Sure, the dollar has risen against the currencies of most other emerging economies and, in the case of India, its huge dependence on imported crude oil, whose prices are rising, which results in a rising current account deficit, is another factor. For sure.

Yet, at the root of everything is how well a company, and a country, utilises its capital. It’s quite simple really. If a company/country earns a higher return on its invested capital than the cost of the capital, it thrives. The economy grows, and with it, the currency is stable. If a company/country earns less than the cost of its capital, consistently, then the shortfall has to be funded by someone.

The previous UPA government was flexible in accommodating the corporate sector in such funding of losses. This resulted in a huge NPA (non-performing assets) problem which is now, belatedly, being addressed. Corporate assets, unviable at original cost, are being sold. These assets will become viable at the lower, distressed sale price.

But for public sector companies (PSUs) the problem remains. They continue to be funded. When companies do not earn more than their cost of capital they bring down the economy and are a drag on the economy. They must be amputated.

Yet they are not!

This is tax payer money going down the drain. In other words, a handful of tax payers (about 3 per cent of Indians pay income tax) work to support the employees who are not producing anything. Economic growth suffers and the currency depreciates.

For what?

It is poor governance. An inability to take corrective action. To protect a vote bank.

The classic example is Air India. The airline is not viable. It has too much debt, taken to buy planes it could not afford. Now, a Parliamentary panel has recommended that the airline be ‘given another chance’. Further tax payer money will be used to keep afloat a failed business which the government should never have acquired.

Why is it sought to be kept alive? So that a handful of policy makers can get free upgrades and free flights.

For whose benefit?

As a nation we must decide whether we run the country for the benefit of the polity or for the citizens? We have, throughout different governments, failed to run the country in the interest of the people.

What else explains the bizarre public statement of an MLA that he would be willing to kidnap!!! a girl if a boy and his family approved of her! If an MLA, a lawmaker, is willing to kidnap (break a law) is he fit for his job? Why should he not be suspended?

Another example of disrespect for capital is in the sale of IDBI Bank majority bank holding to LIC, the State owned insurance behemoth. The LIC is an insurance company and has no expertise in running a bank. The funds it will use for its purchase belong to its policy holders, not to LIC.

Everyone has failed in their duty.

Let us see if SEBI, the market regulator, lives up to its fiduciary duty. LIC may approach it for permission to waive the need to make an offer to shareholders of IDBI Bank following a change of management. SEBI should not, if it is true to the purpose of its creation, viz to protect shareholders.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)

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