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Disinvestment Juggernaut Part II

Ashok Kumar writes on ?disinvestment? as being the ?final frontier? that could further trigger the ongoing economic boom.

india Updated: Nov 07, 2006 17:45 IST

Last week, I began a discussion on how the economic reforms juggernaut has rolled on and turned India into a potential economic powerhouse. I had stressed on ‘disinvestment’ being the ‘final frontier’ that could further trigger the ongoing economic boom. So where do the stumbling blocks lie?

The leftists put forth their argument against disinvestment by stating that there is no need to sell the ‘family silver’, to fund the socialist objectives of this government. They argue that India’s Tax to GDP ratio is relatively low. Of course, they conveniently forget the fact that there is no semblance of social security in India and tax payers have only their own savings to depend upon at the end of their earning lives.

It is now clear, which segment of his coalition partners, Finance Minister P Chidambaram was catering to, when he mooted the draconican E-E-T principle of taxation whereby, hitherto holy cows like the PPF and others like it could also be taxed on withdrawal.

The next argument revolves around alternative avenues of taxing the Indian business, professional and middle-class. If a high rate of income-tax, service-tax and a host of other taxes, not to speak of the seemingly senseless Fringe Benefit-Tax is not enough, what is ? What other tax can be imposed? This argument is self-defeating and will only further strengthen the thriving parallel cash economy.

One area where the leftists have been making the right noises though has been on taxing the affluent agricultural class. Perhaps, they would do well to focus some of their boundless energies there instead of expending them on street protests and strikes that drain national productivity and wealth.

So does all this mean, that the disinvestment programme in India will be shelved ? Not at all. Having taken a complete U-turn in the early 1990’s and having traversed past the various roadblocks, historical evidence suggests that the present halt to disinvestment too be finally looked at as nothing more than a hiccup. With the passage of time, parties with common economic ideologies will share the Government platform and adhere to the basic tenet that the ‘Government has no business to be in business’.

For those who believe this will inevitably happen and are willing to play out the waiting game, can there be any more compelling investments than in some of the state PSU’s which are still selling for a song even as the Indian bourses reverberate to bull-tunes ? Food for thought!


(Ashok Kumar heads Lotus Knowlwealth in Mumbai)

First Published: Nov 07, 2006 17:45 IST