GE, Rolls Royce , P&W , Safran , IHI japan are all successful jet engine manufacturers and co incidentally all are private companies.....
If there's demand and backing, private sector will deliver.
If there's demand and backing, private sector will deliver.
Wrong most of there technology is due to public money & research by there respective govt institutions. India pvt sector is debt ridden with nothing to show for with 43% long term loans facing potential defaults. Covid-19 wont save Modi, congress & there cronies pals.
Which government institution in the US? Or UK?
Which government institution in the US? Or UK?
Federally funded research and development centers - Wikipedia
this list many.
State of innovation: Busting the private-sector myth.
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
Menu
State of innovation: Busting the private-sector myth
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
TECHNOLOGY | COMMENT 21 August 2013
By Mariana Mazzucato
(Image: Andrzej Krauze)
IMAGES of tech entrepreneurs such as Mark Zuckerberg and Steve Jobs are continually thrown at us by politicians, economists and the media. The message is that innovation is best left in the hands of these individuals and the wider private sector, and that the state – bureaucratic and sluggish – should keep out. A telling 2012 article in The Economist claimed that, to be innovative, governments must “stick to the basics” such as spending on infrastructure, education and skills, leaving the rest to the revolutionary garage tinkerers.
Yet it is ideology, not evidence, that fuels this image. A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.
Whether an innovation will be a success is uncertain and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the US, China, Singapore and Denmark the state has provided the kind of patient and long-term finance new technologies need to get off the ground. Investments of this kind have often been driven by big missions, from putting a human on the moon, to solving climate change. This has required not only funding basic research – the typical “public good” that most economists admit needs state help – but applied research and seed funding too.
Apple is a perfect example. In its early stages the company received government cash support via a $500,000 small business investment company grant. And every technology that makes the iPhone a smartphone owes its vision and funding to the state: the internet, GPS, touchscreen displays and even the voice-activated smartphone assistant Siri all received state cash. The US Defence Advanced Research Projects Agency (DARPA) bankrolled the internet, and the CIA and the military funded GPS. So, although the US is sold to us as the model example of progress through private enterprise, innovation there has benefited from a very interventionist state.
“Every technology that makes the iPhone a smartphone owes its vision and funding to the state”
The examples don’t just come from the military arena, either. The US National Institutes of Health spends around $30 billion every year on pharmaceutical and biotechnology research and is responsible for 75 per cent of the most innovative new drugs annually. Even the algorithm behind Google benefited from US National Science Foundation (NSF) funding.
Across the world we see state investment banks financing innovation. Green energy is a great example. From Germany’s KfW state bank to the Chinese and Brazilian development banks, state-run finance is playing an increasing role in the development of the next big thing: green tech.
In this era of obsession with reducing public debt – and the size of the state more generally – it is vital to dispel the myth that the public sector will be less innovative than the private sector. If not, the state’s ability to continue to play its enterprising role will be weakened. Stories about how progress is led by entrepreneurs and venture capitalists have aided lobbyists for the US venture capital industry in negotiating lower capital gains and corporate income taxes – hurting the ability of the state to refill its innovation fund.
The fact that companies like Apple and Google pay hardly any tax – relative to their massive profits – is all the more problematic, given the significant contributions they have had from the government.
Thus, the “real” economy (made up of goods and services) has experienced a shift similar to that of the “financial” economy: the risk has been increasingly moved to the public sector while the private sector keeps the rewards.
Indeed, one of the most perverse trends in recent years is that while the state has increased its funding of R&D and innovation, the private sector is apparently de-committing itself.
In the name of “open innovation” big pharma is closing down its R&D labs, relying more on small biotech companies and public funds to do the hard stuff. Is this a symbiotic public-private partnership or a parasitic one?
It is time for the state to get something back for its investments. How? First, this requires an admission that the state does more than just fix market failures – the usual way economists justify state spending. The state has shaped and created markets and, in doing so, took on great risks. Second, we must ask where the reward is for such risk-taking and admit that it is no longer coming from the tax systems. Third, we must think creatively about how that reward can come back.
There are many ways for this to happen. The repayment of some loans for students depends on income, so why not do this for companies? When Google’s future owners received a grant from the NSF, the contract should have said: if/when the beneficiaries of the grant make $X billion, a contribution will be made back to the NSF.
Other ways include giving the state bank or agency that invested a stake in the company. A good example is Finland, where the government-backed innovation fund SITRA retained equity when it invested in Nokia. There is also the possibility of keeping a share of the intellectual property rights, which are almost totally given away in the current system.
Recognising the state as a lead risk-taker, and enabling it to reap a reward, will not only make the innovation system stronger, it will also spread the profits of growth more fairly. This will ensure that education, health and transport can benefit from state investments in innovation, instead of just the small number of people who see themselves as wealth creators, while relying increasingly on the courageous, entrepreneurial state.
