The need to privatize

Prime Minister Narendra Modi seems to have given up on the privatization agenda. That is unfortunate, for strategic rather than ideological reasons


Air India earned a small operating profit in the fiscal year ended March. Prime Minister Narendra Modi seemed impressed enough to mention this fact in his Independence Day speech. The operating profit flatters to deceive. The airline still ended the year with a net loss. It also has a mountain of accumulated losses. Then there are the accumulated losses of other public sector companies—in excess of Rs.1 trillion, according to the last numbers from the national auditor.

Modi seems to have given up on the privatization agenda. That is unfortunate, for strategic rather than ideological reasons. There are two reasons why these failed public sector companies need to be sold or shut down. First, the money thus released could be used to fund new, sorely needed public investment. Second, the centre can also use the money to pay states the compensation they have been promised as part of the deal to shift to the goods and services tax.