In a TV interview the CEA K Subramanian said “the private sector should not keep running to the government for everything”. Great. Well said.
Let us see who is the BIGGEST enemy of the working of Free economics. It has to be the government of India. The crony capitalist can keep accessing free or subsidized money for the full life of a company. We do see companies who have no right to exist keep getting doles from the government of India. Just do an audit of the books of LIC. Do some research on why it gets such poor returns on its investments.
The only 2 sector in which the Psu has made money has been OIL and banking. Just shows how much inefficiency of the PSU is built into these sectors. If a free hand was to be given to say Reliance – the retail price of fuel is likely to fall. The middle class going for its banking needs to the private sector is clear in the rising share of the private sector banks. This, despite the fact that the PSU companies do not deal with private sector banks, or private sector mutual funds or now private sector bonds.
Lets look at the airline business (same story in many industries including mutual funds, and soon life insurance?). Indigo cuts prices, so immediately AirIndia cuts prices. However, AI gives us food -which Indigo sells. Let’s look at the cost structure in AI. Unless there is a rule that for every passenger you fly you should have one employee, there is no way AI can earn money. When Indigo loses money in a deal the promoter knows that he will have to ask the shareholders for money to run the company in the following year. Not so for a PSU company. Hindustan photo films, Nepa paper, Scooters India – can continue to pay salaries for the rest of OUR LIVES. In a typical competitive economy, Air India should have shut down and that much of the market share should have gone to Indigo, SpiceJet, Vistara…..in the same ratio as their current market share. However, if the government does not let the weak companies die, they will continue to hurt the efficient ones.
Will the government privatize? No. They will not even privatize the private sector. Axis bank, Larsen and Tubruo, ITC – who owns them? who runs them? the top 20 employees and the sarkari baboo(n)s who benefit from it! Remember LnT gave ‘esop shares’ to its directors INCLUDING THE GOVT directors? well, that is just the beginning.
The country is run by Sarkari baboo(n)s, our elected representatives, and say 1000 others who influence the government. Obviously even in the sarkari baboo(n)s and elected reps, it is only the 20% who matter. Others don’t.
So Mr CEA let the Hindustan photo films, Scooters India, Air India raise money without the govt guarantee (at least implied guarantee) – and survive for 10 years, then we should talk of whether the gov should do anything to ‘help’ the private sector.
No, the private sector is not a paragon of virtue, but the only way they can raise money is by being efficient. If you see the inefficient private sector which has survived for a long time, it might be funded by psu banks. Lol.
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