By the way why don't you give me your view on the post i made on Indian economy thread @Deathstar.
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But that is precisely the point. Pvt players when provided with adequate funds, deliver what they are supposed to do. While PSU have no such necessity to deliver as they can get funding and salaries to their employees, whether they deliver or not. And it’s more true in case of non research work like manufacturing etc.Federally funded research and development centers - Wikipedia
this list many.
State of innovation: Busting the private-sector myth.
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
Menu
State of innovation: Busting the private-sector myth
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
TECHNOLOGY | COMMENT 21 August 2013
By Mariana Mazzucato
(Image: Andrzej Krauze)
IMAGES of tech entrepreneurs such as Mark Zuckerberg and Steve Jobs are continually thrown at us by politicians, economists and the media. The message is that innovation is best left in the hands of these individuals and the wider private sector, and that the state – bureaucratic and sluggish – should keep out. A telling 2012 article in The Economist claimed that, to be innovative, governments must “stick to the basics” such as spending on infrastructure, education and skills, leaving the rest to the revolutionary garage tinkerers.
Yet it is ideology, not evidence, that fuels this image. A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.
Whether an innovation will be a success is uncertain and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the US, China, Singapore and Denmark the state has provided the kind of patient and long-term finance new technologies need to get off the ground. Investments of this kind have often been driven by big missions, from putting a human on the moon, to solving climate change. This has required not only funding basic research – the typical “public good” that most economists admit needs state help – but applied research and seed funding too.
Apple is a perfect example. In its early stages the company received government cash support via a $500,000 small business investment company grant. And every technology that makes the iPhone a smartphone owes its vision and funding to the state: the internet, GPS, touchscreen displays and even the voice-activated smartphone assistant Siri all received state cash. The US Defence Advanced Research Projects Agency (DARPA) bankrolled the internet, and the CIA and the military funded GPS. So, although the US is sold to us as the model example of progress through private enterprise, innovation there has benefited from a very interventionist state.
“Every technology that makes the iPhone a smartphone owes its vision and funding to the state”
The examples don’t just come from the military arena, either. The US National Institutes of Health spends around $30 billion every year on pharmaceutical and biotechnology research and is responsible for 75 per cent of the most innovative new drugs annually. Even the algorithm behind Google benefited from US National Science Foundation (NSF) funding.
Across the world we see state investment banks financing innovation. Green energy is a great example. From Germany’s KfW state bank to the Chinese and Brazilian development banks, state-run finance is playing an increasing role in the development of the next big thing: green tech.
In this era of obsession with reducing public debt – and the size of the state more generally – it is vital to dispel the myth that the public sector will be less innovative than the private sector. If not, the state’s ability to continue to play its enterprising role will be weakened. Stories about how progress is led by entrepreneurs and venture capitalists have aided lobbyists for the US venture capital industry in negotiating lower capital gains and corporate income taxes – hurting the ability of the state to refill its innovation fund.
The fact that companies like Apple and Google pay hardly any tax – relative to their massive profits – is all the more problematic, given the significant contributions they have had from the government.
Thus, the “real” economy (made up of goods and services) has experienced a shift similar to that of the “financial” economy: the risk has been increasingly moved to the public sector while the private sector keeps the rewards.
Indeed, one of the most perverse trends in recent years is that while the state has increased its funding of R&D and innovation, the private sector is apparently de-committing itself.
In the name of “open innovation” big pharma is closing down its R&D labs, relying more on small biotech companies and public funds to do the hard stuff. Is this a symbiotic public-private partnership or a parasitic one?
It is time for the state to get something back for its investments. How? First, this requires an admission that the state does more than just fix market failures – the usual way economists justify state spending. The state has shaped and created markets and, in doing so, took on great risks. Second, we must ask where the reward is for such risk-taking and admit that it is no longer coming from the tax systems. Third, we must think creatively about how that reward can come back.
There are many ways for this to happen. The repayment of some loans for students depends on income, so why not do this for companies? When Google’s future owners received a grant from the NSF, the contract should have said: if/when the beneficiaries of the grant make $X billion, a contribution will be made back to the NSF.
Other ways include giving the state bank or agency that invested a stake in the company. A good example is Finland, where the government-backed innovation fund SITRA retained equity when it invested in Nokia. There is also the possibility of keeping a share of the intellectual property rights, which are almost totally given away in the current system.
Recognising the state as a lead risk-taker, and enabling it to reap a reward, will not only make the innovation system stronger, it will also spread the profits of growth more fairly. This will ensure that education, health and transport can benefit from state investments in innovation, instead of just the small number of people who see themselves as wealth creators, while relying increasingly on the courageous, entrepreneurial state.
By the way why don't you give me your view on the post i made on Indian economy thread @Deathstar.
