When the world economy is passing through its gravest crisis, the zeitgeist of our times is certainly greater State intervention and regulatory oversight over markets. Fiscal stimulus packages to boost demand are in place in most countries, including India. Bail-out packages are being fashioned to save big companies from demand destruction. Troubling questions surely arise when similar remedies are blindly extended to companies like Satyam Computer Services Ltd, which is poster boy of corporate misgovernance. Should the Indian government be at all involved in rescuing such a company with a Rs 2,000 crore bail-out package? To be sure, there are compulsions to save the India story from being tarnished. Similarly, there is realpolitik to ensure that Satyam’s 53,000 employees are not without work when national elections draw near.
But there is the big question: should the government be engaged in a more ‘hands-on’ stance on the economy? Although Prime Minister Manmohan Singh, for his part, has categorically stated that “hands-off” policies have been followed with regard to the economy, the track record of the UPA government has not been inspiring. In a bid to lower inflation, leading steel and cement producers were warned of harsh measures if they did not lower prices, which hark back to the earlier control raj. Private airline operators who had the temerity to lay off 1, 900 of their staff were ordered to take them back. India Inc was made to pledge not to hand out pink slips. State-owned banks were ordered to lower lending rates for businesses. And, of course, they are now being urged to provide a short-term loan to the scam-tainted Satyam.
Doesn’t all of this set a dangerous precedent for India Inc? In a market economy, companies rise and fall. Those that fail pass into the hands of a bigger company. Left to itself, this would have been the fate of Satyam as it would have come under a new management more committed to corporate governance. There is no warrant at all for a rescue act from the government.