India has always wanted to overtake China. In order to boost the economy in the past few years, India began to privatize state-owned enterprises, and although it has encountered twists and turns, it is still continuing to advance. Can the sale of state-owned enterprises really make India rise?
In recent years, India has attracted much attention in the international community, like a rising "new star", with rapid and stable economic development, surpassing United Kingdom to become the world's fifth largest economy, and the future development potential is considerable. Of course, under the surface of rapid development, India's debt is also rising year by year, in order to stabilize the economy, Modi has reached out to state-owned enterprises, through the privatization of state-owned enterprises in exchange for cash flow, to improve the economic level. Will this path work?
Debt-ridden, India sells state-owned enterprises to raise funds
In recent years, India's economic development has been remarkable, especially when it surpassed the former suzerain, United Kingdom, to become the world's fifth largest country in terms of GDP, and India's economy was pinned on high hopes, and the United States and the West said that it was the most alternative to China's economy.
But I know my own situation best, while India's economy is developing rapidly, it is inevitable that the proportion of debt will increase year by year.
Especially during the epidemic in previous years, the global economy was devastated, and the scale of India's debt continued to expand. As a result, some institutions also consider India to be a "false prosperity."
Public data shows that in 2019, India's debt was 50% of GDP, and by fiscal 2021, India's debt has exceeded 91% of GDP, the highest since 1980.
Debt is rising sharply at the same time as the economy is booming, and India is considered to be borrowing to boost its economy, which is not a healthy and sustainable state of development.
In order to alleviate the huge debt pressure and enhance the international community's confidence in India's economic development, the Modi government has hit the idea of state-owned enterprises, hoping to raise funds and reduce the scale of debt by selling part of the shares of state-owned enterprises.
A 10 percent stake in the country's largest insurer, India Life Insurance, was put up for auction. The business ranks first among 24 insurance companies in India, accounting for nearly 70% of the country's market.
In addition, some stakes in some India airlines will also be transferred to the Tata Group, and shares in Bharat Petroleum Company, India's second-largest oil refiner, will also be sold for the purpose of privatizing state-owned enterprises.
Some India economists believe that accelerating the pace of capital cuts for privatization of state-owned enterprises is the "only way" to help the government reduce debt pressure. The Modi government did the same, but now it doesn't seem like the right decision.
The Modi government's plan to sell stakes in state-owned enterprises comes at the height of the global pandemic, when the global air transport market is bleak and stakes in state-owned airlines are not selling at a good price.
In the past few years since the pandemic, global exchanges have resumed rapidly, and the demand for air transport has exploded. The share price of the airline to be sold has increased several times, and the price set during the epidemic is undoubtedly a loss-making transaction.
The same is true for oil companies. When the stake was originally planned, the Russian-Ukrainian war had not yet broken out, and then the Russian-Ukrainian war broke out, and the European Union sanctioned Russia for not importing oil, and India became the largest entrepot trader of Russian oil.
While importing Russia crude oil at a low price and selling it to EU countries at a higher price, India oil companies make high profits from it, and the overall value of the company is also rising.
This has made the Modi government a little embarrassed, and when it decided to sell its shares, it was born at the wrong time, even if it was a year or two later, and the price of the shares could go up even a year or two.
Now Modi is a little want to change his mind, after all, no matter how you look at this deal, it is the government's loss, if it continues to be implemented, there is no doubt that the India government will suffer a big loss, and Modi is also to blame.
When he became prime minister, he may not have much to do, but when he leaves office in the future, he may be turned out one day, and prison is not a joke.
Of course, in the process of selling shares in state-owned enterprises to private companies, Indians also broke out in mass protests against the privatization of state-owned enterprises.
The privatization of state-owned enterprises, the Indian people do not buy it
It is said that India are submissive, and even the country's independence was exchanged for sit-in demonstrations such as "non-violent non-cooperation". But now India's young people have apparently woken up and taken to the streets to protest and go on strike when they encounter problems.
Workers in several India states went on strike at the call of 10 trade unions to protest the Modi government's policy of privatizing state-owned enterprises.
In response to the strike, trade unions said that "at least 25 million people participated", including more than 1.5 million workers in the energy sector, as well as airlines and road transport companies. In almost all industries involved in the privatization of state-owned enterprises, a large number of workers participated.