BTW I do think that research is inherently risky and have equal chance failure. And govt should adequately fund research labs like DRDO, RCI,ISRO and other civilian facilities related to research and innovation.
But IMO wasting govt money inefficient manufacturing PSUs like OFB and BSNL is not good.
The technology that we see is mostly spin off from US defence programs. Most ppl end up assuming that private sector did every thing. Some one has to throw the money into the pit. Once the market became larger and companies made more revenue they were able to spend more R&D on their own.Federally funded research and development centers - Wikipedia
this list many.
State of innovation: Busting the private-sector myth.
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
Menu
State of innovation: Busting the private-sector myth
Forget Silicon Valley entrepreneurs. It is government that should be credited for backing wealth-creating technology
TECHNOLOGY | COMMENT 21 August 2013
By Mariana Mazzucato
(Image: Andrzej Krauze)
IMAGES of tech entrepreneurs such as Mark Zuckerberg and Steve Jobs are continually thrown at us by politicians, economists and the media. The message is that innovation is best left in the hands of these individuals and the wider private sector, and that the state – bureaucratic and sluggish – should keep out. A telling 2012 article in The Economist claimed that, to be innovative, governments must “stick to the basics” such as spending on infrastructure, education and skills, leaving the rest to the revolutionary garage tinkerers.
Yet it is ideology, not evidence, that fuels this image. A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.
Whether an innovation will be a success is uncertain and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the US, China, Singapore and Denmark the state has provided the kind of patient and long-term finance new technologies need to get off the ground. Investments of this kind have often been driven by big missions, from putting a human on the moon, to solving climate change. This has required not only funding basic research – the typical “public good” that most economists admit needs state help – but applied research and seed funding too.
Apple is a perfect example. In its early stages the company received government cash support via a $500,000 small business investment company grant. And every technology that makes the iPhone a smartphone owes its vision and funding to the state: the internet, GPS, touchscreen displays and even the voice-activated smartphone assistant Siri all received state cash. The US Defence Advanced Research Projects Agency (DARPA) bankrolled the internet, and the CIA and the military funded GPS. So, although the US is sold to us as the model example of progress through private enterprise, innovation there has benefited from a very interventionist state.
“Every technology that makes the iPhone a smartphone owes its vision and funding to the state”
The examples don’t just come from the military arena, either. The US National Institutes of Health spends around $30 billion every year on pharmaceutical and biotechnology research and is responsible for 75 per cent of the most innovative new drugs annually. Even the algorithm behind Google benefited from US National Science Foundation (NSF) funding.
Across the world we see state investment banks financing innovation. Green energy is a great example. From Germany’s KfW state bank to the Chinese and Brazilian development banks, state-run finance is playing an increasing role in the development of the next big thing: green tech.
In this era of obsession with reducing public debt – and the size of the state more generally – it is vital to dispel the myth that the public sector will be less innovative than the private sector. If not, the state’s ability to continue to play its enterprising role will be weakened. Stories about how progress is led by entrepreneurs and venture capitalists have aided lobbyists for the US venture capital industry in negotiating lower capital gains and corporate income taxes – hurting the ability of the state to refill its innovation fund.
The fact that companies like Apple and Google pay hardly any tax – relative to their massive profits – is all the more problematic, given the significant contributions they have had from the government.
Thus, the “real” economy (made up of goods and services) has experienced a shift similar to that of the “financial” economy: the risk has been increasingly moved to the public sector while the private sector keeps the rewards.
Indeed, one of the most perverse trends in recent years is that while the state has increased its funding of R&D and innovation, the private sector is apparently de-committing itself.
In the name of “open innovation” big pharma is closing down its R&D labs, relying more on small biotech companies and public funds to do the hard stuff. Is this a symbiotic public-private partnership or a parasitic one?
It is time for the state to get something back for its investments. How? First, this requires an admission that the state does more than just fix market failures – the usual way economists justify state spending. The state has shaped and created markets and, in doing so, took on great risks. Second, we must ask where the reward is for such risk-taking and admit that it is no longer coming from the tax systems. Third, we must think creatively about how that reward can come back.
There are many ways for this to happen. The repayment of some loans for students depends on income, so why not do this for companies? When Google’s future owners received a grant from the NSF, the contract should have said: if/when the beneficiaries of the grant make $X billion, a contribution will be made back to the NSF.
Other ways include giving the state bank or agency that invested a stake in the company. A good example is Finland, where the government-backed innovation fund SITRA retained equity when it invested in Nokia. There is also the possibility of keeping a share of the intellectual property rights, which are almost totally given away in the current system.
Recognising the state as a lead risk-taker, and enabling it to reap a reward, will not only make the innovation system stronger, it will also spread the profits of growth more fairly. This will ensure that education, health and transport can benefit from state investments in innovation, instead of just the small number of people who see themselves as wealth creators, while relying increasingly on the courageous, entrepreneurial state.
