Undoubtedly, the COVID-19 pandemic came down heavily and all of a sudden on almost all the countries in the world creating great havoc to their economies.
Some of the countries were already having some serious problems in their economies even prior to that: India being such a country. India has had some very serious problems in the economy for many years much before the advent of the COVID-19. So in the context of India, it will not be proper to blame only the COVID-19 pandemic for all the sufferings in the country’s economy.
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True, aggravation of some of the problems due to the COVID-19 is undeniable and like India, almost all other countries in the world have been suffering because one phase after another of the pandemic has been hitting the economies hard and even now the economies have been threatened with a likelihood of further waves.
But what is really heartening to observe that most of the countries have tried to turn around their economies even after being badly hit. Their success has thrown new challenges to the global competition wherein losing and gaining fresh grips of some of the countries in global economic positions, are sure to happen.
The entire concept of India’s mixed economy has been found to be giving a loose rope to so many PSUs to operate in a manner pushing efficiency to play a secondary role.
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That the state-run public utility services should devote on rendering services to the people comes second to none would not have done much harm had those who believed in that would also have firmly believed that at the same time there should not be any compromise on profitability of the service-rendering concern weighing in on maintaining the desired levels of efficiency also, as the situations demand from time to time.
But what is the ground reality in India? Is it really happening in India? Let us consider the conditions of most of the state transport corporations. As far as Assam is concerned, I cannot recollect when the Assam State Transport Corporation earned net profit last. The quality of services rendered are also not satisfactory if we compare with private bus services.
Similarly, the erstwhile ASEB, which was divided into three companies few years ago, was never heard to have earned profit for at least in the last decade if not more than that. The managements of those companies entrusted with power production, distribution and collection of bills, etc. believe that the only solution for turning around is in hiking of tariffs! Though I have cited the examples in Assam, that so many states in India are facing the same pathetic fates, is a matter of fact.
That rapid privatization is likely to do more harm than good to the economy, has become my monotonous repetition in so many of my already published articles on Indian economy. A PSU showing a sumptuous amount of profit may not necessarily mean that its performance is very satisfactory and hence worth-mentioning because so many factors like size of the unit and whether it is operating in monopoly etc. are the notable factors in this regard.
It is indeed very pathetic that those inefficiently run units forget that on their performance, so many stakeholders are dependent. Nagaon Paper Mill at Jagiroad and Cachar Paper Mill at Panchgram, of HPC, have lost hope of their revival by the government. How many have been rendered jobless, and how are the subscribers to the capital formation, etc. being affected? Impacts of closure on all other stakeholders are also there.
As if any request to the government for consideration of revival of those units, has become absolutely irrelevant. Even though, of late, we have heard that on the demands of the unions, an agreement by and between the unions of those paper mills of HPC in Assam and the government of Assam, has been arrived at wherein involvement of the managements of the respective mills has not been found, the provisions so agreed upon, are not known in detail till now. But nothing is there in the news available in both print and electronic media about revival of operation of those paper mills. However, what the NCLT says on the matter, will have to be awaited.
In a clear-cut reference to the position that private sector cannot be an adequate replacement in entirety to do away with operation of public sector units, ex-Governor, Reserve Bank of India and presently the Katherine Dusak Miller Distinguished Professor of Finance at the University of Chicago Booth School of Business, Dr. Raghuram Rajan has greatly emphasized on drastic improvement of the performances of the PSUs in India.
In a recently held discussion on the topic ‘New Economy – Redesign the World”, which was also participated by Dr. Sam Pitroda, an architect of India’s telecom revolution and a product of Illinois Institute of Technology in Chicago and Dr. Palanivel Thiagarajan, hon’ble Finance Minister, Tamil Nadu, whose alma maters are University of Buffalo and MIT Sloan School of Management, USA, to a question by Supriya Shrinate, Dr. Raghuram Rajan has come out with his opinion that there is a need for public sector enterprises including banks in India.
He has opined that better governance can have the same desired effect as outright privatization. Dr. Thiagarajan has been with his opinion that his government recognizes the role for the private sector, but public goods and services, roads, infrastructure must stay with the government.
I have always been with my opinion that rampant privatization in India is likely to do more harm than good and if there is any compromise on adequate regulations and rules and better governance fails to appear, then capitalizing on them, private sector monopoly with squeezing the people cannot be ruled out. Yes, certain sectors must be wide open for private sector to flourish.
In the language of Dr. Raghuram Rajan “there are clear rules for all sectors. The government may not be in watch making business (such as HMT), but the state has a different set of objectives and must ensure there is adequate competition in place to prevent monopoly.”
That co-existence of both private sector and public sector has thrown some great challenges for the public sector to accept and out of them the most pivotal is the need for drastic development of manpower efficiency in almost all of the PSUs.
In human resource, India is undoubtedly unique in numbers. But time has already arrived to count on the quality of human resource instead with paramount significance. No economy can prosper without proficient manpower. India and especially the North-East of it, require a relook into that with utmost precision and urgency. That most of our PSUs seem to be not that much concerned in real senses, is a matter I have dwelt on elaborately in numbers of my already published articles.
Improper handling of manpower not only increases manpower cost, productivity also goes down to a concern’s great detriment with undue increase in total cost of production. In various government departments also such improper use of human resource is absolutely transparent to notice. Such increase in manpower cost and decrease in productivity do great damage to an economy.
That more than required number of employees is harmful for a concern and for efficiency increase, there is dire necessity of finding out actual necessity for desired efficiency, are two great professional calls of the hour. Mere sufficient formal education of an employee is not enough even though that places him in a distinctly more advantageous position compared to another who is not having that much formal education.
