Modi unlikely to overhaul India’s state-owned giants

The bull statue greeting those who enter the Bombay Stock Exchange
Firms owned by India’s federal government account for 12% of the Bombay Stock Exchange’s market capitalization. Any moves to privatize them are unpopular (source: dpa)
  • The Modi government’s actions don’t match its slogans on state-owned firms
  • Selling government stakes in these companies is politically unpopular
  • They can also bring in money to bridge budget deficits
  • Instead of privatizing, PM Modi will squeeze them for cash

Indian Prime Minister Narendra Modi is implementing an ambitious plan to reform the country’s central public sector enterprises (CPSEs) – companies owned by the federal government. However, rather than liberalizing the market and privatizing the firms, the initiative may end up consolidating the government’s hold over the economy. During the election campaign in the summer of 2014, Mr. Modi promised “minimum government, maximum governance” as his guiding philosophy for the economy. His oft-repeated mantra both before and after the election was that “the business of government is not business.” Yet many who expected big economic reforms, especially the privatization of many of the CPSEs, have been disappointed.

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