Privatization under Right-Wing Politics of India through eyes of Progress

Introduction

Privatization is an engine to run the vehicle economy of India, from without which India would bankrupt.

Privatization[1] in simple words means that any public sector or any part of the public sector is taken up by the private sector and continuing the ownership.

This helps, the government to acquire more income and decrease the number of expenses to be occurred. It also helps in the economic development of the country by improving productivity and efficiency in the government system, developing infrastructure, and overall economic progress of a country.

When did Privatization start in India and How it is being helped in the progress of the economy?

Privatization in India was started in 1991 after facing a huge loss in the economy and the same is discussed below along with the present scenario with the utilization of privatization as a positive step towards the progress of our nation.

History

Privatization in India has been developing since independence. There is a lot of changes observed in the economy compared to pre-Privatization and post-Privatization. It has drastically increased the progress of the economy which helps the economy to the better development.

The history of Privatization is better understood with the help of two important policies such as;

1. IPR (Industrial Policy Resolution), 1956
2. LPG (Liberalisation, Privatization, and Globalisation), 1991 which is also known as NEP (New Economic Policy) of 1991

These two policies are explained below in detail.

IPR (Industrial Policy Resolution), 1956[2]

Since, after the independence, the Indian government faced a huge loss in the economy because in 1956 policy of IPR (Industrial Policy Resolution) was adopted with the objective of industrialization of the public sector and private sector units. This policy categorized the sectors into public and private sectors, by framing rules and regulations which impose a restriction on the private sector. There onwards, the government would own the maximum share of the private sector and majorly decrease the ownership of the private sector. Whereas, it means the public sector played a major role when compared to the private sector. This gave rise to corruption, inefficiency, and increased expenses in the economy.

LPG (Liberalisation, Privatization, and Globalisation), 1991[3]

The government in observing these economic drawbacks put on an important and progressive decision towards the country. Thus, to overcome this economic crisis, the concept of liberalization, privatization, and globalization (LPG) was adopted in India in the form of a New Economic Policy (NEP) by Finance Minister Dr. Manmohan Singh in 1991. The main objective of this policy was to develop the agriculture sector in the economy because due to the previous policy there was a huge loss in agriculture since people ran in the hope of industrialization. As agriculture is the backbone of our country, which is must be needed for the nation to protect agriculture because of its huge contribution to the economy which helps in a better stand of the economy and economic growth.

Privatization undergoes three important steps namely;

1. Sale of public sectors shares
2. Disinvestment in PSU’s
3. Maximization of private sectors

These three steps can be described briefly as;

1. Sale of public sectors shares: The government of India has started the sale of public sector unit shares and financial institutions to the private sector, which increases the share value of the private sector thereon.
2. Disinvestment in PSU’s: Indian government has started disinvesting in the public sectors which were facing huge losses in return. Thus, it has increased the sale of the public sector to the private sector.
3. Maximization of the private sector: The public sector’s number has decreased from 17 to 2 which includes railway operation and atomic energy. By observing the previous policy which has failed in helping industrialization and removing the poverty.

Privatization was a positive step towards the progress of the economy because though the government sector would disinvest in several other sectors in the economy, it has increased the profit and decreased the expenditure, fiscal deficit throughout the financial year thereon.

Later, the government observed huge profits majorly earned by nine of the sectors thus, these companies were not privatized and named them as ‘Navratnas’ which includes companies such as;

1. BHEL (Bharat Heavy Electronics Limited)
2. ONGC (Oil & Natural Gas Corporation)
3.  Steel Authority of India Limited (SAIL)
4. Bharat Petroleum
5. BSNL (Bharat Sanchar Nigam)
6. NTPC (National Thermal Power Corporation Limited)
7. IPCL (Indian Petrochemicals Corporation Limited)
8. Oil India Limited
9. HP (Hindustan Petroleum Corporation)

In this approach, Privatization took a major role in India and it is being continued by today’s Modi government also, with the aim of attaining great profits with less involvement in public sector units.

