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It Is Certainly The Business Of The Government To Earn More For Providing Better Facilities To Its People

PSEs and other state-owned entities can generate extra revenue, which can be reinvested in essential services

It Is Certainly The Business Of The Government To Earn More For Providing Better Facilities To Its People

It Is Certainly The Business Of The Government To Earn More For Providing Better Facilities To Its People
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6 Nov 2024 9:27 AM IST

I don't foresee a miracle happening in the near or distant future whereupon we have enough in our national coffers to transform people's lives. We cannot be dependent on the private sector for strengthening the two key two pillars, which are essential for fostering human capital


It is none of the government’s business to be in business. It is not a wise statement, at all, particularly in the Indian context given that funds crunch has always been a serious issue in undertaking welfare and capacity building measures. Towards this, the Union and state governments must encourage public sector enterprises and other entities to make most of competitive global markets in terms of revenue generation. Though it is binding on the governments to focus on governance, regulation and policy-making, they must not be oblivious of the country’s socio-economic realities where financial constraints pose significant challenges to funding welfare programmes, social services and infrastructural development.

Public sector enterprises (PSEs) and other government-owned entities can generate extra revenue, which can be reinvested in essential services.

Sectors like information technology (IT), telecom, services, retail, aviation and transport have a huge potential both within and outside the country. Private sector players are doing fairly well but their services are not as competitive. Quality, reliability and authenticity are always questionable, notwithstanding the fact that certain checks and balances are in place. It is lack of due diligence on the part of our enforcement agencies.

A number of PSEs have turned into white elephants or are not earning profits for want of accountability and professionalism. Classic cases in point are Bharat Sanchar Nigam Limited (BSNL) and the Mahanagar Telephone Nigam Limited (MTNL). Instead of rising to the occasion to reap the benefits of the telecom revolution, the two great entities seem to be losing sheen. I don’t know the reasons but realities are in the public domain. Similarly, we don’t have a state-owned airline today. For air travels, we are solely dependent on private players. The maintenance of airports has too been outsourced to the private sector.

As per an estimate, the global market size of the airline industry was pegged at $762.8 billion last year. According to Cognitive Market Research, the global airline industry market size would be $ 548415.2 million in 2024 and will expand at a compound annual growth rate (CAGR) of four per cent from by 2031.

Let us pause and reflect if Air India owned by the Government of India would have become one of the largest airlines in the world, filling the state coffers with revenue. Turkish Airlines, China Eastern Airlines, and China Southern Airlines are said to be among the largest state-owned carriers globally. The Qatari government wholly owns Qatar Airways, while the Investment Corporation of Dubai fully owns Emirates.

When managed effectively, public enterprises not only contribute to the nation’s economic growth but also provide a stable source of income that supports long-term national interests. We have the classic example of Oil and Natural Gas Corporation (ONGC) in this regard. It is doing so well. There are many other PSUs also that are sound. The government should harness the potential of public sector enterprises to compete in global markets. By enabling them to operate efficiently and profitably, the governments will bolster national revenue streams without overly burdening taxpayers. This approach will also support broader economic resilience and will allow governments to fund welfare initiatives, invest in capacity-building projects, and promote sustainable development.

Now let us have a look at some important details to understand the entire issue in its proper perspective. According to the Union Budget 2024-25 papers, around 19 per cent of the total revenue comes from income tax, five per cent from Union Excise and Duties, 18 per cent from GST and other taxes, 17 per cent from corporation tax, four per cent from custom, one per cent from non-debt capital receipts, nine per cent from non-tax receipts and 27 per cent from borrowings and other liabilities, a critical source of revenue for a government, particularly when expenditures exceed the revenue generated from taxes and other income.

These funds are often raised through the issuance of government bonds, loans from financial institutions, and multilateral organizations. While they provide necessary funds in the short term, they also create obligations for future repayment with interest, impacting the fiscal health and sustainability of the economy.

Where does all the money go? If we go by the details of the Union Budget 2024-25, four per cent of the revenue goes towards pensions, nine per cent to other expenditure, eight per cent to centrally sponsored schemes, nine per cent to the Finance Commission and other transfers, 21 per cent to States’ share of taxes and duties, eight per cent to defence, six per cent to subsidies, 16 per cent to central sector scheme excluding capital outlay on defence and subsidy, and 19 per cent towards payment of interests for loans that have been availed.

In terms of rupees, Rs. 56,501 crore was earmarked for the social sector, Rs. 1,25,638 crore for education, Rs. 89,287 crore for health, Rs. 1,51,851 crore for agriculture and allied activities and Rs. 2,65,808 crore for rural development. This clearly exposes the fact that we are not spending adequately on people’s health and education needs. Over the years, spending has certainly increased but that is not in sync with the need of the hour; disproportionate, so to say.

I don't foresee a miracle happening in the near or distant future whereupon we have enough in our national coffers to transform people's lives. But can India as a developing nation where the majority of the population is struggling hard to lift their living standards afford less spending on health and education sectors? Perhaps, not! We cannot be dependent on the private sector for strengthening the two key two pillars, which are essential for fostering human capital, which in turn drives economic growth, social stability, and long-term national progress.

Spending on health ensures a robust workforce, capable of contributing productively without the setback of preventable diseases or inadequate medical care. Investment in education empowers individuals with knowledge, skills, and opportunities for upward mobility, breaking the cycle of poverty and equipping the country for a competitive global economy. Neglecting such sectors will only exacerbate inequalities, limit economic potential, and weaken social cohesion.

If India has to transition into a more prosperous and resilient society, then it is imperative that it prioritises substantial investment in health and education. Therefore, let us not dismiss the role of the governments in business by overlooking the strategic advantages that state-owned enterprises can provide, particularly in emerging economies, where private sector investments alone may not suffice to address widespread developmental needs.

A balanced perspective recognizes that while the government should not monopolize business activities, it must empower PSUs to thrive in a competitive environment for the benefit of the country and its citizens.

(The writer is a senior journalist, author and columnist. The views expressed are strictly his personal)

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