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What the article is about?
- Talks about the role of government in business investments.
Syllabus: GS-III Issues relating growth and development, disinvestment, privatisation
Government in business:
- The Government of Singapore Investment Corporation (GIC) invests internationally in equities.
- It owned shares worth about ₹1.09 lakh crore at the end of March 2022 in India alone.
- Around the world, GIC investments amount to about ₹55 lakh crore. GIC is the eight largest wealth management fund in the world.
- The money doubled in real terms in the last 20 years.
- This money is also used by the government for public welfare.
- China is doing the same.
- The Municipal Government of Hefei invested $787 million to acquire a 17% stake in Nio’s core business and shortly after that exited making a profit of 5.5 times its investment.
- By 2017, Chinese government-owned companies had invested ₹67.5 lakh crore in overseas companies.
- This is about 27% of India’s GDP.
- Meanwhile, in India, we are disinvesting.
- The total market value of Indian government holdings is only ₹13 lakh crore, far less than China or even Singapore.
- The Navratna PSUs are performing well, but are being sold.
- As China increases its global influence, India is bartering away one source of such influence – its ability to invest overseas and create greater economic clout
- The prevailing ideology that the government has no business to be in business is used to justify disinvestment.
- The real reason is the growing government deficit.
- India uses a western ideology about government-owned companies, but forgets that what the West preaches is for others and what it practices is in national self-interest.
- The world’s list of top asset-holding PSUs includes the U.S., Israel and the European Union counties. But there are none from India.
Way Ahead:
- While the smaller and loss-making ones need to be disinvested, the profitable ones can be reformed.
- The only problem in India is archaic rules governing PSUs and political interference.
- Other talents from the private sector can also be brought in.
- Salaries for key top personnel should be in line with worldwide best practices, along with real accountability.
Conclusion
- If the Indian government invests like Singapore, that will give it much more funds than disinvestment ever can.
- Meanwhile, ownership remains intact.
- Another powerful reason is managing government finances.
- The only avenue for revenue generation seems to be taxes.
- However, markets, wealth management and dividends are not explored.
