Disinvestment and the Destruction of the Indian Economy

N. Bhattacharyya

India was declared an independent country in August 1947 and in 2003, after more than half a century, no government, either in the centre or in the states has felt the responsibility of providing safe drinking water to the citizens of the country. Rather it allowed corporates both Indian and foreign to sell water and earn fabulous profits. Nobody was accountable, they were allowed to sell water full of dangerous chemicals like pesticides causing immense damage to public health. This is the latest version of the ‘privatisation and ‘corporatisation’ of modern India! In a country of one billion people, electricity is required in every house, whether it is the Rashtrapati Bhavan (presidential residence) in Delhi, a five star hotel or only a six by four feet jhuggi (shanty) in an unauthorised colony. (The majority of Delhi people are forced to live in these jhuggis unlike the learned judges occupying spacious government bungalows in the heart of the metropolis and who are paid by these hapless jhuggiwalas through indirect taxes. These learned judges want that there should not be any jhuggi in Delhi on government land and that there should not be any provision of subsidised land for the settlement of these millions of citizens of the country). Electricity is one of the most highly profitable businesses in the world and demand for it will only increase. The government says that in future the electricity business will be only in the hands of private companies and not with the public sector, on the ground of efficiency and better service. The government handed over Delhi electricity to two private companies as the public sector was in a mess and the power situation was extremely chaotic. Two private companies with distinct market orientation were entrusted with the job of power distribution and each has monopoly right over its own area of operation. So where is the free competition in a so-called market economy? Ask any one in Delhi, during the last one year private power suppliers refused to listen to consumers’ complaints, the power situation is worse than what it was there during the chaotic regime of public sector. The regulatory commission on electricity in Delhi is a paper tiger; no one knows what it is doing. At least it is not accountable to the hapless unorganised household consumers of electricity in Delhi. One of these two companies which has now been taken over by Reliance created total chaos in power distribution in Orissa. So ‘privatisation’ or ‘corporatisation’ as mandated by the international organisations like the World Bank (WB), International Monetary Fund (IMF) and World Trade Organisation (WTO) is being implemented not to meet any specific requirements of our country and its billion people. It is implemented to destroy completely the hold of the community that it had on those services. In a unipolar world commanded by the USA, capitalism of the worst form is experienced by the poor people in the developing countries with around or less than one US dollar per day per capita income.

The developed countries

Let us have a look at the economic scene in the developed countries which export to the developing world these blood-sucking transnational corporations whose individual annual budget often exceeds the GDP of many developing countries. The US economy has lost 1.6 million jobs in the first two years of Mr. Bush’s presidency, the first consecutive drop since 1957 and 1958. Mr. Edward Gramlich, the Federal Reserve Governor, suggested the Central Bank might lower its benchmark US overnight bank lending rate which is already at its lowest in four decades at 1.25 percent. To divert the attention of his growing unemployed electorate, he may seek reelection in November, 2004, Mr. Bush promises to hand over the Iraqi oil fields to his election fund contributors – the American oil cartels – in which the US President and other money bags have an substantial interest. US and British troops in their thousands are waiting in war preparedness for the necessary orders to destroy Iraq, a sovereign country and its peace loving people unless it surrenders to these imperialist powers. UNO or no UNO, US has to occupy Iraq after Afghanistan, and other countries specially North Korea are not far away from the US radar. To counter the massive international protests throughout the globe against the war on Iraq, the US hawks are releasing in instalments the list of countries that are going to actively support this savage war. As Turkey initially refused the offer of the US of a substantial bribe for giving permission to launch the war from its soil, each of these countries including Britain must have been assured by US with huge financial and other allurements to their respective rulers. No one in the US or in Britain is told the real cost of this war including the cost of postponing investment decisions till it is over. The US economy will definitely be poorer after this war, though people like Mr. Bush and his colleagues may gain personally at the cost of the loss of human blood, both of his own people and those of Iraq. Mr. Bush is conscious of the fact that his father was defeated in the presidential election after the previous Gulf war in the early nineties. This time suppose he manages to win the election due in 2004, the Iraqi oil fields are in such a bad state of affairs over the last 12 years that it may take much more than 4 years to restore them to health. Mr. Bush may not enjoy the fruit of his aggression during his second term as president; rather he will be treated (prosecuted!) as a murderer and the destroyer of the world economy. Already dissent within NATO is heard and if France, Germany and Russia refuse to vote in the Security Council and the US attacks Iraq unilaterally, world opinion will never excuse the US for destroying the UN. The recession-hit US economy is already in bad shape and after the war it will face more economic hardship, since the prosperity started from the bombing of Hiroshima and Nagasaki during the Second World war.

