India’s growth is inextricably linked to its PSU’s health. From the standpoint of a developing country like India, the sector shoulders a huge responsibility to achieve the goal of a sustainable economic growth. During recession when several MNCs, including foreign ones, posted slow growth or losses, India could manage to swim past because of many PSEs, which have been a stabilising factor and a major wealth creator for their stakeholders and the nation.
From Independence to modern economic reforms, Indian PSEs have witnessed healthy balance sheets. With rising competition, they have carried out several operational reforms and have expanded their presence globally. Earlier, there were only a few CPSEs and their range of activities was limited. Over the years, they have not only grown in numbers but have also entered areas like engineering, steel, textiles, pharmaceuticals, and petro-chemicals, to name some.
Even in adverse economic situation, there are a few sectors in India which will only grow. A report ‘Global economic recession and its impact on Indian economy’ by Dr. B Shekhar states that the food processing industry in India was seeing growth even as the world was facing economic recession.
According to the Ministry of Food Processing Industry, the retail food sector in India is likely to grow from around USD 70 billion in 2008 to USD 150 billion by 2025.
Railways will register growth owing to poor output of the aviation sector. People will prefer travelling by trains to aircraft. PSU banks too will gain confidence due to job safety and security as against job cuts in the private sector.
It is precisely this confidence in the public sector that IPOs floated by prominent PSUs have attracted the Indian investor a great deal, and at times, have performed better than the private sector IPOs.
According to a report on Investor’s preference on IPOs in India, out of 13 public sector undertaking IPOs that came between 2004 and June 2009, 12 were trading above their issue prices. On the other hand, out of 265 private sector IPOs during the same period, 189 were trading below their issue prices.
PSUs hold the key to India’s future. But, are we really doing enough in terms of internal growth that will definitely impact the future and convert into tangle growth? People management is one aspect where people believe the private sector is the king.
Global engagement levels had been falling consistently since 2007, reaching just two-thirds (65 per cent) in 2011, according to a Hay Group report. For India, the public sector performance levels are too grim to mention alongside their global counterparts.
Reforms are the need of the hour, especially those which play a direct role in India’s development. It is also important for any system to respond to the changing pace of expectations of its all stakeholders in order to be effective.
The 2010 Civil Services Survey by the Government of India states that improved performance of civil services is imperative if India has to take its rightful place as a global power.
“Wide ranging reforms are necessary to transform the Indian civil service into one which epitomises best practices, is committed to continuous improvements and exemplifies contemporary management techniques (Tenth report of the Second Administrative Reforms Commission on Refurbishing of Personnel Administration)”. The private sector might be cutting back government’s involvement in certain areas, but the role of government is essential in maintaining public order, justice and law, human development through access to good quality education and health care, infrastructure and sustainable natural resource development and social security. Thus, for an efficient system, it is important to focus on understanding the needs and concerns of the people. It is time to invest in the soft aspect more. Some key concerns of civil servants that came to light in the survey were postings and transfers, performance appraisal, opportunities for deputation, political interference and timely promotions rank. Eighty two percent of the respondents (officers) supported post-selection counselling enabling the candidates to make proper choice of services.
Retention of civil servants emerged as a factor as important as recruitment. This was against the backdrop that over the last few years, a good number of civil servants, including IAS officers, left their jobs to join the private sector. As many as 34 per cent of respondents indicated that they had considered leaving the service at some point and 44 per cent attributed it to better salary opportunities outside. Lack of recognition and inability to contribute meaningfully at work emerged as the other top reasons. Red tape mars efficiency of public departments and often stunts growth. There are plenty of examples of successful organisations that started as state-owned enterprises like Rolls Royce and Renault and British Aerospace. They are known for their efficient performance. Both Air India and Singapore Airlines are state owned, yet the latter is a profitable and a successful organisation. The real difference lies in the management style, decisions made by the leadership, and the way one serves one’s customers.
People take the functioning of a public department with a pinch of salt today. The value generated by a government department compared to a private organisation is either less or absent for the same effort.
The public health care and education in India, two basic demands of over a billion population, is in disorder. The irony is that on the one hand, there are millions of unemployed or underemployed people in India, and on the other hand there are thousands of vacant posts at various levels in government hospitals and educational institutions. Indian public sector banks alone would fill nearly 63,200 vacant posts by March 2013.
As the state education machinery is inept and suboptimal, an average middle class is forced to compete for far less private institution seats, which at times, means huge capitation fee.
It is impractical to see mushrooming private institutions as the answer to India’s huge demand for skills and education. Thus, empowering the government system is the only solution to meet the needs of a growing economy and to promote social equality. The quality of elementary education is a huge problem coupled with teacher absenteeism, lack of trained faculty and poor pedagogy, especially in rural areas.
China has increased its GER (Gross Enrolment Ratio) in higher education from 10 per cent in 1998 to 21 per cent in 2005. India, in its Eleventh Five Year Plan, aimed at increasing the GER to 15 per cent by the end of the Plan and reach 21 per cent by the end of the Twelfth Plan.
Statistics and figures speak aloud about the poor facilities at state-run hospitals. Despite huge sums spent on basic health care, nothing great has been achieved except the successful polio eradication drive. The government has to ensure clean drinking water, sanitation, nutritious diet and hygiene, for a comprehensive health reform. The Eleventh Plan announced public health spending would be raised to at least two per cent of the GDP.
Improvement and innovation in the current policies are imperative. While in business, innovation is often related to commercial success; it is different when viewed in the public sector’s context. Innovation here must mean improvement and not just change. “Whereas ongoing change is a common feature to any organisation (replacement, expansion, etc.), innovation must bring a certain novelty and a substantial improvement…” says Hugo Thenint, in a report on the innovation in public sector.
Thenint also says, in Europe – whose public services account for between 40 per cent and 55 per cent of GDP – public services could even become a comparative advantage for its competitiveness by creating innovation-conducive environments.
However, this intangible nature of innovation in the public sector often results in a vague perception of government objectives. Also, these policies involve a greater risk or a sense of responsibility as the actions impact the society overall. Thus, the high risk factor often leads to slow decision-making in the public sector as compared to the private sector. But the slow ‘responsible’ pace at times gives way to corruption. Public sector departments have been lambasted from all quarters for this social menace, eating out efficiency and fairness from the system.
In the CPIA transparency, accountability, and corruption in the public sector rating (1=low, 6=high), India scored 3.5. The three main dimensions assessed were the accountability of the executive to oversight institutions and of public employees for their performance, access of civil society to information on public affairs, and state capture by narrow vested interests.
For India, no reform can be more meaning at the moment than self-reform. There is a need for resurgent India, where every public servant bears a sense of responsibility and accountability. We are good people and it is important we understand what is good, can always be made better.
