The silver lining of the devastating Covid-19 pandemic, which despite take-off of the national vaccination campaign, is surging in some parts of the country, is that it has made the neta-babu brotherhood aware that adoption of the socialist development model under which the State dominates the “commanding heights of the economy” was the biggest mistake in Indian history.
The empty treasuries of the Central and state governments are testimony to the bankruptcy of the neta-babu economic development model. As a result while the newly-elected Biden administration in the United States has provided a $1.9 trillion pandemic relief package for America — a sum equal to more than half the GDP of India in 2019-20 — the numerous relief packages of the BJP/NDA government at the Centre aggregate Rs.3 lakh crore ($41 billion) for a population that’s 3x of the US.
Nevertheless an upside of the Covid blight which has felled the Indian economy, is that even if belatedly, the BJP leadership has rediscovered its ideological moorings and announced an intent of wholesale privatisation of the country’s black hole 348 government-owned public sector enterprises (PSEs). In particular it has declared firm intent to privatise the country’s 12 banks which were nationalised way back in 1969, starting with two large (unnamed) PSE banks in 2021-22.
This latter declaration of intent should be especially welcomed as during the past half century public sector banks (PSBs) mismanaged by business-illiterate bureaucrats and over-promoted clerks, have inflicted incalculable damage upon the Indian economy, and are primarily responsible for its slow growth and under-development during the past 50 years. This charge is evidenced by recent data published by the Switzerland-based Bank of International Settlements (BIS) and the World Bank.
According to BIS, in 2019 total bank credit to non-financial enterprises in India by the banking sector overwhelmingly dominated by PSBs, was a mere 87 percent of GDP. And in July 2020 (during the pandemic lockdown) it plunged to 56 percent.
In sharp contrast, in China the ratio was 205 percent; South Korea 197; USA 150; UK 158 percent. World Bank data confirms the risk-aversion of India’s public sector banks. In China, the bank credit to GDP ratio (2019) was 164 percent and South Korea 151 percent cf. India’s 50 percent. A combination of politically directed lending, chronic ineptitude and risk-aversion for over half a century, starved Indian industry — particularly MSMEs (micro small and medium enterprises) — of credit, the prerequisite of economic growth.
Unsurprisingly, lazy, overpaid and technologically and productivity challenged bank employees enamoured with the status quo called a two-day national strike (March 15-17) to protest the proposed denationalisation of PSBs. No right-thinking citizen should support them or tolerate government back-sliding on the issue of privatisation of PSBs.