The US fiscal deficit has already crossed US $300 billion, exceeding the current record of US $290 billion in 1992. Over and above this, the US President announced a US $674 billion plan to boost its economy by ‘scrapping taxes investors pay on dividends and speeding income tax reductions’. This is only to help the wealthy Americans and it will boost the fiscal deficit. Moreover, the US current account deficit is around 4.8 percent of GDP, a clear indication that a financial crisis is imminent. The trade deficit has increased from US $150 billion in 1995 to around US $300 billion in 2001. The accumulation of current account deficits and net foreign capital inflows have made the US’s net investment position negative. In 199, net international investment position stood at US $269 billion and by 2001, the net international position of the US economy was – US $2 trillion – approximately 20 percent of the US GDP. Global investors have increased their holding in US assets tremendously. It surprises no one that the Bush administration is pushing the country to the brink of disaster.

What is the economic scene in Japan? During the last 12 years it has experimented with all types of economic and political permutations and combinations, even reduced the lending interest rate to a negative figure, but unemployment and recession have destroyed its vast economy which is dependent on export led growth. Japan’s jobless rate has climbed to a post-war high around 6 percent. The banks’ bad debt no one dares to mention. Will China accelerate its urban economic activity to the logical conclusion of destroying substantially Japan’s industrial economy? 800 millions of Chinese residing in small towns and in the rural areas are restless and the Chinese Communist Party has totally failed to meet their demands. The sufferings of farm labour in China have reached their peak. The rural-urban clash in the Chinese Communist party has reached a flash point. In Europe, on the other hand, the situation is no better. Only recently they have reduced the interest rate and due to the rapid appreciation of the Euro vis-a-vis the US dollar, Europe’s exports will definitely suffer. Increasing unemployment in the entire European subcontinent is the main headache of the European Union.

Destruction of the third world economies

The representatives of the transnational corporations in US, Japan and elsewhere are in a hurry to fulfil their narrow selfish ever-expanding greed for wealth and power and they have absolutely no regard for the people in the rest of the world. This exposes the hollowness of the market economy and globalisation, or in other words it is a blueprint to globalise robbery and internationalise poverty. It may not be out of place to mention here that though the US demands that its exports should reach all coasts without any hindrance, but as a matter of policy it puts the maximum obstructions on imports to the US. This is the tragedy of the US brand of globalisation! It is of great concern to the think tank of the G-7 countries that more and more economies in Latin America are showing tiredness with the text book capitalism followed by the G-7 countries during the last 2 decades. The economic balloon of artificial prosperity was blasted first in Argentina during the last 3 years. The rich and affluent people there came out into the streets with their eating utensils demanding a refund of their dollars kept as deposits in the banks. The IMF policies were declared bankrupt to solve the policies of pauperisation of the vibrant economy of Argentina where the Argentine currency was linked to the US dollar. Next came the left electoral victory in neighbouring Brazil and it showed that US policies of exploitation and extortions are being challenged in its very courtyard. Now, it is the turn of Venezuela, the second richest oil reserve after Iraq with more than 60 percent of the population in abject poverty and almost all the public sector units have already been privatised under the order of the WB and IMF. People are crushed by poverty and unemployment. The oil companies and other MNCs paralysed the economy and are trying their level best to throw out the duly elected popular government of Chavez. The situation in Bolivia, Ecuador and in many other Latin American counties are beyond description and these are the places where the WB, IMF and WTO were ruling for decades with their anti-people policies. Here in the name of globalisation, destruction is more or less complete. In August 2002, 400 representatives of labour and civil society organisations from throughout Latin America met in the Ecuador capital and established a tribunal against privatisation, which was charged with having led to the ‘globalisation of poverty.’ We know from the history of Nigeria how the oil companies virtually destroyed the natural resources of that country and how no one listened to their problems. Now a new issue is being taken up by the MNCs and that is the ‘privatisation of water resources’ which were exclusively under community ownership and management. In 2001, 50 percent of World Bank loans required countries to privatise services and more than 80 percent of the loans required cost recovery requirements. In Ghana, for example, in May, 2001, after the insistence of the WB and IMF water fees from community water areas were increased and three buckets of water cost a family almost 20 percent of the daily minimum wage! So capitalism not only failed miserably in the G-7 countries, it is creating mass destitution in the developing world.

