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HMT Watches, the once iconic produce of the nation, has shutdown its factories. It was running losses for a while. The government run business had trouble keeping up with the times and nimble competitors. Many employees were reportedly not paid salaries for a while and have been ‘forced’ to voluntarily retire. Its not clear what steps have been taken to retrain them with employable skills, help them get other jobs, and support their families during a difficult period.

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Not surprisingly, there are many other ticking bombs in India like HMT. When incapable hands (read government) run businesses under the pretext of social welfare, massive losses of public money, unnecessary job losses and social disruption are inevitable. Government has a role to play, but it is not running businesses, especially now when the private sector is miles ahead on business ingenuity. Our post-independence experiment with large scale government owned & run enterprises has largely failed. Its time the government admits to failure and takes corrective measures to wind down such loss making businesses, retrain & rehabilitate displaced employees.

Chakravyuha. Thats the label given to the situation by Government’s own Chief Economic Advisor in the Economic Survey 2015-16.  Like in Mahabharatha, a big bunch of public sector enterprises have entered businesses which they are unable to exit, with seriously adverse consequences. The survey points out the combination of fiscal, economic & political costs of this chakravyuha situation is likely to be enormous.

The big culprits are the public sector enterprises engaged in the businesses of fertilizers, civil aviation, banking, discoms & other Central PSEs, with accumulated losses running to thousands of crores of public money. These employ thousands of workers who face a bleak future because the companies are ticking time bombs which can go the HMT way. Many of these companies survive on government subsidies which certainly can be put to better use.

The survey recommends ways to tackle the problem.

But does the government have the capability and courage to diffuse the bomb?

Economic Survey 2015-16

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