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Opinion | Sobering counsel

Are Indian private companies also getting overly dependent on public support? That’s unclear, since many of them are merely asking the Centre to eliminate obstacles

India’s chief economic adviser K. Subramanian has some sobering, if curt, advice for private companies. He wants them to stand on their feet, and not ask for government bailouts when in distress. Asking for such support, he believes, amounts to socializing losses, while the same firms get to pocket profits when the going is good. In saying so, he has called upon the private sector to lead an investment revival to help the economy pick up pace.

The practice of socializing losses came under scrutiny at the height of the West’s Great Recession of 2008-09. The US had set up a $700 billion rescue fund to save large banks, some of them deemed “too big to fail". Such bailouts perversely reward poor risk management, thus setting up a moral hazard—since businesses would be less likely to watch their risks if they expect to be bailed out. Are Indian private companies also getting overly dependent on public support? That’s unclear, since many of them are merely asking the Centre to eliminate obstacles. So long as they seek reforms that let market forces operate freely, they should not be faulted. Asking for special sector-specific benefits, however, is quite another thing.

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