By the way why don't you give me your view on the post i made on Indian economy thread @Deathstar.
Please define waste of money, instead of calling it waste of money why dont we acknowledge the fact there is no responsibility & accountability. pvt players will never invest the money until they see a way to recoup the investment. Govt has to invest seed money and hand hold the industry until it becomes large enuf to survive on its own. In fact why cannot govt sell IP's to private players and make money out of it. Other thing is govt's thinking it alone can be trusted on critical technology, by default they assume technology in private & common ppl's hand as threat to the country(or themselves). Even technologies which were freely available outside India were under the ambit of govt control.
There is waste of money as there is no accountability and liability. If PSUs can be prosecuted for their incompetence, I’m sure it will boost their productivity.
PSU employees take their job security and perks in wrong way. Even NTPC employees are grossly ignorant and lazy, forget about failing PSUs like OFB. They are just a big taxpayer’s money sink hole.
(PSUs like NTPC are minting money only because they outsource their entire work to Pvt companies and act more like middleman/managers)
No they are not delivering.....majority of quality research is still by public institutions using public money in US & Europe. For e.g The US National Institutes of Health spends around $30 billion every year on new pharmaceutical drugs which are responsible for 75% of most innovative new drug annually.
India pvt sector is a money laundering debt ridden corrupt mess which can not even innovate a toilet paper.
Why is private sector dependent on public money in times of crisis?
Contrary to popular belief, private sector efficiency vis-a-vis public sector is a neoliberal construct for which there is little evidence or lived experience but is pushed, nevertheless, for private gains.
Every single industrial association representing private enterprises in India has sought government assistance to tide over the pandemic induced economic lockdown. The central government has promised to help and is working on the mechanisms. In the US, huge sums of public money (taxpayers') have already been given to private industries as grants (no repayments) and loans (interest rate of 1%).
The clamour for public assistance raises questions about the post-1970 neoliberal concepts that seek to discredit state and public institutions in running economies and champion as well as drive private sector growth instead. The argument is that the private sector is inherently more efficient.
There is, however, little historical evidence, lived experience, or global studies to support this argument. Like many other neoliberal (radical right) constructs, this one too hides more than it reveals.
The clamour for assistance is an encore of the Great Recession of 2007-08 when private financial companies were bailed out on pleas such as "too big to fail", ignoring the fact that those very big private companies had caused the crisis in the first place through reckless business practices. The 1929 Great Depression too had been sparked by similar reckless behaviour.
Private sector thriving on public bail-outs.
To many the maxim "privatisation of rewards and socialisation of risks" or "privatisation of profit and socialisation of loss" may seem malicious, but there is more historical evidence and lived experiences to validate it.
In April 2020, economic historian and author Dirk Philipsen of Duke University drove home the point bluntly in the US context.
In an article on April 24, Philipsen wrote: "...without massive public assistance, late-stage extractive capitalism, turbocharged by private interest and greed, would long be dead...Boeing, Goldman Sachs, Bank of America, Exxon - all would be bust without public bailouts, tax breaks, and subsidies. Every time the private system works itself into a crisis, public funds bail it out - in the current crisis (following the pandemic), to the tune of trillions of dollars. As others have noted, for more than a century, it's a clever machine that privatises gains and socialises costs."
Philipsen also reminded how once these private companies were back up and running, "they don't hold themselves accountable to the public who rescued them" and since the 2008 bailouts at Wells Fargo, American Airlines and AIG, companies that have been rescued often go right back to milking the public".
By no means is this an individual's observation. It is a matter of common knowledge. Nobel laureate Joseph Stiglitz has been repeatedly writing and explaining that the root cause of a pro-private policy is due to the fact that their money power translates into political power in the money-driven politics of the US.
This comes at a cost of ordinary citizens whose welfare is the primary job of elected public authorities.
Look at some of the COVID-19 relief packages the US has announced.
Under the CARES Act of 2020 passed to address economic disruptions caused by the pandemic shutdown, the US gave $32 billion "grant" (free-money) and another $29 million as loan (at 1% interest rate) of public money (taxpayers') to big aviation companies. Now the airlines are seeking another $32 billion of public assistance.
Some of the biggest airline companies of the US spent $90 billion in stock buybacks in the past decade. This made their executives and shareholders a lot richer but reduced cash surplus and financially enfeebled their business.
In 2017, the US government cut corporate tax to boost investment and create jobs. In 2019, a US Congress investigation found that the tax cut was used to buyback stocks worth $1 trillion in 2018, breaking all previous records, instead of investing in businesses and creating jobs.
