THE most notable feature of the 1998-99 Budget is the Finance Minister's announcement of a large-scale programme of privatisation of the economy. Key sectors such as coal, lignite and petroleum products are to be delicensed; Indian Airlines is to be privatised; the insurance sector is to be opened up for Indian capital; and in all areas other than "strategic" ones, state equity in public enterprises is to be brought down to 26 per cent. While these proposals are to be implemented over time, they together constitute a comprehensive plan to alter property relations in the Indian economy. Since talk of such an alteration has been in the air for some time, this announcement has not evoked much discussion. But it has far-reaching consequences.
First, it would remove a large chunk of the economy from the purview of public scrutiny and hence from the realm of social accountability. A basic distinction between public and private property consists in the fact that the former in principle is socially accountable, and this is enforced through Parliament and its committees. How well this job is done is a separate issue. If it is badly done then that requires reforms in a different sphere. But privatisation puts an end to this form of social accountability and hence constitutes in a fundamental sense an abridgement of democracy.
Social accountability is not merely intrinsically desirable. It becomes absolutely necessary when enterprises have to fulfil certain social functions going beyond mere profit-making. Privatisation, and even making public enterprises concentrate exclusively on profit-making, effectively does away with these social functions. And yet they are periodically, and hypocritically, invoked for convenience.
In his Budget speech, for instance, the Finance Minister talked of commercial banks designing "specific loan packages to meet the needs of micro enterprises", of debt relief to farmers, and of Kisan credit cards. None of these is significantly enforceable if priority sector lending norms are abandoned and banks are driven by profits alone. It is hypocritical to talk of social functions while apotheosising profit-making. It is also hypocritical to talk of social functions while pooh-poohing social accountability, as is fashionable these days.
Secondly, all privatisation involves the selling of state property at "throwaway" prices. This is true the world over. And it has been true in India too as the Comptroller and Auditor-General's report pointed out some time ago. In other words, in privatising enterprises the state is not merely changing the form of its property from enterprises to schools or hospitals or reduced public debt but is transferring gratis some state property to private monopolists. Since state property has been built up through the sacrifices of the common people through tax payments or inflation-induced restraints on consumption, privatisation amounts to an implicit act of plunder, or what Marx called "primitive accumulation of capital": a few are being allowed to filch from many through the courtesy of the state.
This point incidentally has nothing to do with "loss-making" or "profit-making" public enterprises. Whether one considers individual enterprises changing hands, whatever their profit situation, or the totality of the enterprises, the prices at which they are sold are invariably less than what any objective assessment would suggest. And it is this difference which constitutes "primitive accumulation", or, in simple terms, filching.
Privatisation is usually justified by invoking either or both of the following arguments. The first is that it would release resources for more worthwhile causes like investment in schools, hospitals, infrastructure and so on. This argument, however, is completely erroneous and is based on an elementary confusion between what economists call "stocks" and "flows". If schools or hospitals are built from the proceeds of selling public enterprises which are bought by the buyers by borrowing from banks or by running down cash reserves, then the macro effects of such financing are no different from deficit financing. In fact it is a roundabout manner of deficit financing. Avoiding such deficit financing requires taxing the rich rather than privatisation. The second argument talks of the greater "efficiency" of private as compared to public enterprises. This, however, is more impression and prejudice than argument. And in any case it has never been shown that "efficiency" (it is never clear in what sense) cannot in principle be raised on public enterprises. Thus the arguments for privatisation are dubious; but the element of filching is very real.
The third point about privatisation is that it opens the way for the domination of the economy by foreign capital. Since it is extremely difficult to distinguish in practice between domestic and foreign capital within the private sector when they are operating together in joint ventures, or when a domestic firm can be a front for foreign capital, any expansion in the scope for the private sector necessarily enlarges the sphere of operation of foreign capital as well. This is why the Finance Minister's claim in his Budget speech that the opening up of the insurance sector would be confined to Indian capital is meaningless.
But the BJP-led Government has not just created possibilities for foreign capital; it seems to be wooing multinationals assiduously and doling out huge concessions. Counter-guarantees on the so-called "fast track" power projects have been cleared, and such counter-guarantees are from now on going to be the order of the day. Large concessions are being offered for mineral exploration, which incidentally is one field where removing multinationals was a national priority in all Third World countries after decolonisation. Foreign banks are being allowed to repatriate profits.
And the Government has capitulated before the Suzuki Motor Corporation. The idea behind such overtures is to win over multinational corporations to lobby for the removal of sanctions.
But the irony is obvious: the nuclear tests which were supposed to strengthen India's sovereignty have resulted in a situation where the Government is frantically trying to surrender it to multinationals! Swadeshi has ended in a whimper.