India is forced to bankruptcy and destruction

Both in the human development index and in terms of the governance of the country India is still a really very backward country in the world. Per capita income of the vast majority is less than one dollar a day. We are not taking into consideration the recent report of the United Nations System wide evaluation of global water resources, which ranked India a poor 120th out of 122 countries in water quality. (Business Standard dated 6.3.03). On the other extreme till today people are killed by the elected government on the basis of religious faith, both the Human Rights Commission and the ‘independent’ judiciary never thought it necessary to punish the killers, though the evidence is there in great abundance. In the so called progressive state of India in terms of literacy, infant mortality etc. etc. children are denied their fundamental right to study in a school on the plea that either they are having HIV positive or their parents are leprosy patients. During the last 12 years of so-called reform, unemployment instead of declining has increased. Though we are a leading exporter of Information Technology (IT), we avoid publishing exact employment and unemployment data and sector-wise fearing public criticisms. When the leader of the opposition on the floor of the house challenged the Prime Minister of his promise to create jobs for a million persons each year, instead of answering with facts and figures the entire issue was made a big laughing matter. Employment in the unorganised sector is the largest basket with innumerable holes kept for exploiting as slave labour, but no parliamentary party wants to touch it. According to a rough estimate the organised sector provides jobs to around only 8 to 9 percent of our workers. In the organised sector since 1997 there is continuous decline in jobs. In 1997 the total employment in the organised sector was 28.25 million – the public sector provided 19.56 million and the private sector 8.69 million. By 2001 total employment declined to 27.79 million – the public sector – 19.14 million and the private sector 8.65 million. Thus jobs are vanishing at a fast speed with every new injection of capital-intensive technology imported from the west. Data from the Annual Survey of Industries (ASI) shows that the factory sector shed 7 lakh jobs between 1998 and 2000. Even then the World Bank demands that Indian labour laws should be thoroughly changed so that the ‘hire and fire’ policy of the 18th century can be brought back to India in 21st Century. So to oblige them the government is going to amend the entire labour law of the country. The Voluntary Retirement Scheme is now an economic policy to retrench people without providing any social insurance benefit. The central public sector enterprises have cut employee strength from 2.179 million in 1991 to 1.994 million in 2001-02. After privatisation of these public sector units these employees are simply thrown out without any compensation. It is disastrous for this poor country!

