{"id":4500,"date":"2016-06-01T13:32:57","date_gmt":"2016-06-01T08:02:57","guid":{"rendered":"https:\/\/teekhapan.wordpress.com\/?p=4500"},"modified":"2016-06-01T13:32:57","modified_gmt":"2016-06-01T08:02:57","slug":"indias-crony-socialism-and-why-congress-mukt-bharat-will-remain-a-dream","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2016\/06\/01\/indias-crony-socialism-and-why-congress-mukt-bharat-will-remain-a-dream\/","title":{"rendered":"India’s Crony Socialism and Why Congress Mukt Bharat Will Remain a Dream"},"content":{"rendered":"
<\/a><\/p>\n The prime minister Narendra Modi in a recent interview to the Wall Street Journal said: \u201cActually, in any developing country in the world, both the public sector and the private sector have a very important role to play. You can\u2019t suddenly get rid of the public sector, nor should you<\/em>.\u00a0\u201c<\/p>\n In this column we will concentrate on the second sentence i.e. you can\u2019t suddenly get rid of the public sector<\/em>.<\/p>\n Let\u2019s look at the losses of the loss making public sector units over the last twenty years. As can be seen, the losses have gone up from Rs 5,188 crore per year to Rs 27,360 crore per year. While the number of loss-making public sector enterprises came down over the years, it has started to go up again. Also, it needs to be stated here that I stopped in 1995-1996 because I couldn\u2019t find data before that.<\/p>\n <\/p>\n The public sector enterprises have lost a total of Rs 2,72,512 crore over the last twenty years. Of course, this calculation has got very little meaning given that it does not take inflation into account. If inflation were to be taken into account, we would be expressing the losses of 1995-1996, 1996-1997 and so on, by adjusting them for inflation. This would be a horribly big number.<\/p>\n The broader point here is that public sector enterprises have been losing money for many years now. This is a problem that has been left unaddressed by a series of governments. So, when Modi says that you cannot suddenly get rid of the public sector, what he is not taking into account is the fact that these companies have been bleeding for many many years.<\/p>\n In many cases, the government makes up for these losses, once the networth (i.e. assets minus liabilities) of the company has been eroded. And this money can easily be used somewhere else.<\/p>\n Up until, May 2014, India had an era of coalition governments. And this limited the ability of the government to do anything about these loss making companies. Each loss-making public sector enterprise comes under a ministry and what is a ministry without a few public sector enterprises under it. The current Modi government has no pressures of a coalition government.<\/p>\n Further, most political parties have trade unions affiliated to them and no government likes to take them on. Hence, shutting down a public sector enterprise remains difficult.<\/p>\n As of 2013-2014, a total of 2.5 lakh people worked for sick public sector enterprises. A public sector enterprise is considered sick if its accumulated losses at the end of a given financial year are equal to more than 50% of its average networth in the four preceding years. Of course, the number of people working for loss making public sector enterprises would be more than 2.5 lakh. But it still forms an insignificant portion of the population.<\/p>\n The question is why is the whole county subsidising these 2.5 lakh people? Or is this another version of sabka saath sabka vikas?<\/em> The general impression is that such a waste of money, hurts only the income tax payers, who form an insignificant portion of the population and hence, the government does not bother about them.<\/p>\n This is incorrect. While everyone doesn\u2019t pay income tax, people do pay indirect taxes. And by subsidizing these sick and loss making public sector enterprises, the government is essentially wasting this money. In fact, the government seems to have the same view as well.<\/p>\n <\/p>\n As the Economic Survey of 2015-2016 points out: \u201cThose paying the costs could well be the poor. They pay taxes, even if only indirect ones. And they may also have to bear the burden of paying higher prices while getting substandard goods and services from inefficient firms which should have exited, but haven\u2019t.\u201d <\/p>\n\n\n
\n Year<\/td>\n Total losses of loss making PSEs (in Rs crore)<\/td>\n Number of loss making\u00a0 PSEs<\/td>\n<\/tr>\n \n 1995-1996<\/td>\n 5,188<\/td>\n 102<\/td>\n<\/tr>\n \n 1996-1997<\/td>\n 5,939<\/td>\n 104<\/td>\n<\/tr>\n \n 1997-1998<\/td>\n 6,697<\/td>\n 100<\/td>\n<\/tr>\n \n 1998-1999<\/td>\n 9,305<\/td>\n 107<\/td>\n<\/tr>\n \n 1999-2000<\/td>\n 10,302<\/td>\n 105<\/td>\n<\/tr>\n \n 2000-2001<\/td>\n 12,841<\/td>\n 110<\/td>\n<\/tr>\n \n 2001-2002<\/td>\n 10,454<\/td>\n 109<\/td>\n<\/tr>\n \n 2002-2003<\/td>\n 10,972<\/td>\n 105<\/td>\n<\/tr>\n \n 2003-2004<\/td>\n 8,522<\/td>\n 89<\/td>\n<\/tr>\n \n 2004-2005<\/td>\n 9,003<\/td>\n 79<\/td>\n<\/tr>\n \n 2005-2006<\/td>\n 6,845<\/td>\n 63<\/td>\n<\/tr>\n \n 2006-2007<\/td>\n 8,526<\/td>\n 61<\/td>\n<\/tr>\n \n 2007-2008<\/td>\n 10,303<\/td>\n 54<\/td>\n<\/tr>\n \n 2008-2009<\/td>\n 14,621<\/td>\n 55<\/td>\n<\/tr>\n \n 2009-2010<\/td>\n 16,231<\/td>\n 60<\/td>\n<\/tr>\n \n 2010-2011<\/td>\n 21,817<\/td>\n 62<\/td>\n<\/tr>\n \n 2011-2012<\/td>\n 27,683<\/td>\n 64<\/td>\n<\/tr>\n \n 2012-2013<\/td>\n 28,562<\/td>\n 79<\/td>\n<\/tr>\n \n 2013-2014<\/td>\n 21,341<\/td>\n 70<\/td>\n<\/tr>\n \n 2014-2015<\/td>\n 27,360<\/td>\n 77<\/td>\n<\/tr>\n \n Source: Public Sector Enterprises Surveys<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\nOther than this, subsidizing these losses means that the government has lesser money to spend on other things, given that it has only so much money to spend. Let\u2019s take the case of money that the government spends on elementary education (classes I to VIII). The following table shows the money spent on elementary education between 1997-198 and 2014-2015.<\/p>\n