The Hindu Business Line : Private sector performance

IT IS high time the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) undertook a comprehensive study of the performance of the private sector in the 15 years after liberalisation. If nothing else, at the minimum, it will serve as a historical record, and a handy reference manual for the regulators, federations of industry and commerce, and the enterprises themselves.

It may also hold lessons which could then be compared with the experiences of companies elsewhere in the world whose products and services are the same or similar. The public sector too may find the material useful to benchmark themselves.

There are also substantive reasons justifying an independent survey of this nature. It looks like boom time for Indian economy and corporate chiefs are in an exuberant frame of mind. They are spoiling to spread their wings and demonstrate their mettle.

This is something to be proud about as it shows that the private sector has come of age. At the same time, the situation carries an inherent temptation for stakeholders of industry and commerce to go overboard in the sense of being less than balanced and measured in taking decisions.

Hitherto, India had been spared the sort of scandals that rocked the US under the traumatic impact of which many firms sank without trace. It will take many years before the corporates and CEOs in that country regain the trust and confidence of the people. India needs to be forewarned so as to avoid being overtaken by ugly surprises. The regulators, therefore, have a responsibility to ask the necessary questions, when there is still time to remedy incipient shortcomings in management. The study can provide the basis for trouble shooting and early warning.

Another purpose of such a study is to find out the extent to which business has actually taken advantage of all the facilities and incentives that have come its way after liberalisation so that it learns to make the best use of what is already available before clamouring for more.

The RBI brought out a report in November 2005 giving the results of its appraisal of the financial performance of the private corporate sector as viewed through public limited companies, but its focus was mainly on sales, profit margins, mode of financing for asset formation, inventory control, and return on shareholders' equity. What is now needed is a more extended and incisive joint study by both the SEBI and the RBI.

B. S. RAGHAVAN

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