A Dalit Shareholding Trust?

MICROVIEW

The biggest question that confronts Indian policymakers and politicians is this: how does one hitch the wheels of socio-economic progress with those of growth and reforms?

It's easy to run an India Shining campaign before an election and try to sell the feel-good factor. But as several commentators have pointed out, India is not necessarily shining all that brightly for many Indians. Among them are the rural poor and socio-economically marginalised Dalits.

If you were to seek policy prescriptions from right-wing economists, they will ask you to focus on growth and reforms, and let prosperity trickle down.

For the Left, the answer will be different. They will emphasise a direct attack on poverty. Growth will take care of itself when increasing purchasing power at the bottom of the pyramid starts driving the economy. In other words, trickle up.

There is nothing intrinsically wrong with either approach, but the flaws of both are clear. When the focus is purely on growth, the resulting inequality accentuates feelings of deprivation among the have-nots even if they become have-somethings.

If one were to concentrate instead on redistributive justice, growth clearly slows down as entrepreneurs find their rewards drying up. I believe that the big mistake is in thinking either/or. There is no reason why one shouldn't attempt both "" growth with socio-economic upliftment.

How can one eat the cake and have it grow, too? Any good policy ought to achieve the following objectives: it must promote growth by unleashing entrepreneurship, it must help create wealth faster, it must create a sense of participation among all classes of people, and especially those who feel left out, and it must be consistent with the idea of human self-respect and dignity. In other words, it must help the weak and poor help themselves rather than make them permanently dependent on the dole.

Ideally, governments should try to weave these objectives into all major initiatives, but the question is how. Let's look at one such initiative "" disinvestment "" and how it can be reworked to achieve the above objectives.

In a couple of months, the government will have sold a major stake in ONGC and GAIL to the general public. I think it's being singularly unambitious. Any government that plans to raise something like Rs 10,000-15,000 crore through disinvestment ought to be aiming for something more than merely a reduction in the fiscal deficit, important though that may be in itself.

In fact, it would be best if disinvestment receipts are never used for this purpose. There have been suggestions in the past that money from disinvestment should be used to pay down the national debt, fund education, etc. But all these ideas suffer from a fatal flaw "" they leave the money very much under the control of politicians. There is no guarantee that they will keep their word.

I think that the best way to deal with disinvestment proceeds is to take the money and PSUs completely out of the government's hands and directly fund social projects. One idea: what if the government's entire stake in ONGC were to be transferred to, say, a Dalit Shareholding Trust at par?

At one stroke, the government would have disinvested a jumbo wealth-creator and transferred real resources to those who need it. To make sure that the resources are wisely used, the government could still retain a golden share that can be used during times of national crisis or if there is total mismanagement. But otherwise, the trust should be left free to grow ONGC anyway it deems fit.

Such a trust would obviously have to be structured well. It should be headed by Dalits of unimpeachable credentials and probity "" former president K R Narayanan's name comes to mind, not Mayawati.

The objective of the trust should be to invest incomes (or profits from future dilution of shareholdings) in education and health services for the underclass. More importantly, it should be given the explicit objective of raising the market value of ONGC over time by enabling sensible business decisions in a deregulated environment.

To be sure, it is always possible that the men running the show will meddle with commercial decisions and mess things up. But it is more than likely that Dalits will actually use this financial empowerment to lift themselves out of poverty.

Not only that, they will be less suspicious of reforms and private enterprise if they can see the direct benefits themselves. Why shouldn't the government not use the money itself to educate and help the underclass? Can be done, but I am not sure it will mean the same thing.

First, it is far better for Dalits to invest in their own upliftment through direct control of financial resources rather than through the intervention of the state. And second, how can one trust the government to help the poor when it has manifestly failed to do so through five decades of independence? It is time to give new ideas a try.

rjagann@business-standard.com