Under the Pay-check Protection Programme, another relief measure to aid private enterprises to protect jobs, the US provided $349 billion of public money as emergency loans to small private businesses having "no access to capital". An investigative report of the Associated Press (AP) found out that 94 publicly traded large private companies, some with over $100 million in market value, benefitted from it. It wasn't meant for them at all.
In July, another investigative report, by The Guardian, found that at least $3 billion aid was given to "over 5,600 fossil fuel companies" of oil and gas drillers and coal mine operators whose operations impose a high cost by way of air, water, and soil pollution spreading disease and death. A Harvard study has shown that COVID-19 deaths are more common in high air pollution counties of the US. Besides, such operations entail destruction of forests and wildlife habitats leading to a spike in zoonotic diseases like COVID-19.
The Guardian report said its assessment of $3 billion aid could be far less because (i) the US government did not disclose the exact amount but instead listed its range and (ii) the high end of it for fossil fuel companies was $6.7 billion.
India's Rs 21 lakh crore COVID-19 relief package consists of just 7-9% of allocations (fiscal spending) for the millions who have lost jobs and incomes due to the lockdown (additional food grain supply, cash transfers, etc.) and the rest are liquidity infusion for private businesses.
India has also announced moratorium on debt servicing and suspended insolvency proceedings for private businesses. Several states have suspended labour laws for three years, like Uttar Pradesh, removing such protections as minimum working hours, payment of minimum wages, etc. to help private industries at the cost of workers.
If India hasn't done more it is because in September 2019 it cut corporate tax by Rs 1.45 lakh crore to promote investment and job creation, just like the US. But unlike the US, the Indian Parliament did not find out what happened to the money saved. Going by the bull-run in the stock markets, the possibility of a part of the money saved finding its way into stock trading can't be entirely ruled out.
Following this tax cut, corporate tax rates have fallen below individual tax rates. Now existing private corporates pay 22-25% tax (with or without tax concessions) and new ones just 15% while individuals pay 30% tax above Rs 15 lakh annual taxable income. This turns the foundational principles of taxation - capacity-to-pay or equity and fairness - upside down.
Corporate tax cuts are not US or India specific but a global phenomenon.
An internal study of the International Monetary Fund (IMF), the champion of corporate tax-cuts and private sector growth, mapped the sharp fall in corporate tax in its 2019 internal study - reproduced below - and warning developing countries that this not only undermines fairness of the taxation system and provides opportunity for tax avoidance and abuse but also deprives much-needed revenues for reducing poverty and boost growth.
During the Golden Age of Capitalism between 1950s and 1970s when both developed and developing countries registered the highest ever GDP growth (3.8% and 3%, respectively) and inequality was lower, the average top corporate tax rate was 70-80% in the US and 99.25-80% in the UK.
Private enterprises thriving on public hand-outs
In India, private enterprises not only rely on public deposits in the public sector banks to fund their business activities (this includes almost the entire top brass), but a large number of them also don't pay back even when they can. The RBI calls them "wilful defaulters" - those who don't pay (i) even when they have capacity to pay (ii) diverted loan money for other purposes and (iii) siphoned off the loans.
Their debts are also written off routinely, on an annual basis, as non-performing assets of banks (NPAs), along with those who genuinely fail in their business venture and go bankrupt.
What should come as equally shocking is that going by the global financial company Credit Suisse's 'India Corporate Health Tracker' of August 2019, debts of almost all the big and familiar private businesses (more than 50) are marked "chronically stressed" or with inadequate capacity to pay interest (interest cover of less than 1) for several quarters.
These companies span finance, infrastructure, and construction, telecom, power, metals, textile, energy, and others. Credit Suisse has been saying that the corporate stress remains "elevated" at last since 2017. The lockdown is bound to increase financial stress even more and NPAs are expected to rise further due to the lockdown.
It does say something about modern business operations that even after running successful businesses for decades, India's familiar big names are so precarious in their financial affairs. Or is something amiss? What happened to decades of accumulated profits and wealth? Where is prudence in financial dealings? It calls for a detailed and honest study.
Ironically, every year Indian banks write off loans of private businesses.
It is a deceptive and dishonest game. For one, loan defaults by private enterprises are masked as non-performing assets (NPAs) of banks. By calling it so, the burden and blame shifts to banks, starting another deceptive and dishonest game: recapitalisation of banks with more public money. Between FY15 and FY19, the PSBs have been recapitalised with Rs 2.46 lakh crore of public money.
This is a double whammy. First, public deposit goes into private hands, reducing scope for public investment in growth, and then more public money is ploughed back to fill the gaps in bank balance sheets. The defaulting private companies don't come into the picture at all.
On July 18, CH Venkatachalam, general secretary of the All India Bank Employees Association (AIBEA), released some startling information about the PSBs. His documents listed 2,426 private companies classified as "wilful defaulters" - 33 of them owing more than Rs 500 crore each and 147 more than Rs 200 crore each.
