Monday, June 13, 2016

Building India - Make in India - Expand Public Sector

Government of India has budgeted Rs. 36,000 crores as dividend receipts from Public Sector. It will go towards reducing fiscal deficit.

Instead Government should investment Rs. 25,000 crores in new public sector units out of the dividend and start one PSU with Rs. 1000 crore equity in each state.

Government should not shy away from PSUs. Government involvement in economic activities is an age old practice in India. Chanakya wrote elaborately on King's economic activities in Artha Shastra.

Government will be able to know the likely malpractices that businessmen can resorts and also know the difficulties of businessmen by having its own PSUs. While we have moved away the old thinking of commanding heights of the economy being in the hands of PSUs, we still have to develop the competency to run our PSUs with adequate effectiveness and efficieny.

Rational public sector investment is needed.

If public sectors units cannot be planned and managed by Government to the extent they are required for a meaningful involvement in economic activity of the country, it is a failure of political and administrative wings of the Government.

Can Public Sectors Units be Closed?

Yes. When economic organizations are started there is a big risk of failure. If the failure materializes, the government is free to close the unit. Failure of business organizations is part of competitive business economy and government units also fail. Failure should not held against government. The specific errors committed can be identified and rectified in the future.

Failure of certain units should not mean Government has to run away from PSU investment. Every body needs to know that Tatas and Birlas have many failed businesses in the groups and many of them are closed. The arguments for reducing the size of PSU investment has won the day and served its useful purpose. Now the argument has to be in favour of Government reigniting growth  by finding investment opportunities and in manufacturing sector and investing in it to a minimum threshold level.

Rational public sector investment is needed.

Closure of failed PSUs ok. But start new PSUs.

Start one PSU in every state each year with investment of Rs. 1000 cr in each.

Benefits of Public Sector and  Disadvantages

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