Standard & Poorآ’s urges India to privatise public sector

Vol 3, PW 22 (24 Nov 99) People & Policy

India needs to accelerate the privatisation of its public sector, according to the US credit agency Standard & Poors.

The widening gap between private sector prosperity and public sector impoverishment can only be tackled through large-scale privatisation, as well as fiscal, legal, and regulatory reform, said S&P in the 19th November issue of Credit Week, Despite impressive progress in recent years, successive governments have failed to address the weakness of public finances, even as they have liberalized the private sector. According to the report, poor education and health, along with challenges to India's identity from movements based on caste and religion, will continue to complicate governance in coming years.

The country needs both economic growth and better political management to alleviate its poor public finances and deep social problems. On a positive note, S&P predicts the present government is in a stronger position than past government to accelerate economic reform.

The report notes that despite the fractured nature of India's politics, the country will enjoy stability in coming years, after enduring six different governments in the past three years. The report notes public hostility to further elections and the enhanced strength of two southern regional parties, whose alliance with the BJP is based on a common opposition to the Congress party in both national and state politics.

Unlike its predecessor, the new coalition is less dependent on the whims of smaller partners, and its larger partners are generally in favour of deeper economic reforms. The report ends: A longer life expectancy should encourage the government to undertake difficult reforms.