Can a new India be created by disinvestment: Experts debate

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Whatever the queen is selling, you should be buying it. That was Peter Lynch's way of informing investors that good gains could be made through privatisation. Here is a 360 degree perspective on what India's disinvestment programme is looking like.

 

Pradeep Baijal, Former Secretary of Disinvestment under Arun Shourie, Former Chairman, TRAI and currently Author of Disinvestment in India: I Lose & You Gain said, the politics of the country determines whether one goes ahead with disinvestment or privatisation. He said, "In the last five years, disinvestment was opposed by the communists and therefore there was no disinvestment even though the government initially said that there would be disinvestment. So, the polity will decide."

He added that the country needs enormous amount of resources today as there is an expectation about spending in infrastructure, and a lot many other poll promises and fiscal deficit is spiralling. "The issue is, do you deal with that fiscal deficit by higher taxes or by lower spending on infrastructure or by disinvestment and particularly privatisation," he added

 

Ajay Shah, Senior Fellow of National Institute of Public Finance and Policy said, the government should target 1-2% of GDP every year for the next five years in terms of proceeds from privatisation and from disinvestment. "If they do between 5-10% of GDP over the next five years in this fashion, it would undo the immense deficit that they ran up last year," he added. He said the money should be used to pay off debt.

 

Prithvi Haldea, MD of Prime Database said, he would be happy if Mr. Mukherjee in his budget speech gives a list of Central Public Sector Enterprises or CPSEs that are profitable, and would like to see them listed over the next 3-5 years fetching 5-10%. "I think that will be a huge step that the government would have taken and I think that would pave the way importantly for what our vision is of all these companies getting into the private hands 10-20 years from now," he added.

Here is a verbatim transcript of the exclusive interview with Pradeep Baijal, Ajay Shah and Prithvi Haldea on CNBC-TV18's special show RD 360 Degrees. Also watch the accompanying video.

Q: Under Manmohan Singh we started disinvestment in 1991. Today he is the PM. Twenty years later is the country's public and polity ready for disinvestment?

Baijal: You must understand that disinvestment and also privatization in all countries is a political issue. It is not really an economic issue. So the politics of the country determines whether you go ahead for disinvestment or privatization.

In the last five years, disinvestment was opposed by the communists and therefore there was no disinvestment even though the government initially said that there would be disinvestment. So, the polity will decide.

But my understanding is that in relation to what happened earlier, the polity is much more prepared for disinvestment and privatisation today.

 

Q: This is a country of socialists. In your opinion, does the Congress believe in privatisation?

Haldea: It's a very difficult subject and I think we should distinguish between privatisation and disinvestment. Where privatisation will immediately send a lot of wrong signals to a lot of people, and I think what we are not looking for today is privatisation. We are looking basically at not even disinvestment. I would like to term it as Public Participation in Public Enterprises, PPPE. The moment we talk of substantial disinvestment or privatisation, I think we are going to go nowhere because there is going to be a lot of opposition from within the politics and within state governments.

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