Present scenario of privatization in India

Since, Modi’s governance from 2014, it focused on the concept of ‘minimum government, maximum governance’ which clearly states that less involvement of government in the business sector or any other public sector units.

The budget of 2021-2022 is tragic news that created a tragedy within the minds of people and it gave a way to the opposition party against the government. They even pass negative comments like is the government selling everything to the private sector with the aim of getting the assumed profits.

The budget list included certain important information regarding Privatization which was made out of the pure intention of economic progress.

Still, the question arises why did the government take this big decision and whether it benefits or not?

Let us know what was the budget for 2021-2022, how and for what purpose it was framed?

The target of budget 2021-2022[4]

The Finance Minister Nirmala Sitaraman in Modi’s government has announced the budget targeted Rs. 1.75 lakh crore from the sale of public sector companies and financial institutions.

• It says the sale of PSUs must include two PSU banks and one insurance company by the financial year-end i.e 31^st March 2022.
• The disinvestment of the previous financial year targeted up to Rs. 2.10 lakh crores to acquire by CPSE disinvestment but unfortunately due to rising cases of covid 19, it wasn’t able to achieve the same.
• From among the Rs. 1.75 lakh crore, Rs. 1 lakh crore is expected to get from the sale of government shares in public sector banks and financial institutions.
• On the other hand, the leftover amount i.e Rs. 75,000 crores would be coming from the CPSE disinvestments.

Strategic Sectors

The strategic sector will include four important sectors such as;

1. Atomic energy, space, and defense
2. Transport and telecommunications
3. Power, petroleum, coal, and other minerals
4. Banking, insurance, and financial services

• In these sectors, the government would bare minimum presence.
• Other strategic sectors like CPSEs would be merged or privatized or closed.
• Non-strategic sectors are expected to be privatized or otherwise closed.

The budget 2021-2022 includes the companies to be disinvested are:

1. BPCL
2. Air India
3. Shipping Corporation of India
4. Container Corporation of India
5. IDBI Bank
6. BEML
7. Pawan Hans
8. Neelachal Ispat Nigam Ltd

Advantages[5] of Privatization under budget 2021-2022

1. Reduces fiscal Pressure: The government will get relief from the fiscal burden, since the ownership, management of PSUs are transferred to the private sectors the government faces less amount of responsibility and burden of repayment.
2. Economic growth of CPSEs: Privatization of the public sector is thereby found to be developed with the quality of maintenance. The economic position of the same will be growing and give a productive result.
3. Growth of financial institutions: Privatization acts as a supportive organization to the financial institution which gives rise to the growth of the same.
4. Infrastructure development: Infrastructure maintenance is the most important aspect to be concentrated on when it comes to economic growth. Privatizing the same will lead to better maintenance and development of infrastructure.
5. Better management procedures: Private companies are found to make bold management and decisions which is better than the management of government. This makes the process of management run smoothly without ambiguity.
6. Increase in job opportunity: Privatization increase the employment rate and this helps the economic growth due to an increase in GDP rate.
7. Decrease rate of unemployment: Privatization calls for more employers and provides better incentives, salary, etc which may turn up to an increase in the employment rate. Due to bank Privatization, there is a possibility of the high rate of loans provided with tax holidays which encourages startup companies. Thus, there is less employment rate due to Privatization.
8. Less corruption: Corruption is all over the world but majorly we find more amount of corruption in India, if there is private sector ownership then there is less interference of government and political authority because the majority of the management and development of the company is the responsibility of the private enterprises.
9. Good services: Private sectors are well versed in maintenance, thus they offer better quality services by which it attracts profits
10. Increase competition: Private enterprises encourage other firms to enter the industry which will automatically lead to an increase in competition between the existing companies. This may give rise to efficiency and innovation.
11. Improved efficiency: Privatization leads to an increase in efficiency due to the high rate of profit incentive they earn. The private sectors plan wisely in such a way that there is reduced in costs and an increase in the profits they get from the same.
12. Less political interference: Since it is a private sector it operates according to the decisions of private companies and it does not encourage the influence of political figures to affect any of their operations.
13. Attracts investors: If the PSU’s are privatized then there is an increase in productivity, efficiency, innovation along with reasonable profit which attracts more investors to invest. There is also a rise in startup companies.
14. Economic democracy: Privatization reduces the government monopoly in the country since there is less interference of governance.
15. Optimum utilization of resources: Though resources are unlimited, sometimes government fails to utilize them completely so, if Privatization takes place then the available resources (both limited unlimited resources) would be utilized to the maximum extent to gain the assumed profits.
16. Innovation: Since private sectors are more efficient and effective in the competitive market will always focus on innovation which helps in being a successful enterprise and it gives rise to competitiveness among the other companies also.
17. Reasonable profits: Privatization leads to efficiency and innovation which gives a path to a rise in profits and gets a better return as compared to the government.

