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Part - VI

But this retreat of the Government has also been fraught with controversy. It has been complained that the failure to have a holistic policy on disinvestment is a result, of the Government's failure to detach the administrative ministries that currently control the different PSUs from their disinvestment process. Also one must take into consideration that the strategic nature of a sector is a function of time and hence disinvestment has to be a phased process. The objective function for a strategic exit of the Government should be guided by two considerations: the management culture of a PSU and the market opportunities for getting a good price for its stake. Most importantly, the entire process can be made more accountable if the Government were to transfer ownership of the firms to be privatized to a single special purpose vehicle, whose mandate would then be to sell the firms at the best possible price over a reasonable time-frame. This would minimize, interference by individual ministries and departments in the disinvestment process. The fact that the Kelkar Committee proposals in these lines are gathering dust, points to the very systemic indecisiveness!

The Government as a Monopolist in the "Social Sector"

The Government virtually acts as a monopolist in the "social sector" and its role in this area is often mistaken as mutually exclusive of its market-friendliness. As Amartya Sen aptly puts it "The impact of economic growth depends much on how the fruits of economic growth are used." It is here that the most crucial difference can be made by a "market-friendly" Government. The problems with investment in the "social sector" (both in infrastructural hardware and in softer human capital) are that these have long gestation periods and their linkages with the market are somewhat indirect. The importance of the social sector reforms is now being felt and questions being raised about the potential of the Indian market vis-à-vis global standards. Merely opening up of the economy makes only the already-prepared portion of the population benefit from its goods. If the efforts of expanding the market's ambit are not supplemented thorough strategic investments in human resources the result will be a dangerous widening of the developmental rift that already exists in the country. It is worth noting that some of the basic differences between the East Asian and the Indian approach to transition towards a market friendly economy lie in the extent of focus on basic education and health care and the speed of execution of land reforms. It has now been empirically established that life expectancy has a significantly positive correlation with per capita GNP. A point often missed is that though a developing economy may have less money to invest in the "social sector" but it also needs less to spend to provide these services as compared to a developed economy!

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*Contributed by -
Suchintan Chatterjee,
Post Graduate Diploma in Computer Aided Managemnet (PGDCM),
IIM Calcutta.