State-Capitalism is India’s best bet forward

By U D Choubey

When in 2008-09, the global GDP rate started declining, India managed the recession better than most countries because of its ‘mixed economy’. Indian public sector enterprises (PSEs) were the only corporates that reflected a positive growth of 3.7 per cent-plus against the negative growth of most state-owned enterprises (SOEs) the world over.

But even as India’s public sector was relatively comfortable, its bad loans to private entities resulted in the sluggishness in the economy. Investment by private corporates almost came to a halt. Even today, some sectors have not fully recovered, and job opportunities are yet to return to their pre-recession health. In this context, if capital is not kept under some control of the State — ‘State capitalism’, if you will — recession will recur and become a default state.

Let’s go to the afterparty

In the post-recession period, a number of governments across the world started consolidating their sovereign holding in the country’s capital. Decisions started to be made by legislative and senior executives. The decisions of the US Federal Reserve and the World Bank, for instance, are substantially influenced by the US Senate and senior executives in Washington.

India, too, adopted a proactive approach by unleashing reforms over the last two-three years. A large amount of capital, earlier in the hands of private companies as unaccounted money, came under sovereign control with the government’s demonetisation agenda. With the goods and services tax (GST) to be rolled out soon, there will be further consolidation.

A protectionist policy adopted by developed nations such as the US is on the rise again. Cross-country movement of labour is also facing serious obstacles. Meagre private investment during recession by all those who had capital in their hands has jolted the world economy as the latter prefer investing ‘at appropriate time later’. Low investment is a serious bottleneck in the way of…

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