The Indian government has put the brakes on all sales of stakes in state-owned companies, effectively ending its privatization program.
Business and political analysts attribute this change to opposition from political allies in the ruling Congress Party’s 19-member coalition, as well as workers and unions upset at the likely loss of jobs if state assets continued to be sold off.
After gaining independence from Great Britain in 1947, India embarked on an economic self-sufficiency plan that relied heavily on government investment in the nation’s economy. Eventually, everything from hotels and bakeries to auto-making and software was state-run.
In the 1990s however, successive governments began to sell shares in industries as part of a package of economic reforms. According to the New York Times, “The funds raised were expected to finance a social-equity agenda by helping build roads, power projects, schools and hospitals, and by providing jobs in poor rural regions.”
However, the inability of governments to institute necessary political reforms stalled economic advancement. So, confused and confusing labour laws continued to exist despite advances in other areas of society and the economy. Repeated attempts by governments to push increased privatization met with increasing resistance from key political allies and labour unions.
Lately, the Congress Party has faced problems on three fronts. A key member of the government coalition threatened to pull out over the planned sale of stakes in a state-run power company. The government hoped to raise about $567 million by selling 10 per cent of it shares in the company. The government also planned to sell some of its shares in one of the country’s largest aluminium manufacturers. The government would have retained majority control in both companies if the sales went through. However, the threat of increased job action by thousands of workers at both companies convinced the government to pull back and end the privatization of its holdings, at least for now.