These companies include those run by high-profile and fugitive businessmen Nirav Modi, Mehul Choksi, Jatin Mehta, Vijay Mallya and others owing Rs 1.47 lakh crore to the PSBs.
The documents further revealed that the PSBs wrote off Rs 6.94 lakh crore of loan defaults (NPAs) by private corporate entities between FY01 and FY19. If the write off by private and foreign banks are added (which are part of the Scheduled Commercial Banks or SCBs), the number would go further up.
The SBI accounted for most of the "wilful defaulters" - 685 of them have not paid back Rs 43,887 crore even when they could have. The SBI's 2019-20 annual report reveals that it has written off corporate loans of Rs 1.79 lakh crore during FY17-FY20.
Private corporate defaulters get RBI protection.
The banking regulator, Reserve Bank of India (RBI), has been zealously guarding the identity of private corporate defaulters, even those who are wilful defaulters. It braved the Supreme Court's (SC) warnings and even contempt proceedings in 2019, but refused to budge.
The top court's last order directing it to reveal the names of defaulters to an RTI applicant came in April 2019 during the contempt of court proceedings. The court severely reprimanded the RBI for "continuing to violate the directions by this court" and issued a warning: "Any further violation shall be viewed seriously by this Court."
After this, a fresh RTI application was filed in July 2019. Shailesh Gandhi, former Central Information Commissioner, who had issued a series of orders for such information that ended up in the apex court, confirms that the RBI is yet to comply with the order.
In the meanwhile, the RBI pulled out its data on NPAs being written off in 2019. Its latest banking trend report of 2018-19 gives adequate information on NPAs in the agriculture sector and how much is being written off, but not for private industries.
Come to think of it, the Gross NPAs of agriculture sector constituted just 8.6% and 12.4% of the total in FY18 and FY19, respectively, but those of private industries constituted 91.4% and 87.6% for those years.
The following graph maps the two sectors' GNPAs of four years between FY16 and FY19.
Why does the RBI protects private corporate loan defaulters is not a mystery. Here is another aspect.
It is by now well-known that former RBI Governor Raghuram Rajan had given a list of big bank frauds to the central government in 2015 asking for "coordinated investigation", which included firms run by Modi, Choksi, among others. No action was taken for the next three years and both Modi and Choksi ran away in 2018.
The RBI's 2018-19 banking trend report does reveal the annual NPA write-offs in a graph (but no data) - as reproduced below. Taking the average write-offs at 20% of GNPAs for the SCBs during FY16-FY19 (for which data is given in 2018-19 and 2016-17 reports), the write-offs work out to Rs 6.7 lakh crore (total GNPAs being Rs 31.35 lakh crore).
Much else to consider for private sector efficiency
There are several other aspects to consider while examining the efficiency of private sector vis-a-vis public sector.
To its advantage, the cost of many benefits that private sector gets are not counted: tax holidays at the start, tax concessions through the ages, stimulus packages during crisis, virtually free use of public sector assets like infrastructure and human capital (even basic skilling is provided at public expense), allocation of public assets like land (through government acquisition), minerals (until recently given on a paltry royalty, not auctioned), forests, etc. at concessional rates.
Besides, the social and environmental costs of operations that cause pollution and deforestation leading to diseases and deaths are also not counted. The burden is passed on to people and government (healthcare).
To its disadvantage, there is much that the public sector does with taxpayers' money but not counted: building public goods and services (infrastructure, hospitals, schools, colleges and universities), funding all major technological and scientific breakthroughs on which the modern ITC revolution is built (Internet, GPS, touchscreen, Apple's Siri (virtual assistance) and Google's algorithm), taking care of poor and needy during normal times and everyone during calamities like droughts, floods, cyclones, earthquakes and even the current pandemic in all of which the private sector plays a very small role, if at all, without seeking profits (private healthcare for example).
(NB: Primacy of the US experience is warranted because the world has followed in its footsteps in social and economic governance, first after World War II when the reconstruction of war-ravaged Europe began with its money, followed by neoliberal push by the World Bank-International Monetary Fund (IMF) in 1980s when they provided loans to crisis-hit countries like India.)
It's all govts , public institutions.....it always have been.
Only one with non accountability is India corrupt pvt sector, political class & now even military no one else.
It’s the govt that have been shutting down every pvt player to enforce lockdown. How a pvt player is supposed to survive without doing its work and getting paid for it ?No they are not delivering.....majority of quality research is still by public institutions using public money in US & Europe. For e.g The US National Institutes of Health spends around $30 billion every year on new pharmaceutical drugs which are responsible for 75% of most innovative new drug annually.
India pvt sector is a money laundering debt ridden corrupt mess which can not even innovate a toilet paper.