After 1991 the Congress government in the centre started implementing the economic reform programme of the WB and IMF and today after 12 years of its implementation, the country is the net loser; while the politicians and the bureaucracy personally got their due commission as agents of these MNCs. For the first 30 years after independence the rate of economic growth with nominal additions for new jobs was around 3 to 3.5 percent per annum, in the next two decades the new Hindu rate of growth is stabilised around 5 to 5.5 percent per annum with no additional job creation, rather employed people were thrown in the unemployment and poverty dustbin. In the US this peculiar ‘thin’ labour force working after massive retrenchment is exploited fully and they claim increase in labour productivity. The World Bank wants that all the public sector units should be privatised and our government is complying with that directive more than faithfully. The World Bank and IMF know that Britain ‘privatised’ its railway system but was compelled to bring it back to the public sector due to continuous public pressure. In the same manner South Korea renationalised its electricity business as people were suffering in the hands of the private operators. France has not privatised many of her business units including that of Air Bus. We are asked to privatise because our public sector units are loss making and the management is very inefficient. But then why privatise the profit making units? It is a fact that our management is totally anti people but that is not only in the public sector units alone as it is the broad policy of the government. In text books, the citizens are the real masters and the consumers are the real kings, but in practice we have yet to get our simple ‘legal right to information’ of what is happening in the country. Till to day we don’t know who is paying how much tax. It is alleged that payment of tax is avoided; bribes keep both taxpayers and the bureaucracy happy. A rough estimate of the quantum of black money in the economy is around 40 percent of the GDP. The number of public sector units (PSU) in the country is about 240 and their total equity investment is around Rs 78484 crores. The fiscal deficit last year was around 5.9 percent of GDP and for the current year it is projected around 5.6 percent of GDP or around Rs 153000 crores. The government wants to collect Rs 13200 crores by the sale of PSUs next year against Rs 3360 crores collected last year against a target of Rs 12000 crores. In the current year the net increase in tax due to additional imposition or withdrawal of taxes is virtually nil because the WTO wants reduced indirect taxes and custom and excise duties. The state level elections at the end of this year and central elections next year have compelled the government to be friendly to the rich taxpayers. That is why all the recommendations of Dr. Kelkar Committee were thrown into the dustbin as demanded by the BJP. Not only that, as on March 2002 the total outstanding tax arrears of the centre was around Rs 86400 crores which must have increased during the current year. Thus the government is willingly punishing salary earners by deducting tax at source and allowing the big tax payers either to evade tax and accumulate black money and/or to throw the tax issue to the spider net of never ending legal procedures. Even today we have a system of tax called Minimum Alternate Tax (MAT) where some small amount is collected on voluntary basis based on the book profit. So both the government and business are in league not to collect even the legal dues from industry and commerce and all of which are in the private sector. By continuing with exemption of Capital Gain Tax for fake Mauritius-based companies gave incentives to avoid paying taxes. However, the public sector units are never allowed to manipulate their accounts and evade taxes. The profit earning PSUs paid every year huge amounts to the public exchequer by way of various taxes, interests and dividends. During 1998-99, 1999-2000 and 2001-2002, the government was given dividends by the PSUs of Rs 4894, Rs 5437 and Rs 8260 crores respectively. During 2000-2001 PSUs paid the government around Rs 164068 crores (more than the fiscal deficit figure of 2003-04) in the form of dividends, interest and taxes. The oil PSUs are the most profit generating units in the country. The private sector finds it cheaper to bribe politicians and avoid paying taxes. They don’t pay back to the banks and financial institutions their outstanding loan and interest. This has reached an astronomical figure of around one lakh crores of Rupees and though now there is a law to realise the dues no one is coming forward to obey that law. The Reserve Bank of India has asked the Banks to mutually settle the issue. This is the anti-national role of the banking regulator of the country! Every day one or more cooperative banks are closing their shops and the defaulters are never penalised by the RBI.

Those who advocate privatisation and corporatisation should tell us what happened last year to so many transnationals in the US where laws are supposed to be strictly enforced. As soon as Enron collapsed, it was amazing how one after another a host of so many big houses queued up before the bankruptcy courts telling the world how they indulged in window dressing their accounts and committed the worst fraud of the century. In this connection it was not at all surprising when Mr. Bush and his Vice- President were found committing the worst form of fraud in share dealing based on inside information of the companies (Halliburton) in which both of them were in the management. When the fifth largest auditing firm, Anderson of the US, was caught red-handed in manipulating accounts and destroying their records, the world auditing business knew that they actually practiced under the protection of law. Anderson was sent immediately to bankruptcy but our own auditing firms are still surviving. Every one knows that they are directly involved in so many scams being systematically investigated by Joint Parliamentary Committee of the Parliament. Nothing happens to the big sharks, some small fishes are caught and punished here and there. The Unit Trust of India financial scandal is the biggest scam in the public sector, but no minister was sent to jail for defrauding the millions of small investors.

