Probably for the first time in history, a sitting Indian Prime Minister has batted for greater private sector participation in the economy and slammed those who abuse it for political gain. This indicates that the government is ready to discard ideological baggage of the past to take India to a higher and more lasting growth trajectory thanks to the power of reforms.
There is a popular truism in India – that the country implements far reaching economic reforms only by stealth or in the face of extreme crises. Prime Minister Narendra Modi is now turning conventional wisdom on its head.
His wholehearted support for the private sector and his categorical assertion that private companies are equal partners in India's development marks a welcome break from the past.
This will give domestic and foreign investors global ratings agencies and all those with India’s best interests at heart cause for cheer. The decisive break from past skittishness about private enterprise came in the first fortnight of this month – though it has been in the making for several years.
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In what is probably a historic first, Finance Minister Nirmala Sitharaman mentioned the word “privatisation” in her Budget speech this year. This is sharp contrast to previous Finance Minister, from both the BJP and the Congress, who, over the past two decades, have announced plans to “disinvestment” government stakes in various public sector companies, in an obvious bid to preclude the backlash that invariably results from powerful vested interests – political parties, trade unions, public intellectuals and opinion makers.
She went even further and said: "Other than IDBI Bank, we propose to take up the privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22.”
In other moves in a similar vein, the government has also decided to push for an initial public offer (IPO) of Life Insurance Corporation (LIC) of India and raise the foreign investment limit in the insurance sector to 74 per cent.
The banking and insurance sectors were hitherto regarded as the holiest of holies. The fact that the Modi government announced this decision just two months ahead of crucial elections in four states and one Union Territory – Assam, West Bengal, Tamil Nadu, Kerala and Puducherry – seem to indicate that the Modi government has decided to bite the bullet and go ahead even with those reforms that could be politically controversial.
Particularly since the Budget, the Prime Minister has pointedly affirmed his government’s faith in the private sector, asserting that the culture of “abusing” it for political gains is no longer acceptable.
In his reply in the Lok Sabha, India’s lower house of Parliament, to the discussion on the Motion of Thanks to the President's address, Modi said quite categorically: "To use improper words against the private sector may have got votes for a few people in the past but those times are gone. The culture of abusing the private sector is not acceptable any longer. We cannot keep insulting our youth like this.”
Stating quite categorically that wealth can be redistributed to the poor only if wealth creators first generate it, he said that if the public sector is important, the role of the private sector is no less so. "If our babus belong to the country so do our youngsters," the prime minister said.
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In the context of IAS (the elite Indian civil service) officers running large companies in the aviation, chemicals and other sectors, he wondered what can be achieved by handing over the country to bureaucrats and other government officials.
“The nation should have faith in its young population and there should be opportunities for everyone to grow,” he added, pointing to the country’s telecom and pharmaceuticals sector, which were galvanised by the entry of the private sector. As a result, even poor people now have access to smartphones and India has emerged as the pharmacy for a vast swathe of the world’s less developed and poorer countries.
On another occasion, addressing chief ministers of 26 states, three lieutenant governors and two administrators via video conference at a Niti Aayog meeting, the Prime Minister batted strongly for private sector participation in the development of the nation.
“As a government, we also have to honour this… energy of the private sector and give it as much opportunity in the Atma Nirbhar Bharat campaign,” which, he said, “is the way to develop an India that produces not only for its own needs but also for the world and this production also stands the test of the world,” he said.
Then, speaking at a webinar on implementation of various Budget provisions relating to the health sector, Modi said: “When the Centre, states, local bodies and the private sector come together, we will get better results. We have to devise solutions together and fast, keeping in mind the poor.”
Such ringing endorsement of the private sector from no less a person than the Prime Minister is probably a historic first.
It signals the intent of the government to chart a new trajectory for the economy. Most importantly, for the first time since 1991, the Government of India will be implementing reforms that are needed rather than policies that are politically expedient.
All of these are sending out a message to foreign and Indian investors that India is ready to shed the last vestiges of the ideological baggage that has held up its growth for decades, open up for business like never before and lay the foundations for sustained future growth.