Too much absenteeism is a great headache for a number of industrial units, and it increases overtime cost. For the wellbeing of the industrial units, so that production and productivity are also not compromised, I do very strong advocacy for curtailing overtime cost as much as possible. Unless the sense of belonging and commitment to contribute are very high amongst the employees in an industrial unit, such a unit fails to derive substantially from its human resources.
It becomes painful for me when I find a person earning bread and butter both for his/her family and him/her, fails to show his/her sense of belonging and sincere commitment to render his/her best to the organization he/she is employed in.
Pathetically in India, those employed with such mentality are doing severe harm to the economy. It is more prominent when wages are not linked adequately with production rendered with acceptable standard of quality.
Without analyzing real necessity, every manpower development programme is not likely to be beneficial for each and every participant. Realization of importance of increasing productivity of human resource in the light of its paramount importance for a rapid stride of the Indian economy, must get urgent attention of all concerned, because all the other factors of production are meaningless unless labour yields.
It is really a mammoth challenge before the economy for low productivity of manpower being one of the major reasons of failure of a number of industrial units in the country. Hence, what I visualize is that the coming days will be belonging only to the professionally competent entities except for those which the government prefers to keep in monopoly.
It is time for all those which have failed to show professional competence, either to pull up their socks to survive in competition or to concede defeat in the competition with the professional entities. The PSUs should take that call as most significant and urgent for rising to the occasion.
The Indian economy is witnessing further growth of the big industrial concerns and most of the existing MSMEs are clamouring for their survival; forget those which have faced their ultimate goal of closure. Thus, let us not be jubilant looking at the GDP figure. To me, it is really high time to examine the extent of relevance of our such ecstasy when at the same time the growth of our country’s depressed economic activities in the informal sector, whereon a very large number of people are dependent, is really creating a very severely piercing headache for the economy.
Resultant sliding down of domestic consumption aggravating the declining purchasing power is indeed an unpalatable truth. So long that burgeoning problem is not adequately addressed, not only that economic disparity will have uninhibited growth, private consumption is also bound to lie low.
Therefore, a projection of India’s GDP growth with increase in the financial disparities in the society with conversion of more and more number of people into poor category with inevitable further tapering of purchasing power, is rather likely to do very great harm to the economy even in the near future if the issue of growing financial disparities is not properly addressed. Who does not have the propensity to spend if purchasing power is sound?
It does not require great research into the basic reasons of low domestic consumption vis-à-vis increase in exports, and hence to the factual position that increase in exports is a major reason of increase in India’s GDP in the first quarter of the FY2021-2022. In the post-second wave of the COVID-19 period, in the movement of the economy with increase in exports, increase in the number of startups has taken a very encouraging role. Digital mode of activities vis-à-vis physical mode of activities have been observed to be of alarmingly growing difference.
In the physical mode of activities, the informal sector plays a very great role in Indian economy. Growth of absorption can be successful only through prosperity of the informal sector. With rapid plummeting of the industrial units under that sector, growth of unemployment, closure of industrial units and increase in NPAs in the financial institutions are making their such rapid upsurging very prominent.
In uprising of a K-shaped recovery, with financial woes of a sizeable number of people, wealth accumulates very markedly among a small number of people. So long that K-shaped economy continues its growth, the difference between both the groups becomes more and more alarming, which is very dangerous to an economy.
The country’s GDP growth may show satisfactory figures in the quarters to come in the prevailing fiscal year. The sectors like agriculture and tourism are not so promising so as to contribute to the economy both through increase in production and productivity of the manpower opening meaningful vistas for absorbing unemployed youths. To me, any dream of bringing about economic progress in the country without taking care of meaningful absorption of unemployed youths and improving upon purchasing power of the people, is nothing but an impetus for a K-shaped recovery only, which so many in the line, have already started apprehending.
In addressing these two major headaches in the economy, unless the remedy is not searched in the MSME sector, the problems will be remaining painful. Most of the big industrial houses have been successful in bring back smile to the economy taking the most leading role and if there is no impediment like emergence of the third wave of COVID-19, to me, if the unorganized sector’s growing sufferings do not find any meaningful redressal, that the economy will head towards a disaster instead, I am not having any iota of doubt.
Now, as for the government of Assam, it seems as if in the list of priorities so many items are claiming more importance compared to economic recovery. The state is already languishing industrially with its diabolic impact on the economy. If overall reading of the country’s economy reveals failure to lift economic conditions of growingly sizeable number of people, and failure to address their economic problems pragmatically is likely to aggravate their such problems, the government of Assam must prioritize the economic distress of that very large section of the people of the state, creating vistas for earning their livelihood instead of taking to the measures like distribution of freebies and waiver of microfinance loans to a small section of the loanees etc. on sustained basis.
Frankly speaking, the importance that our state’s economy should have got by now for its upturn, is pathetically inadequate. My suggestions for necessity of very urgent and pragmatic steps for turning around the state’s economy have already covered a very long space. That the negligence of the government to all those sectors of the economy will create further pain to the state’s economy, is absolutely certain.
While for the state government, the consideration of viability of the ventures of commercial value seems to be playing a dormant role, very pathetically, the ailing MSME units in the state are fighting tooth and nail to emerge viable amidst a number of odds surrounding them.
Time has arrived fast to consider all the factors that may contribute to inflow of revenue before venturing to pump money into any venture, because then only it will be possible to realize the meaning of viability of that particular venture. Unless in respect of all the commercial ventures, the question of viability by means of inflow of money vis-à-vis outflow of fund from them is considered, not only that they may become white elephants but at the same time there will surely be harmful effect of that on the economy. But what I have noticed is consideration of viability of most of the government ventures in Assam is moving into disappearance, which to me, is all set for doing immense harm to the economy.
(The author, Satyajit Kumar Sharmah Thakur is a Guwahati-based advocate. He can be reached at [email protected])