:: Nitish Sengupta

Our PSU stars helped us face global crisis

Nitish Sengupta

March.5 : India’s image is at an-all time high with a projected growth rate of 7.1 per cent of the GDP, the highest growth rate in the world except that of China.

The manner in which India has been able to steer clear of the ongoing global financial crisis with only minimal impact is a tribute to the sound policies followed by our authorities.

In many respects, the October tsunami in the Wall Street affecting the world is as important as the fall of the Soviet Union in the ’90s. The latter event demonstrated the fall of a whole socio-economic system propagated by the Marxist intellectuals and fellow travellers for a century-and-a-half.

Similarly, the Wall Street crash has demonstrated the bankruptcy of unregulated market capitalism which has also been systematically propagated by the West all these years.

Unfortunately, the terror attacks in Mumbai in November 2008 and the Satyam Computers scandal have somewhat affected the image of India.

The Satyam event is a shameful story of corporate scam. But the government intervened in time and effectively, and the company may well be saved. Hopefully, this is an exception, not the rule. But in retrospect, it has done more damage to India’s economy than the Wall Street meltdown.

The Wall Street crisis demonstrates the classic type of economic crises generated by the capitalist system and analysed and propagated by Karl Marx, Engels and Lenin.

Clearly, both alternatives are simply not acceptable in the present-day world. We have to look for a third alternative that takes a middle course between these two systems and avoids the pitfalls of both.

Interestingly, this is the model followed in India under our founding fathers. India had followed a mixed system where there are both free market institutions and private sector companies with the government’s pervasive control in economic matters and public sector corporations dominating several major sectors of the economy.

This has served its objectives well as illustrated by the fact that India has survived crisis after crisis, economic and political, global and national.

Our private sector, despite the lull from time to time, has, as a whole, performed well, especially after the abolition of the licence-permit raj during the ’90s. It has stood competition and has taken its position by the side of the best private sector corporations all over the world. There are some danger signals but they are controllable. Unfortunately, unlike India’s public sector, a section of the private sector has raised cries of recession.

They should do well to heed the sound advice of the Israeli management guru Prof Goldratt, now on a visit to India, that there is no recession so long as you reduce your inventory by timely price cuts and clearance sales and by directing your marketing effort to newer climes.

Similarly, our public sector, despite its dark moments in the past, has more than justified itself in recent years.

Today, the great majority of the public sector corporations have established a record of profitability. Some of them have attained global standards; and some like Bhel, NTPC and Coal India have established new records of steady profitability and performance.

Some of them are shining stars in our stock exchange horizon. Many others are also on the way to becoming listed companies with partial private shares. We should encourage these tendencies. Recent policy measures from the government have encouraged autonomy and accountability in public sector and these have produced results.

Today, the number of sick public sector enterprises is in decline. A vigorous policy of strengthening them through restructuring and at times amalgamation is in place. Some of the sick companies are being merged with healthy companies, thereby facilitating the process of recovery.

Hopefully, a time will come soon when the difference between the private sector companies with social orientation and some degree of government shareholding and government companies with certain amount of private shareholding and with profitability orientation will gradually thin out. Our experience has clearly shown the need for a balance between the state and the market, between national self-sufficiency and unbridled globalisation, between agriculture and industry and between urban India and rural India.

There is also the issue of reducing day-to-day government control over private activities through vexatious and unproductive administrative controls. Instead, there should be healthy supervision of private sector activities and encouragement of production and productivity.

We also need wholesale civil service reforms by which officials are made people-friendly. Non-government organisations can also be allowed substantial roles in education, public health, public morality and infrastructure management.

There is a strong possibility that by 2050 India would again the income status of a developed country. With the current per capita income in PPP terms and with an expected annual growth rate of sic to seven per cent, she could, by 2050, replace China as the most populated country in the world and could well be the largest economy in the world in PPP terms.

But this need not necessarily mean that we have to copy the Western style of living. We should avoid the ill-effects of climate change, CO2 emission, pollution and urban congestion and make for a sustainable, tension-free life style. Above all, we must revive the ideals and values of the freedom movement days and the doctrines preached by national stalwarts such as Mahatma Gandhi and Swami Vivekananda. Confrontation and social conflicts should be brought to an end. There is no room for continuing caste conflicts and communal tension. There should be political will to forthwith abolish all such tensions.

A case in point in corrective action is the recent proclamation from the clerics of Deoband advising Muslims that India is not a Dar-ul-Harb against whom all faithfuls need to do jihad, but is a Darul Aman — a land of peace which welcomes Muslims as brothers. It should therefore be supported by all Muslims.

All these will, no doubt, give India a position in the front rank of nations.

Nitish Sengupta, an academic and an author, is a former Member of

Parliament and a former secretary to the

Government of India