In the course of a speech she gave at the Hindustan Times Leadership Summit on 21 November, Sonia Gandhi had set the cat among the reform pigeons. She claimed that the nationalization of banks pushed through by her mother-in-law in 1969 has saved India from the financial crisis gripping the world.
Gandhi’s statement was partly an exercise in politics. She was trying to take some steam out of the Left’s loud claims that it had saved India by blocking financial sector reforms. But part of it was perhaps also the result of deeper beliefs in the mess that markets create.
We now have a situation where the same Western banks that were pushing the Indian government to open the gates till recently are semi-nationalized. Maverick economist Willem Buiter now says that it is time for the entire Western financial system to be publicly owned.
But these are suggestions that come after a huge crisis. India is not in that position. We need to privatize banks, not nationalize them. We hope the November rhetoric is not used for faulty policy.