Why is private sector dependent on public money in times of crisis?
Contrary to popular belief, private sector efficiency vis-a-vis public sector is a neoliberal construct for which there is little evidence or lived experience but is pushed, nevertheless, for private gains.
Every single industrial association representing private enterprises in India has sought government assistance to tide over the pandemic induced economic lockdown. The central government has promised to help and is working on the mechanisms. In the US, huge sums of public money (taxpayers') have already been given to private industries as grants (no repayments) and loans (interest rate of 1%).
The clamour for public assistance raises questions about the post-1970 neoliberal concepts that seek to discredit state and public institutions in running economies and champion as well as drive private sector growth instead. The argument is that the private sector is inherently more efficient.
There is, however, little historical evidence, lived experience, or global studies to support this argument. Like many other neoliberal (radical right) constructs, this one too hides more than it reveals.
The clamour for assistance is an encore of the Great Recession of 2007-08 when private financial companies were bailed out on pleas such as "too big to fail", ignoring the fact that those very big private companies had caused the crisis in the first place through reckless business practices. The 1929 Great Depression too had been sparked by similar reckless behaviour.
Private sector thriving on public bail-outs.
To many the maxim "privatisation of rewards and socialisation of risks" or "privatisation of profit and socialisation of loss" may seem malicious, but there is more historical evidence and lived experiences to validate it.
In April 2020, economic historian and author Dirk Philipsen of Duke University drove home the point bluntly in the US context.
In an article on April 24, Philipsen wrote: "...without massive public assistance, late-stage extractive capitalism, turbocharged by private interest and greed, would long be dead...Boeing, Goldman Sachs, Bank of America, Exxon - all would be bust without public bailouts, tax breaks, and subsidies. Every time the private system works itself into a crisis, public funds bail it out - in the current crisis (following the pandemic), to the tune of trillions of dollars. As others have noted, for more than a century, it's a clever machine that privatises gains and socialises costs."
Philipsen also reminded how once these private companies were back up and running, "they don't hold themselves accountable to the public who rescued them" and since the 2008 bailouts at Wells Fargo, American Airlines and AIG, companies that have been rescued often go right back to milking the public".
By no means is this an individual's observation. It is a matter of common knowledge. Nobel laureate Joseph Stiglitz has been repeatedly writing and explaining that the root cause of a pro-private policy is due to the fact that their money power translates into political power in the money-driven politics of the US.
This comes at a cost of ordinary citizens whose welfare is the primary job of elected public authorities.
Look at some of the COVID-19 relief packages the US has announced.
Under the CARES Act of 2020 passed to address economic disruptions caused by the pandemic shutdown, the US gave $32 billion "grant" (free-money) and another $29 million as loan (at 1% interest rate) of public money (taxpayers') to big aviation companies. Now the airlines are seeking another $32 billion of public assistance.
Some of the biggest airline companies of the US spent $90 billion in stock buybacks in the past decade. This made their executives and shareholders a lot richer but reduced cash surplus and financially enfeebled their business.
In 2017, the US government cut corporate tax to boost investment and create jobs. In 2019, a US Congress investigation found that the tax cut was used to buyback stocks worth $1 trillion in 2018, breaking all previous records, instead of investing in businesses and creating jobs.
Under the Pay-check Protection Programme, another relief measure to aid private enterprises to protect jobs, the US provided $349 billion of public money as emergency loans to small private businesses having "no access to capital". An investigative report of the Associated Press (AP) found out that 94 publicly traded large private companies, some with over $100 million in market value, benefitted from it. It wasn't meant for them at all.
In July, another investigative report, by The Guardian, found that at least $3 billion aid was given to "over 5,600 fossil fuel companies" of oil and gas drillers and coal mine operators whose operations impose a high cost by way of air, water, and soil pollution spreading disease and death. A Harvard study has shown that COVID-19 deaths are more common in high air pollution counties of the US. Besides, such operations entail destruction of forests and wildlife habitats leading to a spike in zoonotic diseases like COVID-19.
The Guardian report said its assessment of $3 billion aid could be far less because (i) the US government did not disclose the exact amount but instead listed its range and (ii) the high end of it for fossil fuel companies was $6.7 billion.
India's Rs 21 lakh crore COVID-19 relief package consists of just 7-9% of allocations (fiscal spending) for the millions who have lost jobs and incomes due to the lockdown (additional food grain supply, cash transfers, etc.) and the rest are liquidity infusion for private businesses.
India has also announced moratorium on debt servicing and suspended insolvency proceedings for private businesses. Several states have suspended labour laws for three years, like Uttar Pradesh, removing such protections as minimum working hours, payment of minimum wages, etc. to help private industries at the cost of workers.
