IRCTC worth Rs. 4473 crores are a few ways of privatization. The capital raised by these moves is used for other growth oriented projects by the government.
“What happens after these top companies are sold?” is the discussion of the hour. Let’s find out.
Privatization: A double edged sword
Mishaps after privatization: the British experience
The best example of a dissatisfied public experience post privatization of a government run facility is the British rail.
The British rail was privatized in 1997 after which the ownership of the engines, rail tracks and the railway stations was handed over to different private companies. And as they say-”Too many cooks spoil the broth”; these three companies could not work efficiently together to provide good services to the public.
The exorbitant rise in ticket rates along with frequent rail accidents worsened the public experience. The private companies played blame-game with each other to safeguard their company from prosecution every time an occurrence occurred.
Success after privatization: The Japanese experience
The Japanese rail was privatized in 1987, and was sold to six different companies which acquired different parts of the system geographically.
This way of dealing with the situation worked really well as the onus of the one entire region was shifted to one entity. Unlike the British way, the public experience was enhanced. A competition between six different companies doing the same thing helped to develop a better customer experience.
The moral of the story is that privatization has got its pros and cons. Implementation and execution are the key.
Disinvestment- Target Vs Realization
The central government plans to sell the stake in most of the PSEs (Public sector enterprises) and raise lumps of money which will be used for growth purposes. To name a few – HPCL, BPCL, GAIL, HAL, HFL are renowned PSEs of the 348 PSEs in India.
For the current year, a target of Rs. 2.1 lakh crores was set through disinvestment. The government has planned to sell stakes of the CPSEs (Central public sector enterprises) worth Rs. 1.2 lakh crores . Also Rs. 90,000 crore will be raised from the stake sale in IDBI bank and LIC through the IPO route to make it a total of Rs. 2.1 lakh crore. But only Rs. 17957 crores have been realized till now.
Sectoral categorization to identify the scapegoats!
The classification of the CPSEs to be sold is broadly done as strategic and non-strategic.
Strategic sector stands for the crucial sectors for the government of India where control of the government is mandatory. Example- Atomic Energy, Space, Defense, Power, etc.
All other sectors in which the authority to take crucial decisions can be passed on to the private players are categorized as non-strategic sectors. Example: telecommunication, general insurance, etc.
The government has decided to entirely privatize all the non-strategic sector CPSEs or merge all the non-strategic sector CPSEs into one holding company.
And to minimize operational and administrative costs, there will be a minimum of one and a maximum of four CPSEs in every strategic sector. This move will keep the government control over all the strategic sectors.
Pros and Cons of Privatization in Public Companies:
Disadvantages of privatization in public companies
Concentration of economic power
A few business houses of India- famously the Adanis and the Ambanis – end up getting contracts of more such privatized firms. This will concentrate economic power in the hands of a few which can give rise to capitalism if things go wrong.
Concentrated geographical development
The private companies will look for cheap labor, raw materials and resources for setting up their factories or corporate offices. Hence, there can be an excessive drainage of resources of particular areas raising environmental concerns.
Also, employment will be concentrated in a few areas and other regional governments will have no say in this.
Without any government control, the private companies will get a free hand to hike rates for their products. In spite of government regulations, these companies can use the drawbacks in their contracts to hand hold the selling prices.
Interdependence on the government
Though it is the government who is privatizing their firms; but the same government regulations and rules can make working difficult for these private companies. Major decisions like the taxes, import, export, foreign currencies depend on the government.
Any such government decision not in line with the planning of the company will affect its performance.
The same factor can turn out to be an advantage in some cases, where the companies will have a free hand to decide the policies within their control and not have to depend on the government.
The privatization of the CPSEs in India will snatch employment from many existing CPSE employees. The ‘survival of the fittest’ will increase the competition within employees and only the best will survive; who in turn can work as much as two more employees.
The staff set up will be revised by the companies reducing the fresh recruitment as well.
Advantages of privatization in public companies
Optimum utilization of resources
The operational and administrative incompetence will be reduced as the available resources will be used to the fullest. The resources or assets which cannot be used to the fullest, will be sold by the companies to achieve an optimization.
The monopoly of the government companies will be reduced as many private companies will offer the same services to the customers. The customer will get to choose the best company for himself; thus maintaining a pressure on all companies to do well.
No reservations in jobs
With privatization of government companies, the reservation system in jobs based on the caste and creed will be abolished forever. Merit will be the only criterion for selection in major companies of India.
This same factor can prove to be a disadvantage giving rise to geo-political tensions in the country. This can give rise to socio-economic rift within societies hampering the unity of India.
Is privatization really needed?
Privatization is a smart way of generating cash. With cash-in-hand, the government can channelize it towards growth activities like infrastructure, making viable employment opportunities and promoting economic growth. Uninterrupted flow of cash in the markets which is the first requirement for a developing economy.
The government is planning to sell stakes in a few public sector banks and Air India. A few oil companies are already undergoing the process of disinvestment which has already raised the eyebrows of the employees of various CPSEs of India.
The disinvestment in LIC by way of the IPO (Initial Public Offering) is under the cards as well. Hence, one of India’s biggest companies will be handed over from the government to other private investors which will raise huge lumps of money for the government.
Is privatization the only way?
The process of disinvestment has been hampered due to the Covid-19 situation. The stock prices of the CPSEs tell us that the CPSEs saw a huge fall in value during the Covid-19 initial days.
OFS (offer for sale) of many PSEs has occurred at such low share prices due to which erosion of the market capitalization of the companies has occurred in the past.
It is just like selling your house when the real estate rates are down and eroding the value (market capitalization in case of companies) of your house
With very few CPSEs left with a government stake of more than 50%, a small stake sale in these companies going forward will not yield any significant value as well due to the already eroded market capitalization.
Another problem here is that the government is planning to sell stakes in the profitable PSUs which are doing really well. But what when they turn to the not so profitable businesses like Air India after the big companies of the Indian economy are exhausted. This won’t be an easy ride for the government as there are many such businesses.
Note: Market capitalization is the number of shares of a company multiplied by the price of one share. It determines the value of the company to anyone who wants to buy it
An alternative to privatization can be to set up a sovereign wealth fund by transferring all the stakes of the government in the CPSEs to this fund. A huge corpus fund will be raised which will give huge interest as earnings (dividend is the correct word) to the government. This earning will be more than what they have been earning out of these CPSEs lately.
The government can raise frequent capital by selling minority stakes in this sovereign wealth fund.
The CPSEs can be managed professionally for a few years and then privatized at an increased value- which will be the true value of these Indian companies, unlike now!
What happens after all companies are sold?
You will definitely see some changes in the day to day working of the government companies after they are privatized.
Don’t be surprised to see every desk occupied at 9:30 am the next time you step into a central government undertaking office. You might even be made to feel important to them, unlike your previous experiences.
You might see lesser employees, each with high tech gadgets on their desk; an alternate counter during lunch hours to make sure you do not have to wait.
The government turned private employees will discover the potential in them for the first time. Whereas a retired government employee might feel alien like never before when he steps into his previous workplace.
So, what next after all the selling is done?
Nothing more will remain to sell! LOL
But may be; the need to sell won’t arise !
So, continuing the ride from the toll plaza towards Delhi on the Yamuna Expressway, I came across the Buddha International circuit at Noida. This project has been completed by The Jaypee group- a private company. Such projects are usually taken up by the government in India and that could be the reason India was deprived of an international standard racing track.
By the time I reached Delhi, I was convinced that privatization of top Indian companies is actually the ‘express-way’ of reaching the destination of a developed nation.