Privatisation

Privatisation is an evocative subject even in the developed economies. In a developing economy like India, with its tradition of successful and pervasive public intervention, it generates unique mind-blocks. Its implementation therefore requires persistent, persuasive zeal. However, the compulsions of ensuring higher levels of investment at progressively higher levels of efficiency and productivity require a complete restructuring of the economic environment. Low levels of public savings, inadequate competition and low export orientation are barriers which need to be transcended. Privatisation and liberalisation of the licensing regime for Foreign Direct Investment are two initiatives which can meet the objectives of efficiency enhancement, domestic and foreign resource mobilisation and incremental capital outlays. The pace of privatisation has quickened since 2000. The adoption of a strategy of block sale of government stock in identified PSEs to a strategic partner, along with transfer of management control, as opposed to market sale of shares in small lots, has enhanced the value received by the government through disinvestment. It also ensures that these assets are put to productive use in the most optimum time frame and with the maximum benefit. While it is too early to quantify such benefits, there is sufficient anecdotal evidence of significant welfare gains for employees, institutional investors and the economy, along with the quantifiable gains for government, from the additional resources freed by the sale of PSEs.

In a country like India which is not yet telephone-saturated and ongoing changes in related areas are resulting in a rapidly changing profile of users, providers and their respective needs, continuous revision of the telecom policy is imperative. Given the emerging new technologies and the integrating economies there must be fairness among competitors.

The IRDA Bill and the consequent opening up of the health insurance sector to foreign and private investors' raises several questions. Are Indians ready for private health insurance? Will there be demand from all sections of society? What would consumers look for when they 'purchase' insurance to cover future health risks, a concept hitherto non-existent in India? These are some of the questions this paper attempts to answer, based on data collected in Delhi from about 500 households. The study found a wide disparity across sections on willingness to participate. The challenges for the new system would be to pool individuals across risk and economic status categories; set up a multi-tier system to meet objectives of equity and efficiency in health care delivery and for planners and regulators, to keep health insurance separate from other non-health insurance.

An examination of the main arguments extended to build a case for privatisation of the public sector banks (PSBs) in India reveals that the arguments are based on (a) perceptions rather than factual analysis; (b) the use of partial information; and (c) evidence on international experience which is not unambiguous. It can be concluded that the case for privatisation of PSBs in India is not strong enough at least on the grounds usually proposed by the advocates of privatisation. Private sector banking would have a larger probability of crisis if the supporting legal and regulatory framework were not sound enough to insulate the systems from extraneous pressures. It may, therefore, be safer to maintain the public sector character of the banks till the conditions for privatisation are conducive enough.