Conclusion

Privatization is found all over the world. It has helped many countries for development. Adopting Privatization in India was a wise decision in 1991, at that time it was urgent for the stand of the economy, while the people lost employment and a lot of rising economic issues. It was only possible by LPG reform which became new economic reform and helped the growth of the economy. Thus, Privatization can be said to be the right-wing politics of India because of its constant economic progress. When we compared the decision of Budget 2021-2022 by Modi’s government, we can find a lot of advantages and majorly focussed on economic growth which is very much needed at this time. As we all have come across the word covid 19 impacts an adverse effect on the Indian economy. Many people lost their jobs and economy is at low with GDP less than 23.9%, the government is also facing huge loss, as they didn’t receive the expected profit, due to covid 19 in fact profit is the far thought, first of all, it failed to get reasonable outcome itself. The decision on Privatization has enlightened the hope of growth in the economy. It is only possible by Privatization to uphold the economy when it is crying for help.

In budget 2021, Privatization and disinvestment made a huge impact and many opposition parties also opposed the same by negative approach, but unfortunately, they could not see the positive aspect of it. Privatization is a good decision taken by the government. Privatization is substantive when it comes to the sectors like banking, mines, insurance, oil and gas, railways, etc.

The government has announced Privatization on a few grounds;

1. Poor policymaking
2. Overstaffing
3. Long term loss
4. Service issue
5. Wastage of resources

The main objective of them was;

1.  To minimize the administrative cost of the central government and
2. To encourage CPSE disinvestment program.

India had adopted the concept of Japan when it comes to the Privatization of the railways.

Wholly, we can conclude that though government privatizes all the PSU’s there are a lot of advantages for the Indian economy. Privatization is a very important and progressive decision for a developing country like India.

India is already more forward, if PSU’s are also privatized then there would be fast economic growth and Privatization pushes India to one step ahead to be a developed country.

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References:

[1] Abdeldayem & Dulaimi,“Privatisation as a Worldwide Tool of Economic Reform: A Literature Review”, Vol 4,  Int. j. soc. adm. sci.66–84, 2019.

[2] Gautam Chikermane,”70 Policies — Industrial Policy Resolution, 1956” ORF https://www.orfonline.org/expert-speak/70-policies-industrial-policy-resolution-1956/ 16^th Sep, 2021, 11:00

[3] Sanket V. Ravan, “Impact of LPG on Indian Economy” Vol 1, Issue 4 int. res. J. pg 21, 21-32, 2014

[4] Bishwajit Bhattacharyya, “Budget 2021: It’s a five-minus-four-year plan”, The Economic Times, Feb 11, 2021, 11:32 PM, https://m.economictimes.com/news/economy/policy/budget-2021-its-a-five-minus-four-year-plan/articleshow/80867221.cms.

[5] Filipovic, Adnan (2006) “Impact of Privatization on Economic Growth,” Vol. 2: Issue 1 UER pg 1, 1-35, 2000.