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OP-ED: The great Indian fire sale?

  • Published at 01:32 pm August 27th, 2021
mumbai
BIGSTOCK

Why the situation in India right now is more dangerous than what the USSR witnessed in 1990

It is a gala week for Indian kleptocrats, after Finance Minister Nirmala Sitharaman announced an extraordinary $80 billion privatization program encompassing 13 different sectors of the economy, including stadiums, railways, airports, warehouses, housing, power lines, mobile towers, coal mines, highways, and much more. 

The greatest sell-off in the country’s history has the potential to be even more far-reaching in significance than the wholesale capture of state assets that occurred at the end of the Soviet Union in the 1990s.

At that time, the transition from Mikhail Gorbachev’s perestroika to Boris Yeltsin’s roughly market-based free-for-all gave rise to monopolistic oligarchs, and, inevitably, Vladimir Putin’s barely concealed “grand bargain” that -- according to Wikileaks revelations -- foreign diplomats openly acknowledge functions as “a mafia state.”

But the situation in India at the moment is even more dangerous, because what happened in the debris of the USSR started from relative scratch, amidst somewhat mitigated inequality. 

Whereas the Indian fire sale will take place in pandemic circumstances, when the balance of the political economy has already shifted heavily in favour of a tiny fraction of special interests. 

The fact is, in the last 12 months alone, an astonishing 50 new dollar billionaires have officially emerged from India (according to the latest Hurun Global Rich List, compiled in Beijing). According to that tally -- which surely leaves out many much less-documented fortunes -- the country now has 209 billionaires, third only to China and the US. 

These are people who have prospered during a global catastrophe, whose net worth sky-rocketed even as the national economy shrunk, during the same time as the number of desperately poor people in the country has doubled. 

All the gains of the past decade have gone to them, and now they will own the most prized national assets as well.

There is doublespeak galore in the “National Monetization Pipeline” project reports, starting from the name itself, which purposefully implies the mere conveyance of assets rather than their peremptory disbursement. 

The NITI Aayog strategists who came up with this nomenclature brainwave also highly dubiously refer to peddling off the apex achievements of Indian infrastructure as “brownfield assets.” 

It is not an entirely original approach -- although “brownfields” are generally understood to be degraded, and often abandoned -- but rather misleading when referring to, for instance, the spectacular Konkan Railway, the brilliant Mumbai airport, hundreds of thousands of kilometres of optical fibre networks, or the Nehru stadium in New Delhi.

“The prime minister is in the process of selling the crown jewels of this country,” said Rahul Gandhi after Sitharaman announced her plans, “it took 70 years to build this massive infrastructure. People’s money was involved but now these are being sold to three to four people. As soon as these become monopolies, employment opportunities would be shrunk. Small business, medium business will not exist.”

Swiping back, the BJP’s own Mukhtar Abbas Naqvi (he is the union minister for minority affairs) rather amusingly termed the Congress Party itself as “a non-performing asset which has no value.”

Meanwhile, other opposition parties have joined the fray, including the Trinamool Congress Party’s chief minister in West Bengal. Mamata Banerjee called the BJP plans ,“A shocking and unfortunate decision. These are national assets that belong to the country. These are not prime minister Modi’s or the BJP’s assets. They are selling the country.”

This is an emotional approach. It has to be balanced with the reality of India’s economy foundering badly, with the terminally sclerotic bureaucracy proving spectacularly incompetent about managing many of the most important national assets (see Air India for just one among many billion-dollar disasters). 

So, while privatization has to be considered in some cases, it should also be noted that it isn’t inevitably always a disaster. Ever since Ronald Reagan started the global shift -- he famously exhorted, “don’t just stand there, undo something” – there has undoubtedly been value unlocked both for the public and private sectors, to the benefit of citizens and consumers alike. British Airways is one leading example.

To find out what he thought about this dilemma, I reached out to Nitin Pai, the co-founder and director of the Takshashila Institution, one of the country’s leading public policy institutions. 

Pai carefully parsed the situation: “The argument that entities that find favour of the government of the day will benefit is quite likely true; but cannot be used to exercise a veto. It’s not as if a different government will act in a lofty manner.”

Thus, “At one level, it doesn’t matter who picks up the asset; as long as there is competition, and rules that favour competition; government must not allow exclusivity. At another level, ownership matters to the public interest because wealth is power; and political leaders, of all people, should be careful in preventing concentration.”

His bottom line: “Give up assets, but don’t create monopolies.”

 

Vivek Menezes is a writer based in Goa, India.

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