In the same manner organised loot is going on the name of disinvestment. You take any company in the public sector which is disinvested ‘strategically’. The ITDC hotels were sold for a price and then they were resold by their purchasers to a third party at fabulously higher prices, pocketing huge profits without paying a single penny from their pockets. Modern Food, VSNL and Balco were sold, but no one bothered to charge the value of land and underground minerals which these companies were given. Balco did not pay for the thermal plant that they took over. In the same manner handing over IPCL to Reliance is pure and simple fraud on the country as it has already been given enough monopoly power to hold the country to ransom. In the name of the market economy the BJP is only helping growth of monopolies in the country. Now they want to disinvest two giant oil companies – HPCL and BPCL to the private sector. As the US is interested to grab international oil resources, the fascist RSS in India also wants that the agents of the international oil cartels should come back and take over our oil industry once again. It took tremendous guts for Sri K.D. Malaviya to nationalise the all powerful oil industry and ask the multinationals to get out of India. The Oil and Natural Gas Commission was never given the required cooperation in subsequent years to explore off shore and river basin oil fields, but even then whatever we have to-day is a great asset and it is in the interest of the country that we should allow ONGC to grow and try to make India at least one of the big producers of oil in the world. The anti-India oil lobby wants us to ignore what is happening in Venezuela, Middle East and in Africa and why their democratic governments are fighting relentlessly against these oil cartels of the world. The people of these countries are brutally exploited by the oil giants. The war on Afghanistan was launched just to have access to the oil resources of erstwhile Soviet states, which the US took out from Soviet Russia. If the RSS refuses to see beyond their nose and act only for some selfish personal profit, the future generation will not excuse the organisation and its leadership. Sri Atal Behari Vajpayee and his BJP party have exposed thoroughly their anti-national activities and people of this country can’t forgive them.


Privatisation and corporatisation is a broad policy to capture the market of developing countries by the sick G-7 countries. The absolute number of poor people in the world is increasing. The experience in Latin America and Africa should teach us what will happen to our so-called rich people after privatisation of the Argentine or Brazilian pattern is introduced in India. It was the Bombay Club of the pre-independence days of the then business community who forced the government to introduce planned development and growth of the nationalised sector investment in industry and commerce. The Indian family-owned private sector developed their empire under well-planned camouflage and support of the licence-permit raj. So this system was advocated and introduced by the government to safeguard Indian business interests and without it the present day Indian business community could not have come to the existing state of affluence. They were never interested in competition and till to day they want protection from the state either in the form of subsidy or tax concession. They take loans from the banks and never want to repay; they evade taxes and if caught red handed take the legal route to avoid payment of taxes. To safeguard their narrow individual interests various chambers dictate the government’s taxation and import and export policies. They survive only when there is oligopoly or monopoly in market structure. The Indian public sector was developed with public money but it never served the interest of the ordinary Indian citizen, rather it was used as a milch cow for the nourishment and growth of the Indian private sector. But when the MNCs were brought to India and they are going for widespread acquisition, amalgamations and mergers with their tons of financial resources, the Indian private sector wants to run away from the scene at the first opportune moment. Chauhans of Thums Up was the classical example. Now they are caught selling adulterated drinking water. In such an hour of crisis, to safeguard the interests of millions of unprotected wage earners, small and marginal cultivators who account for more than three-fourths of the population, it is the duty of the Indian state to protect the existing public sector units and formulate the necessary laws so that Indians are not made beggars in their own country. These foreigners could not achieve their dangerous design in the mid-sixties, discouraging us to invest in agriculture (this policy is still valid when they want to send us genetically modified crops). They tried to feed us with third rate wheat meant for fodder in their own country under the Public Law 420. Rather our cultivators accepted the challenge and made the country self sufficient in food and milk and now they are feeding the rest of the world. In the same manner we are producing oil which is about 30 percent of our requirements and our own refining capacity is self-sufficient. Our steel production is sufficient and we export even some quantity to China. The people and the political parties who are trying to sell the profit earning viable strategic PSUs and trying to destroy our economy, are already marked out. Public hatred and anger against such anti-national policies is very difficult to contain. From the 2003-04 Budget presentation it is clear that the BJP will play its ‘privatisation programme’ in slow motion till next year’s Lok Sabha election, but people may not excuse such an anti-people and anti-national party so easily.

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