Sunday, November 15, 2015

Modi Government to speed up privatisation of PSUs

Modi Government to speed up privatization of PSUs

Modi Government is going ahead with some more “reforms”, in addition to the already announced FDI regulations easing. It wants to create a mechanism for selling loss making and non-strategic PSUs. The thinking is to divide loss making PSUs into three categories—(a) Companies that can be revived with financial and managerial help (b) Companies that can be revived by taking a private sector partner, and (c) Companies to be closed down along with selling of their assets. 

It is also considering to privatize select profit making PSUs. Privatization of IDBI Bank was already hinted by the Finance Minister Jaitley.Government is planning to reduce its stake in IDBI to 49%, thus privatizing it. It is likely to take up the sale of State owned hotels aggressively.

Proposal for strategic sale of PSUs is under consideration. Strategic sale means handing over the management of the PSU to the strategic private partner who buys minority/majority stake in the PSU. 

The Vajpayee Government resorted to a large scale strategic sale of PSUs and sold VSNL, BALCO etc in that manner. Due to the pressure from the Left parties, the UPA-1 Government stopped this strategic sale of PSUs. Now Modi Government is going to implement this strategic sale route for privatizing PSUs.

Economy not out of danger and inflation is rising

Industrial growth is weak. There is 4.6 per cent contraction in consumer non-durables(goods used for daily consumption or frequent consumption and not expected to have a useful life of more than 3 years) in September 2015. It high lights the rural stress. 
On the other hand, the urban dependent consumer  durable (washing machines, refrigerators etc lasting for more than 3 years) posted a growth of 8.4 per cent in September 2015. 
The total industrial output in September 2015 grew by 3.6 per cent only while it was 6.3 per cent in August 2015.  It is the lowest in the 4 months.
During April-September 2015, in the first half of the financial year, the industrial production grew by 4 per cent compared to 2.9 per cent last year. But whether this will continue now that the festival season is over? 
The demand in rural areas and also the demand for our goods in other countries are weak. 
Due to the higher prices of pulses and vegetables, the consumer prices are increasing. Retail food inflation was 5.25 per cent in October while it was 3.88 per cent in September. The over all retail inflation was 5% in October 2015.

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