While the entire nation was busy talking about the #JNUrow in the ongoing debate on tolerance, a very important development with major consequences to everyone in the country has seemingly gone unnoticed.
US based bond rating company Moody’s Investor Service cautioned the Indian government that if it did not boost the capital levels of PSUs by revising its capital infusion plan for the public sector banks in the upcoming budget, the banks will see negative ratings.
Rating 11 state owned banks in India Moody has estimated an external capital requirement at the tune of Rs 1.45 lakh crore for the four financial years, ending March 31, 2019.
Following the directive the Indian government has announced a series of major banking reforms, including lowering its stake in state-owned banks to a staggering 51 per cent.
Under these banking reforms PSB mergers are a top priority, inspite of nationwide protests from the bank employees union of each of these banks. For these reforms the proponents of privatisation raise the issue of productivity in the PSBs. However what they fail to mention is that these are the same banks whose fraudulent policies of the sub-prime housing mortgage collapsed the entire US economy. Now these same banks are lining-up to buy Indian PSBs. The question is where is all the money coming from in these bankrupt banks in the first place?
- Perceptions rather than factual analysis
- The use of partial information
- Evidence on international experience which is ambiguous
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.
This is exactly the case here. If the problem the banks are in in the first place is because of the bad-debt write offs which is a major fraud, what should be the appropriate solution? To ensure appropriate regulatory mechanism to prevent such frauds from occurring and bringing the fraudsters to book or by simply privatising the banks? Is privatisation the only one-stop solution to all of the problems the country is facing, be it the railways, energy, education or any other sector?
Any country’s policies be it related to related to defence, economy, education etc. are drafted keeping it’s history as a reference for improvisation and by studying similar case studies in various other countries to understand the entire life-cycle of the phenomenon better. It is a tragedy for the country that the approach of our policy makers is very shallow and short-sighted, and not one seeped with wisdom gained from the centuries of experiences through which the country has evolved. A short lesson in the history of privatisation and liberalisation to our economists, advisors, policy makers, diplomats and bureaucrats will go a long way to do much good for our country.
The concept of Liberalisation and Privatisation is not in any way a novel concept. It is just a rebranding of the concepts of Free Trade and Globalisation under which the East India Companies were given exclusive rights to trade with India and Southeast Asia by the British Monarchy, and to implement these it was also given the right to civilize India.
The main objective of the EICs were two fold.
Excessive production of commodities within the European Nations needed continuous markets for them to sell. Europe with its limited population could not absorb this onslaught of commodities which were mostly durable in nature like clothes. So they needed new consumers for their commodities which was provided by the Asian Markets who accounted for more than 1 billion (China and India alone) during that time around 1800s.
EICs wanted unrestricted authority to trade (sell or buy) the goods they manufactured or desired from all colonies. Whoever opposed this view were occupied, conquered and destroyed. For this Free Trade to flourish it was imperative that no one else manufacture the commodities that EICs manufactured, as then the competition would exist. So first they destroyed the domestic production of the goods that EICs manufactured. In India for example British destroyed the cloth manufacturers to sell their cloth.
However, the problem was that there are many European kingdoms who at the same wanted the same markets to sell their goods. These kingdoms organised themselves into 3 camps and divided the world in 1875 under the Concert of Nations (forerunner of the League of Nations and United Nations) into colonies and each traded with a group of colonies. If these colonies were not producing enough for each of these groups then they fought with each other to get the markets and resources.
When all these groups engaged in mutual fighting it was called World Wars. When individual members fought over few colonies then depending on who controlled media these wars are called “Saving Civilization” to “Saving Mankind” to “Protecting Freedom” to “Protecting Democracies” or “Pirate Wars”, to “Aggression” to “Robbery” to “Destruction of Civilization.” One can see the same sentiments at play today in the Levant War Zone and other theatres of war.
In the 20th century when almost all EIC colonies became independent countries and got rid of all the colonialists, the above groups lost their most valuable markets. These countries wanted to do their own thing, produce their own commodities and live their own lives. But then what would happen to the above group of nations who now produce more weapons, clothes, electronic equipment, and possess vast oil reserves. Who will buy all these? The question than arose was how to make these colonies buy the stuff they make?
So, in the year 1965 Club of Rome (top industrial houses, real owners of EICs) divided the world in 10 economic segments and gave unbridled authority to ruthlessly exploit Segment 9 (India belongs to this segment 9), a group of mineral (diamond, gold, uranium, life-saving medicinal plants, organic food and drinking water) oil and natural gas rich Southeast Asian nations consisting of one third of population of world under liberalization (liberalize domestic economy to globalize its owners) and privatization (privatize so that Free Trade can further control domestic economy via global owners) to a group of MNCs.
A detailed account of this transformation from the East India Companies to the Multi-National Companies of today is available in our East India Company Series.
Aren’t our economic experts, politicians, policy makers, bureaucrats aware about this history? If not, atleast shouldn’t these important policy matters also be given the same importance and debated in the parliament as well? What would happen if such matters start taking a centre stage in the parliamentary debates? Wouldn’t uncomfortable secrets be spilled out as has happened many a times before? The most important question to be asked is who gains most when such policies are passed with minimal or no debate and scrutiny at all? Starting from the Nirbhaya case, than the documentary of the same India’s Daughter, Lalit Modi case, JNU row, didn’t all this scandals perfectly coincided the parliament sessions and resulted in it’s dis-functioning? What does this pattern indicate?