JAIPUR – An Indian government plan to raise US$80 billion by leasing state infrastructure to private companies has earned both plaudits and brickbats as dueling imperatives of the need to stimulate new growth and protect national sovereignty go head-to-head.
The scheme, known as the National Monetization Pipeline (NMP), was launched last month by Finance and Corporate Affairs Minister Nirmala Sitharaman and aims to create new jobs and generate badly needed state revenues.
But opposition parties and some economists say the plan risks creating instead new private monopolies, similar to the situation in the erstwhile Soviet Union when billions of dollars of state assets ended up in the hands of mega-wealthy oligarchs after communism ended.
Under the NMP, core government assets such as roads, railways and utilities will be leased by the private sector over a four-year period. If all assets included in the scheme are rented the deals should generate $81 billion for state coffers.
Sitharaman said at the launch of the scheme, “The Asset Monetisation program has taken shape because of the vision of our Prime Minister [Narendra Modi] who has always believed in universal access to high-quality and affordable infrastructure to the common citizen of India.”
She said the scheme aimed to tap private sector investment in new infrastructure.
“This is necessary for creating employment opportunities, thereby enabling high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare.”
The top five sectors to be leased out include roads, representing 27% of the total estimated value, railways (25%), power (15%), and oil and gas pipelines (8%).
Opposition critics have predictably lashed out, with senior Congress leader Rahul Gandhi claiming, “The whole idea behind this exercise is to create a monopoly for three or four people.”
He said young people could not find jobs because small and medium industries have been destroyed by Modi’s policies, which he alleged aim at building two or three monopolies that owned everything in the country.
Gandhi said the monetization scheme, contrary to government claims, would not just be a gift of India’s assets to top tycoons, but would also ensure that young people will face a future of unemployment.
It’s a message that’s likely to resonate as the nation endures one of its worst periods of unemployment. The Center for Monitoring Indian Economy says unemployment this month was 9% in urban areas and 6.8% in rural areas.
Kaushik Basu, a professor of economics at Cornell University and a former chief economist of the World Bank, tweeted, “India’s asset monetization sounds good – a plan to unlock government assets by leasing them to pvt [private] players.
“But I fear it will backfire. India’s govt lacks institutions to prevent asset capture by a few big businesses. Recall what Russia’s oligarchs did bringing the economy to its knees.”
In another tweet, he said, “Defenders of monetization are right in saying govt assets are being leased, not sold (like renting a home). But when govt is close to the pvt buyers, the outcome is worse. It’s effectively selling at the price of renting. That’s how the Russian oligarchs stripped state assets.”
Jairam Ramesh, an economist and Indian National Congress politician, tweeted, “First came demonetization disaster, which former prime minister of India Dr Manmohan Singh rightly described as ‘organized loot and legalized plunder’ — invaluable public assets created over decades given away to a chosen few. This is legalized loot and organized plunder.”
Communist Party of India (Marxist) went a step further in declaring that Modi’s government has “officially announced the sale of India.”
“This is outright plunder of people’s wealth,” it said, arguing that selling assets cheaply when the markets are low benefits only crony corporates and promotes crony capitalism.
The government has defended the scheme as essential to restoring growth after a record collapse of the economy amid Covid lockdowns in 2020. “This is necessary for creating employment opportunities, thereby enabling high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare,” a government statement said.
Professor N R Bhanumurthy, an eminent economist and vice-chancellor at the Dr B R Ambedkar School of Economics University in Bengaluru, backed the scheme in an interview with rediff.com.
“I would say, this plan is basically to allow some of the government assets for rent, and surely not for sale,” he said. “This is for allowing the private sector to utilize the public assets.”