Financial Daily from THE HINDU group of publications
Wednesday, Oct 13, 2004
Financial Daily from THE HINDU group of publications Wednesday, Oct 13, 2004 |
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Money & Banking
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Insight Columns - Financial Scan Planning Commission controversy — Left misses historic chance! S. Balakrishnan
THE controversy over the Planning Commission has, at last, died down. To kill it, the Government decided to disband all the Commission's consultative committees, which comprised a mix of desi economists of the Left variety, executives of the World Bank and representatives of international consulting firms such as McKinsey and Boston Consulting Group (BCG) - difficult to think of a more heterogeneous and discordant bunch! It was the Left economists who protested the inclusion of the World Bankers, McKinsey and BCG consultants. They thought this would inevitably lead to prescriptions of more divestment and privatisation of businesses and activities now in the public sector domain, given their strong propensity to market mechanisms and solutions. The resistance of the Left is not to foreigners, per se - they might have been persuaded to accept even someone like Jeffrey Sachs (who in recent times seems to have turned anti - World Bank and IMF) - but their private sector predisposition. After all, it was during the period of the legendary Dr P.C. Mahalanobis that the Commission was advised by several foreign economists. No one attributed motives or questioned their usefulness. Still the Leftists need not have shied away from this opportunity to take on the radical reformers and privatisers in intellectual debate. There are examples galore of industrial sickness in the private sector. n fact, almost the entire NPA problem of banks is because of dishonest and corrupt managements. As far as the experience of private ownership of banks is concerned, the less said the better. Launched with great fanfare in the nineties, the policy of licensing new private sector banks has been a complete failure - other than HDFC Bank, ICICI Bank and UTI Bank, which are really pseudo private sector, they have not survived or are struggling and, in some cases, hoping for a white knight from the public sector! The basic fallacy in privatisation in the Third World lies in assuming that the quality of decision-making, governance, institutions, regulatory framework and legal system are equal to that of the G-7 countries. t is simply not so. Just look at the way the Dabhol Power project was steamrollered through a compliant Electricity Board, State Government, financial institutions and Government of India and you get the idea. And for every Dabhol, there are probably several mini-Dabhols, lurking in the closets of State Governments. As Dr A. Vaidyanathan, the well-known economist and former member of the Planning Commission, said in an insightful observation in a recent interview to The Hindu, the answer to the collapse of public systems and services in a poor country is not privatisation. It would put even basic needs beyond the pale of affordability. Actually, the Left could have handled the situation beautifully. Any time a McKinseyite opened his mouth in the consultative committees, he could have been silenced with the role of the firm in promoting Enron as a paragon of modern business. Truly, it has missed a historic chance!
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