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Monday, August 17, 1998
The father of all boasts
Finance minister Yashwant Sinha has grandly proclaimed that he is the `father' of disinvestment, having first spoken of it in the 1991-92 Budget in his first innings. He is welcome to the credit, such as it is. The term `disinvestment' symbolises the woolly-headedness and risk-averseness that marks Indian politicians' approach to privatisation. It implies that government is willing to cut back its investment in some public sector firms to the extent that this helps it raise funds and stem some of the bleeding of its resources, but that it will not countenance full-fledged privatisation. It means that its motivation is utterly skewed. It aims not to promote companies' efficiency and mark government's withdrawal from production, but is an ill thought-out and ad hoc approach to raising a few quick bucks. And what would Sinha do with this money? He says that disinvestment will be linked to expenditure. This is yet another example of wrong-headedness. The one-time resources raised from disinvestment ought not tobe used to finance the government's current spending but to cut back its fiscal deficit, say, by retiring public debt. The cascade effect throughout the economy of cutting the deficit would be so great as to make disinvestment desirable for this reason alone, to say nothing of privatisation's gains. It would provide a base for successive governments to set their fiscal house in order if sensible policies are followed. Financing current spending on the other hand would be tantamount to throwing this money away, especially as so many of the government's spending priorities are wrong anyway. And if this money were seen to be there for the asking, more wasteful spending demands would be created. In any case, since Sinha is so eager to expand the Disinvestment Commission's role, it behoves him to ask it to recommend how the money should be spent.Sinha is perhaps right to say that ideological resistance to privatisation is not a problem for the BJP as it was for previous -- read Congress -- governments, becauseof their long association with socialist economics. Yet his smugness is thoroughly premature. It was the Congress after all which initiated India's economic liberalisation, albeit not before a balance of payments crisis forced its hand. Absence of ideology, it seems in this case, is neither a necessary nor a sufficient condition of reform: the key words are pragmatism and will. Sinha has himself admitted that privatisation has failed to progress under the BJP so far for obvious reasons. Well, it is obvious that these obvious reasons are not about to disappear in a hurry. The BJP, with its overall opposition to a more open economy, has also muddied the waters for privatisation. It takes finely nuanced minds to distinguish between one kind of economic reform and another. Such minds seem to be in short supply in the BJP, whose tenor in government has been anti-reformist. The party has already shown its disingenuous professions of ``calibrated liberalisation'' to be bunkum. What it has offered instead is plaineconomic illiberalism. Most crucially, far stronger governments have displayed no appetite for taking on the powerful trade union lobby. Why the BJP would want to do so is not clear to the naked eye. Yet if Sinha can find the resolve, here is wishing him luck. He will certainly need it. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.

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