The Transformation Promised By An Embrace Of Market Capitalism

Context: Privatization could spell major gains for India’s economy, but a strategy is needed to get the cooperation of key stakeholders.

Scope of Privatization in India

• PSE ecosystem: There are 348 PSEs with a total investment of over Rs 16.4 trillion and more than a million employees, according to the Department of Public Enterprises.
• Sectors to be held under state control: Atomic energy, space and defence; Transport and telecom; Power, petroleum, coal and other minerals and Banking, insurance and financial services.

Virtues of Privatisation:

• Advantages of the private sector: In its own profit interest, it strives to be globally competitive, takes calculated risks and innovates through investment in research and development
  • Employs highly trained professionals and uses best practices to raise productivity and improve efficiency.
• Foster innovation: It initiates a new phase of creative destruction, leading to product and process innovation that would replace old products and production methods with new ones.

Challenges

• Political challenge: of bringing all stakeholders together - bureaucratic establishment, labour unions, and political parties all have their interests in state control of the economy.
• Bogey of crony capitalism
• Democratic resistances: on similar lines of farmer protest against the government’s efforts to improve the farm economy through exposure to market forces.
• Widespread suspicion of business people: as tax dodgers and greedy profiteers.

Way forward

• Launch a massive public relations campaign: To explain, educate and persuade people how the privatization of PSEs would have a multiplier effect on India’s job market.
  • Business community must step forward and create a positive image through transparency in its hiring and business practices.
• Government must adopt pragmatic approaches: E.g. Approaching each unit with open-mindedness and flexibility while focusing on the desired outcomes.
• Evolve new mechanisms for cooperation: Between Centre, states and private players.