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BW Businessworld

Modi’s Nehruvian PSU Policy

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What we are experiencing in the stock markets is no ordinary bull run. Bull runs are normally phases of high productivity, high growth, low inflation, high employment and positive sentiment. Barring the last, India is experiencing none of the above.

And yet — to quote analysts — we are in the midst of a “multi-year bull run”. On the back of some fierce investing by foreign institutional investors, the markets have already hit 27,354.99 on the Sensex and 8,180.2 on the Nifty. Now, imagine if all the ingredients of a bull run — growth, inflation, employment — begin to fall in place! For instance, retail investors who got singed in the last bust, have shunned the stock markets in this round. What if they return? Then, the primary market is yet to revive. What if it does? What if corporate earnings rebound? It is this scenario that is prompting analysts to predict an upward trend in the stock markets from here on.

But what could spook it all? World War III for sure. But despite a rampaging ISIS, that looks unlikely just yet. An oil shock is another. But despite the turmoil in the Middle East, crude is softening.

Closer home, a conflict with neighbours Pakistan or China would be the height of immaturity. At home, India’s inability to rev up its economy surely would be disastrous. But with one of the most decisive governments ever in power, that looks far-fetched.

In short, buckle up for The Mother Of All Bull Runs.

One of my most enthusiastic colleagues, senior assistant editor Shailesh Menon, put together this cover package at breakneck speed. Among other stories in this issue, read senior editor Joe C. Mathew’s account of how Asia’s three biggest economies — Japan, China and India — are re-evaluating their geo-economic, geo-strategic and geopolitical objectives, much to each other’s nervousness.

And now, to one of my pet themes: India’s PSUs. There’s a reason why NSE’s CPSE index has risen 30 per cent since the new government took charge. Sundry consultants, investment bankers and analysts have been salivating over a likely PSU sell-off bonanza. Now they are deciphering Modi government’s PSU policy, much to their disappointment. Unlike the Vajpayee-Shourie-Baijal combine which favoured the outright sale of PSUs, Modi is a believer in PSUs. As chief minister of Gujarat, he invested heavily in them. Gujarat now has the healthiest state PSUs. So, while there will be dilution of stake in PSUs, far from divestment or sale, PSUs will be strengthened. In its PSU and “Make-in-India” policies, Modi has adopted the Nehruvian model of self-dependence and self-reliance that the Indian National Congress dumped so dismissively more than 25 years ago. Special correspondent Neeraj Thakur has a story on why headless PSUs remain profitless. They need the government’s urgent attention.

(This story was published in BW | Businessworld Issue Dated 06-10-2014)