Marketing assets

Government in Business – The Hindu

India, like the Chinese and Singaporean governments, can earn much more from public investment

India, like the Chinese and Singaporean governments, can earn much more from public investment

The Government of Singapore Investment Corporation (GIC) invests globally in equities. He held shares worth around ₹1.09 crore lakh at the end of March 2022 in India alone. All over the world, GIC investments are around ₹55,000,000. GIC is the eighth largest wealth management fund in the world. Silver has doubled in real terms over the past 20 years. This money is also used by the government for public welfare. Another branch of the Singapore government, Temasek Holdings, has investments worth ₹22 lakh crore. Their investments overshadow some aspects of the Indian economy itself: Indian government budget expenditure for 2022-2023 stands at 39.45 lakh crore. Singapore government investment is several times greater.

China is doing the same. The Hefei municipal government invested $787 million to acquire a 17% stake in Nio’s core business and soon after exited with a profit of 5.5 times its investment. In 2017, Chinese state-owned enterprises had invested ₹67.5 lakh crore in foreign companies. This represents about 27% of India’s GDP.

Only divestment

Meanwhile, in India, we are divesting. The total market value of Indian government assets is only ₹13 lakh crore, far less than China or even Singapore. Foreign holdings through these companies are negligible. Navratna PSUs work well, but are sold out. Instead, can they invest overseas and increase their wealth like China is doing? In China, one company, the China National Petroleum Corporation, has assets of over $600 billion. There is no way to divest. Perhaps the Chinese government wants to use the economic clout of its PSUs for its global ambitions. As China increases its global influence, India is trading away one source of influence: its ability to invest abroad and create greater economic clout.

The prevailing ideology that government has nothing to do with business is used to justify divestment. The real reason is the growing public deficit. Some key corporate investors are waiting behind the scenes to take full control of India’s natural resources through these divestments. It’s like killing the goose that laid the eggs. For example, the total dividend earned by the Indian government from PSUs is ₹50,000 crore. If India learns from the Chinese and Singaporean governments, it can also earn much more from government investments. India uses a Western ideology on state-owned enterprises, but forgets that what the West preaches is for others and what it practices is in the national interest. The global list of the most asset-rich PSUs includes the United States, Israel, and European Union countries. But there is none from India.

India let the baggage of inefficient power supplies cloud its thinking. While the smallest and loss-making ones must be divested, the profitable ones can be reformed. The only problem in India is the archaic rules governing UAPs and political interference. There is excellent talent in PSUs. Other talents from the private sector can also be recruited. Salaries for key senior executives should be in line with global best practice, with real accountability. The success of companies and startups shows that there is an abundance of managerial talent, which must be harnessed in the national interest.

learning lessons

If we avoid the smokescreen of ideology, there are many reasons to learn from other countries, especially Singapore. The first is the national and public interest. The source of wealth has shifted from land to natural resources, to the industrial sector and now to the knowledge economy. Assets are largely in financial markets today. There is enough and more wealth to be made there, as do wealth funds, well-known international investors and some other governments around the world. If the Indian government invests like Singapore does, it will give them a lot more funds than divestment ever could. During this time, the property remains intact. A few caveats are in order. Singapore invests in long-term assets and does not take risky decisions. Another powerful reason is the management of public finances. India is increasing taxes every week, especially on diesel and gasoline. The only way to generate revenue seems to be through taxes. However, the markets, wealth management and dividends are not explored. If markets create wealth, why can’t government create it and use it to create prosperity for the public?

India is capable of doing this if we source talent from our financial markets rather than government alone. The example of the 1980s in telecommunications, the recent examples of Aadhaar and the current creation of a government platform called ONDC to increase the marketing power of ordinary kirana stores show how the talents of the private sector can be harnessed for the good public. There are well-known entrepreneurs and wealth managers in the stock markets. The government can surely use its talent for the greater public good.

Trilochan Sastry is Professor, IIM Bangalore