Of course, the India government does not agree with the statement of trade union organizations, but only says that the number of people participating in the strike is "tens of thousands", and there has never been an exact statement as to how many tens of thousands of these "tens of thousands" are.
The protest strike inevitably led to violent clashes. Some strikers took to the streets, throwing stones at parked vehicles on the side of the road, besieging and beating visitors. At a railway station in West Bengal, police even found four dirt bombs.
According to India media, 60 student organizations were also involved at the time of the strike. This means that the new blood of India society is dissatisfied with the privatization of state-owned enterprises.
The main reason why students participated in this event is that their best destination after graduation is to enter various state-owned enterprises in India, such as oil and banks, which are very popular because of good benefits and stable jobs.
Many students worry that once these companies become private, their benefits will deteriorate, and that private companies may find reasons to lay off employees just to hire new ones with lower wages.
In India, state-owned enterprises are divided into different levels such as "treasure level" and "treasure level", and these two highest levels of state-owned enterprises are the most desirable employment goals for India university students.
It is worth noting that this kind of rating is not a corporate rating issued by college students themselves, nor is it made by private institutions, but after comprehensive consideration by the India government, it can only be assigned to the corresponding level after approval, which is very authoritative.
No matter which country it is, the reform of state-owned enterprises has always been a "big and difficult" problem, which affects the whole body. In India, the same problem exists.
Although SOEs account for only about 22% of GDP, many are already losing money, and privatization reforms are necessary to revive them.
However, it is obviously not very attractive to sell only the equity of loss-making companies, and only by selling the equity of profitable state-owned enterprises and loss-making state-owned enterprises can it be more attractive to private capital.
The Modi government packaged and sold these assets, but this undoubtedly touched the interests of India workers and university students, which led to frequent protest strikes.
How to balance the relationship between the two is a difficult problem facing the Modi government, and if this incident is handled well, it will undoubtedly be of great benefit to India's economic development.
Will India become the second largest economy in the world?
The top level of the India government has high hopes for the privatization of state-owned enterprises and is full of confidence in the India economy after privatization, and Patra, deputy governor of the Central Bank of India, said with confidence that in the next 10 years, the annual growth rate of India's economy will exceed 10%.
India is one of the few developing economies in the world that has maintained rapid growth, and if the outlook of the deputy governor of the central bank becomes a reality, India will become the world's second largest economy by 2032.
While many experts are not optimistic about the future of the economy and remain skeptical about the 10% annual growth rate of the India economy, some experts believe that if the privatization of state-owned enterprises is successfully completed, India's economic development will have a promising future.
In the past few decades, India has developed from a backward agricultural country to a new industrial market, and if it were not for the great achievements of China's economic development, India's economic development would undoubtedly become the brightest star in the world.
Moreover, in recent years, India, with its unique economic position, has seized the dividends brought by the Russian-Ukrainian war, made a lot of money in energy trading, and the entire India market has also shown a thriving scene.
In terms of attracting foreign investment, India is also doing its best, although some foreign enterprises find various reasons to impose high penalties, and are put on the hat of "India makes money India spends, and wants to take it home", but there are still many foreign investors who are optimistic about the India market.
In addition to settling in Southeast Asian countries, India has also become an important choice for these enterprises, after all, India has a huge demographic dividend at this stage.
According to the Deputy Governor of the Central Bank, only 51% of India's population is currently employable, and the future of female labor force participation will be a key focus, and the service and manufacturing industries will absorb more India women.
Internally, through the privatization of state-owned enterprises, the economy has been revitalized, the demographic dividend has been further released, and the external efforts to attract investment and foreign capital have been integrated into India, which has undoubtedly boosted the India economy very much.
At present, India's exports of goods and services have reached $768 billion, accounting for about 2.4% of the world's total imports and exports. With the further improvement of India's industrial level, this proportion is bound to be higher.
If India can complete the industrial technological transformation, it will have a greater role in promoting economic development, perhaps only 8 years, to develop into the world's second largest economy.
The IMF is also full of confidence in India's economic development, and has significantly raised its expectations for India's market growth, predicting that its contribution to global economic growth will exceed 16%, which is already the world's second largest share.
As long as India does not become a demon, its future development is absolutely promising, and it may really develop into the world's second largest economy in a few years. But when the time comes, it's time for the world's largest economy to change positions, and there is no other country other than China that is more suited to this position.
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