Rational Expectations: Rafale Deal and MeToo are big issues, but they are eclipsing bigger concerns

By: | Published: October 22, 2018 5:04 AM

HAL’s record is poor, 34% MPs face criminal charges, huge PSU wealth erosion & export-jobs potential being hit—but who cares?

hal, rafale deal, me tooThe fact that the debate is over why the public sector HAL was overlooked is unfortunate.

Those concerned with gender equality have reason to be pleased that the pressure brought upon the government by the #MeToo movement forced it to capitulate and ask MJ Akbar to resign as junior minister for external affairs; that he continues to retain his Rajya Sabha seat is unfortunate, but hopefully that too will get addressed sooner rather than later.

While the movement has been cathartic for women subjected to sexual abuse for decades—and a few more victories like Akbar will change gender equations, even if by not as much as hoped—the road ahead is a long one. But it goes way beyond #MeToo. If, as the government’s affidavit to the Supreme Court says, 36% of all legislators (MPs/MLAs) are facing criminal charges, and yet remain in office, India is far from getting it right since a lot of the cases include rape, kidnapping and murder—the BJP’s Unnao MLA has not been removed despite rape charges, for instance; the brazen threatening with a gun at south Delhi’s Hyatt last week by a BSP MLA’s brother, who is also an ex-MP’s son, is surely the result of this view that political power entitles you to anything?

Whether the Modi government insisted an Anil Ambani company get part of the Rafale offsets business remains mired in controversy—as also how much of the Rs 30,000 crore business it will get—but much less is said about the fact that, with defence procurement grinding to a near-halt, India’s armed forces are badly underequipped. The fact that the debate is over why the public sector HAL was overlooked is also unfortunate. For one, at 2.1 times over a decade, its poor sales growth does say something about its competence, no? Also, given there are very capable private sector players like L&T and Tata, the fact that the debate is only about HAL being left out means India’s pro-PSU attitude hasn’t changed.

As in gender relations or in decriminalising politics, there is more lip service than genuine commitment from all political parties. So, all swear by PSUs and won’t allow privatisation, but in terms of the PSUs’ market value, the loss in relative terms was Rs 6 lakh crore during the UPA decade and Rs 11 lakh crore during the NDA’s four-and-a-half years. When UPA came to power, the market cap of listed PSUs was 62% that of all sensex firms and this fell to 47.5% when it demitted office—had the share not fallen, listed PSUs would be worth Rs 602,181 crore more; the same method has been used to calculate the relative loss in market cap during the NDA period and for PSU banks.

The reason for this, economists told prime minister Modi in his initial interactions in 2014, lay in Article 12 of the Constitution that says PSUs are an “instrumentality of state” and so, like government ministries, have limited freedom to operate; most contracts have to, for instance, be tendered out and there is a big history of delay here since most losers regularly petition the courts. So, for instance, a Reliance could go ahead and hire the global best to drill its deep-sea KG Basin gas fields, but when ONGC tried to tie up with Brazil’s Petrobras and Norway’s Statoil which had deep-sea drilling experience, it was told it needed to float a tender even though the firms were both PSUs.

Fixing this, the PM was told, needed Parliament to amend the Constitution, but no such amendment has even been moved; and if it were, it is not clear that it will be passed. Apart from the fact that freeing PSUs would reduce the power the government has, the real issue here is that till the electorate see the loss in the relative valuation of PSUs as a national loss, there will be no pressure on the political class to change. Though it pales in comparison, the electorate, and the media, is more excited by the possibility of corruption in a Rafale deal, or a Bofors, but is hardly bothered about a Rs 7,000-8,000 crore annual cash loss in an Air India and a near wiping out of its value.

A Rahul Gandhi will address HAL’s employees to commiserate with their being dealt out of the Rafale contract, to show he is concerned about the fact that less jobs are being created in PSUs. Apart from the fact that no politician has tried to fix the problems PSUs face—that is why most PSUs have seen large contraction in employment over the decades—no one worries about the loss of millions of potential export jobs in, say, garments or shoes due to unfriendly government policies that, for instance, don’t allow factories to fire workers or the inefficient infrastructure that makes India’s exports uncompetitive.

While manufacturing jobs are slowing in India, between 2009 and 2016, manufacturing jobs as a share of the total rose from 14% to 17% in Vietnam—from 11% to 14% in Bangladesh between 2006 and 2016—thanks to their giant strides in exports. Textiles and apparel exports, the latest McKinsey report points out, will grow at double the rate over the next decade compared to that since 1995, but just five economies—Bangladesh, China, Indonesia, Turkey, and Vietnam—are responsible for 51% of global growth in exports of textiles and apparel in the past five years. Bangladesh has around 5,000 garment factories employing approximately 4 million people, or five percent of the country’s labour force.

The #MeToo movement is an important one, as are corruption or nepotism charges such as in the case of Bofors or a Rafale, but no mature nation gets as excited over the immediate without bothering about resolutions to the more deep-seated problems.

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