The Indian government announced a series of reforms last Friday abolishing rules on foreign entrants into India, a new privatisation programme and reducing fuel subsidies. Mint newspaper said India " has woken up from deep slumber". Even the Times of India welcomed the move - "The gainers should vastly outnumber the losers." It is great to see a move towards increased openness and freedom being welcomed. The steps are not a huge move, but they are a step in the right direction - foreign companies can now invest in multi-brand retail (allowing companies like Walmart and Tesco to enter India), and in aviation, a move which may help Kingfisher airlines and Air India from their current financial difficulties. 4 more indian companies are to have government stakes in them sold off, or "disinvested" as the Indians like to call it. And the subsidy on diesel is to be reduced, increasing prices by around 14%, and saving the government huge amounts of money, but still only a small dent in the enormous $34bn annual cost of fuel subsidies.
Subsidizing diesel while the rest of world is trying to go in the opposite direction for environmental reasons, is surely crazy, especially while also spending money reducing greenhouse gas emissions. $34bn is also a staggering amount of money to spend compared to its spending on health and education - $6bn and $11bn per annum respectively.
Not everyone welcomed it, though. Speaking about the diesel price rise, "This is a very cruel blow" said the Communist Party of India (Marxist). The BJP opposition party, supposedly less statist than Congress, opposed the liberalising moves as well, saying "We have always been against Foreign Direct Investment and are [against it] this time as well." Others claimed it would harm local small businesses.
In opening markets to competition like this, everyone agrees that consumers will benefit - if they didn't, they won't take advantage of the new choice, and the market will stay as before. Some people however, see the local businesses losing out, and indeed some might. Actually, lots of local businesses and entrepreneurs will benefit. Any new successful business model entering the market, is rapidly copied, no more so than in India. I look forward to seeing companies like Future Group, who own Big Bazaar, copying innovations brought to India by Tesco.
As far the disinvestment programme goes, there is quite a long way to go. According to the OECD there are 576 Central Government Owned Enterprises (including 25 govt banks, 217 Central Government Companies, and 12 Central Govt Co-operatives) and 1042 State Owned organisations, making a total of 1618 government owned companies in india. At this rate, it will take 300 years for India to have a fully private sector economy and that's not counting the usual state owned industries like health and education.
In conclusion, it's a move to be welcomed, but not as bold everyone seems to suggest. A bold move would be to abolish subsidies totally, allow foreign companies to invest in any industry, and privatise every single state owned company. Just think what you could do with the money - kick starting some kind of welfare insurance fund for instance? So well done, but no cigar.
Subsidizing diesel while the rest of world is trying to go in the opposite direction for environmental reasons, is surely crazy, especially while also spending money reducing greenhouse gas emissions. $34bn is also a staggering amount of money to spend compared to its spending on health and education - $6bn and $11bn per annum respectively.
Not everyone welcomed it, though. Speaking about the diesel price rise, "This is a very cruel blow" said the Communist Party of India (Marxist). The BJP opposition party, supposedly less statist than Congress, opposed the liberalising moves as well, saying "We have always been against Foreign Direct Investment and are [against it] this time as well." Others claimed it would harm local small businesses.
In opening markets to competition like this, everyone agrees that consumers will benefit - if they didn't, they won't take advantage of the new choice, and the market will stay as before. Some people however, see the local businesses losing out, and indeed some might. Actually, lots of local businesses and entrepreneurs will benefit. Any new successful business model entering the market, is rapidly copied, no more so than in India. I look forward to seeing companies like Future Group, who own Big Bazaar, copying innovations brought to India by Tesco.
As far the disinvestment programme goes, there is quite a long way to go. According to the OECD there are 576 Central Government Owned Enterprises (including 25 govt banks, 217 Central Government Companies, and 12 Central Govt Co-operatives) and 1042 State Owned organisations, making a total of 1618 government owned companies in india. At this rate, it will take 300 years for India to have a fully private sector economy and that's not counting the usual state owned industries like health and education.
In conclusion, it's a move to be welcomed, but not as bold everyone seems to suggest. A bold move would be to abolish subsidies totally, allow foreign companies to invest in any industry, and privatise every single state owned company. Just think what you could do with the money - kick starting some kind of welfare insurance fund for instance? So well done, but no cigar.
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