Letter to BS: Pro-capital economy which balances public sector is essential

The article by TCA Srinivasa Raghavan “Modi ji abki baar suit boot ki Sarkar” (May 31) is excellent for emphasising two fundamental economic principles that pro-capital does not mean pro-capitalist and also that private capital uses capital more efficiently. He has rightly underlined that "all policies — tax, imports, interest rates and exchange rates — must be made private sector friendly".

However, he has made two conceptual mistakes. First, if all these policies are private sector friendly, they will also be public sector friendly. For instance, if the anti-profit apparatus in the GST law is abolished, which is a must, then both the private sector and the public sector companies will benefit. And the welfare provision in the customs law and the GST law must be thrown into the nearest dustbin. The capitalist principle of making profit by the most efficient must be admitted if the economy has to progress and compete with other capitalist countries. That will benefit both the private and the public sector.

Second, the author has gone completely wrong when he calls the public sector an abhishaap. He says that the public sector must go. This indiscriminate statement suffers from the fallacy of reductio ad absurdum. Even a correct principle when pushed to the extreme becomes absurd. Surely the public sector must be reduced whenever it becomes a fiscal and administrative burden like Air India. But there are very many efficient public sector firms called Navratna and good banks like the State Bank of India that cannot be privatised just for the sake of serving a theory. One has to be discriminate and not indiscriminate. The competition between private and public sector is better than abolishing public sector altogether. The author is therefore both right and wrong. But it is a brilliantly written article that sets us thinking hard.

Sukumar Mukhopadhyay, via email

TCA Srinivasa Raghavan responds:

Sir, as you well know, the public sector is a curse not for reasons of economics but because it has become a vehicle for political corruption and fund raising. It must go from everything except the social sector.

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