Despair: Even PSUs don’t invest in India


In his recent meeting with top businesspersons of India, Prime Minister Narendra Modi expressed consternation that they were not investing in the country. He said that “when I hear Indian companies are investing abroad and not in their own country, I am really disappointed…” It turns out that not just the captains of industry are overlooking India; the companies directly controlled by the government, public sector undertakings (PSUs), are also not interested in the country. This is evident from the sharp decline in PSUs’ capital expenditure in 2014-15, during most of which Modi was in office.

According to a news report in Business Standard (September 21), the capex by 36 listed PSUs, after increasing 27.8 per cent from Rs 1.32 lakh crore in 2012-13 to Rs 1.69 lakh crore in 2013-14, declined 23.5 per cent to Rs 1.29 lakh crore in the year ended March 31, 2015.

“With a collapse in private-sector investments over the past few years, the government had hoped to kick-start an investment cycle by getting cash-rich PSUs, sitting on an estimated cash reserve of Rs 2 lakh crore, to step up capital investments,” said the report.

In Union Budget 2015-16, Finance Minister Arun Jaitley expressed his faith in the catalytic efficacy of the public sector: “There is a pressing need to increase public investment… The capex of the public sector units is expected to be Rs 317,889 crore…” Chief Economic Advisor Arvind Subramanian has also said similar things in the past.

The PSU capex has to rise almost 150 per cent to meet the Budgetary estimate—a fantastic expectation. Especially against the backdrop of PSUs’ lack of interest in domestic investment.

The fault, however, does not lie in PSUs but with the people controlling them—politicians. Government functionaries may find it odd and annoying that state-run companies are not investing and helping revive the investment cycle, but it is wise on the part of PSU chiefs not to put in money if the business climate is not conducive. For if it is not conducive for the private sector, it can’t be for PSUs.

This is not to say that nothing has been done to improve the ease of doing business in India by the Modi regime. A recent World Bank report, ranking states on the ease of doing business, talks about the measures taken by the government. Prepared in association with the Department of Industrial Policy & Promotion, the report says, “Many reforms have been implemented only very recently—between March and June 2015—so the private sector might not be aware of those. We urge states to undertake a detailed communication campaign to ensure businesses are aware of the improvement in the regulatory environment.”

Can it be true? A government which is campaigning all the time some scheme or the other failing to communicate the important changes it has been able to accomplish? Or is it a case of the delivery, incremental change, falling short of promises?

Whatever may be the case, the result is that not many are interested in investing in India.