If you look at how much just Central PSUs (public sector units) own, rough calculations suggest 40-50% of GDP (gross domestic product) is locked up in their capital. They give you a return of around 2%. If these PSUs were in education and health, then a return of around 2% is understandable.

So we should reorganize or restructure this capital. We need government expenditure on infrastructure, health, education, environment, creating an IPR (intellectual property rights) regime, allowing for innovation and supporting start-up businesses in the private sector. For all of that we need resources and we have the resources. We just need to move it from there (PSUs) into these sectors. Therefore, there is a huge reason why disinvestments should be done.

Social sector needs government

When you are talking of a knowledge-based economy, we are not only talking about engineers and doctors or lawyers or management people, we are talking about basic sciences, we are talking about languages, humanities. Without those you cannot have a knowledge-based economy, you cannot have good research and development. So the government has to set up universities.

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Our private sector is neither resourceful nor enlightened to support universities. They may support private higher institutes of learning but certainly not the basic university structure. In 15-20 years, I don’t see it happening. And we can’t wait that long for India to become a knowledge-based economy, given our large army of young people who need to be trained. So it’s here the government has to step in.

Let’s talk about primary schools. For primary schools, the role of the private sector is limited in rural areas and small towns, because school education is something where you address the poorer communities. It’s like an infrastructure investment; it takes a long time before it starts showing up returns. You need at least one generation.

Where the private sector does put money is in big cities for elite schools. But for general education system, again the government has to play a role. Clearly, the government has to find resources for them. It is the moral responsibility of the government to provide primary health and primary education. These are the rights of citizens.

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Development for its own sake

One of the things about the UPA (United Progressive Alliance) government, the last one as well as this, is that one sees the focus on development for development’s sake, which I think is important. There has never been so much focus on actual development in the history of the country since Independence.

Things have to be logically and consistently argued. So if we can logically and consistently argue that we need education and health for every citizen, since it is their birthright, then it is the responsibility of the government to find the resources. And then, we cannot have the resources sitting in the public sector units.

Otherwise the disinvestment issue becomes a political battle. That is what I mean by public discourse. We are not following the whims and fancies of good and bad political leaders. That’s not the idea; we are a democracy, everybody has to be involved.

So, if we can make a case to ourselves that come what may we need these resources, then we will search for resources; disinvestment will become an option immediately. So, before getting into the disinvestment debate, let us convince ourselves. Education, health and infrastructure are essential for the country’s development. And that is not because you want to grow faster than China—it is because you have a duty towards your citizens.

As told to Sanjiv Shankaran

Shubhashis Gangopadhyay, managing trustee of the India Development Foundation, was economic adviser to the Union finance minister in 2008.