Stocks

Is lobotomy a prerequisite for the polity?

J Mulraj | Updated on September 18, 2020 Published on September 18, 2020

Some decisions taken by policy makers, globally, defy common sense, leading to the query in the title. For example, after the unnecessarily brutal killing of George Floyd, there was an outcry and the Black Lives Matter movement to ‘defund’ the police in the US. The Minneapolis City Council vowed to ‘dismantle the Minneapolis Police Department’ on June 4 and ‘when we are done, not going to glue it together’.

Now, the same City Council is demanding to know why the police are not responding to violent crime! They now suggest, 3 months after promising to dismantle the police, that more funds are needed! Is the council lobotomised?

Over 30 million tenants may be evicted after the moratorium is over, out of 100 million households. The main reason is joblessness. Their savings fetch under one per cent interest because of the insane policies of the US Federal Reserve, supposedly to encourage consumption. The Fed has decided to continue on its insane course for 3 more years. Is it lobotomised?

Air India disinvestment

Or take our own polity’s inability to handle privatisation, especially that of Air India, which has made losses every year since 2007. The losses are attributable to an unaffordable purchase of aircraft decades ago, and the subsequent folly of merging Air India with Indian Airlines. The first attempt to privatise it was 20 years ago, which failed because the buyer was offered 74 per cent and had to take on the debt burden of AI.

Finally, after 20 years, the Government has reconciled to selling a 100 per cent stake, and free of the debt burden of ₹23,000 crore (it had earlier reduced debt by some ₹30,000 crore by sale and leaseback of planes). Had they done this 20 years ago, the debt would most likely not have been so high and the tax payer money pumped into AI to fund losses since 2007, would have been averted. The prime objective of a Government is to defend its borders, not to run commercial enterprises.

Having said that, the work done by Air India in the Vande Bharat Mission to bring back Indians stranded abroad due to Covid, has been brilliant and needs to be highly lauded. Despite this, it needs to be sold and sale proceeds need to be used more effectively.

There are several PSUs (public sector units) making losses. The losses total over ₹1 lakh crore. For example, Hindustan Fertiler Corporation, which has not produced any fertiliser for 12 years, yet continues to pay 1,200 employees, for doing nothing.

Why is there no political will to cut deadwood?

Of course, there are PSUs making smart decisions. SBI, India’s largest bank, last week tied up with Titan to make watches embedded with an NFC (near-field communication) chip linked to the SBI YONO (You Only Need One) app for a contactless payment, up to ₹2000.

In the private sector, RIL is moving briskly towards a digital future. Goldman Sachs has made a list of 12 companies in the Asia Pacific region, called the Digital Dozen which it feels should be invested in. Reliance Industries, thanks to Jio, is the only Indian company on that list.

As per Seeking Alpha, one of the top 10 trends is digital/programmatic/target advertising. You see this happening when you click on or search for, any item. Jio is perfectly positioned for this, which is one factor that enthused the likes of Amazon, Facebook and others to invest huge sums in it.

The stock market is rallying due to the absence of alternative investment opportunities. The main worries are the continuation of Covid and the border tension with China. With the approach of winter, the chances of a flare up subside. Perhaps China is draining India of financial muscle by ratcheting up border issues. All the more reason to take correct, and swift, policy decisions.

The writer is India Head-Finance,Asia,Haymarket.The views are personal

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Published on September 18, 2020
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