If India hasn't done more it is because in September 2019 it cut corporate tax by Rs 1.45 lakh crore to promote investment and job creation, just like the US. But unlike the US, the Indian Parliament did not find out what happened to the money saved. Going by the bull-run in the stock markets, the possibility of a part of the money saved finding its way into stock trading can't be entirely ruled out.
Following this tax cut, corporate tax rates have fallen below individual tax rates. Now existing private corporates pay 22-25% tax (with or without tax concessions) and new ones just 15% while individuals pay 30% tax above Rs 15 lakh annual taxable income. This turns the foundational principles of taxation - capacity-to-pay or equity and fairness - upside down.
Corporate tax cuts are not US or India specific but a global phenomenon.
An internal study of the International Monetary Fund (IMF), the champion of corporate tax-cuts and private sector growth, mapped the sharp fall in corporate tax in its 2019 internal study - reproduced below - and warning developing countries that this not only undermines fairness of the taxation system and provides opportunity for tax avoidance and abuse but also deprives much-needed revenues for reducing poverty and boost growth.
During the Golden Age of Capitalism between 1950s and 1970s when both developed and developing countries registered the highest ever GDP growth (3.8% and 3%, respectively) and inequality was lower, the average top corporate tax rate was 70-80% in the US and 99.25-80% in the UK.
Private enterprises thriving on public hand-outs
In India, private enterprises not only rely on public deposits in the public sector banks to fund their business activities (this includes almost the entire top brass), but a large number of them also don't pay back even when they can. The RBI calls them "wilful defaulters" - those who don't pay (i) even when they have capacity to pay (ii) diverted loan money for other purposes and (iii) siphoned off the loans.
Their debts are also written off routinely, on an annual basis, as non-performing assets of banks (NPAs), along with those who genuinely fail in their business venture and go bankrupt.
What should come as equally shocking is that going by the global financial company Credit Suisse's 'India Corporate Health Tracker' of August 2019, debts of almost all the big and familiar private businesses (more than 50) are marked "chronically stressed" or with inadequate capacity to pay interest (interest cover of less than 1) for several quarters.
These companies span finance, infrastructure, and construction, telecom, power, metals, textile, energy, and others. Credit Suisse has been saying that the corporate stress remains "elevated" at last since 2017. The lockdown is bound to increase financial stress even more and NPAs are expected to rise further due to the lockdown.
It does say something about modern business operations that even after running successful businesses for decades, India's familiar big names are so precarious in their financial affairs. Or is something amiss? What happened to decades of accumulated profits and wealth? Where is prudence in financial dealings? It calls for a detailed and honest study.
Ironically, every year Indian banks write off loans of private businesses.
It is a deceptive and dishonest game. For one, loan defaults by private enterprises are masked as non-performing assets (NPAs) of banks. By calling it so, the burden and blame shifts to banks, starting another deceptive and dishonest game: recapitalisation of banks with more public money. Between FY15 and FY19, the PSBs have been recapitalised with Rs 2.46 lakh crore of public money.
This is a double whammy. First, public deposit goes into private hands, reducing scope for public investment in growth, and then more public money is ploughed back to fill the gaps in bank balance sheets. The defaulting private companies don't come into the picture at all.
On July 18, CH Venkatachalam, general secretary of the All India Bank Employees Association (AIBEA), released some startling information about the PSBs. His documents listed 2,426 private companies classified as "wilful defaulters" - 33 of them owing more than Rs 500 crore each and 147 more than Rs 200 crore each.
These companies include those run by high-profile and fugitive businessmen Nirav Modi, Mehul Choksi, Jatin Mehta, Vijay Mallya and others owing Rs 1.47 lakh crore to the PSBs.
The documents further revealed that the PSBs wrote off Rs 6.94 lakh crore of loan defaults (NPAs) by private corporate entities between FY01 and FY19. If the write off by private and foreign banks are added (which are part of the Scheduled Commercial Banks or SCBs), the number would go further up.
The SBI accounted for most of the "wilful defaulters" - 685 of them have not paid back Rs 43,887 crore even when they could have. The SBI's 2019-20 annual report reveals that it has written off corporate loans of Rs 1.79 lakh crore during FY17-FY20.
Private corporate defaulters get RBI protection.
The banking regulator, Reserve Bank of India (RBI), has been zealously guarding the identity of private corporate defaulters, even those who are wilful defaulters. It braved the Supreme Court's (SC) warnings and even contempt proceedings in 2019, but refused to budge.
The top court's last order directing it to reveal the names of defaulters to an RTI applicant came in April 2019 during the contempt of court proceedings. The court severely reprimanded the RBI for "continuing to violate the directions by this court" and issued a warning: "Any further violation shall be viewed seriously by this Court."
After this, a fresh RTI application was filed in July 2019. Shailesh Gandhi, former Central Information Commissioner, who had issued a series of orders for such information that ended up in the apex court, confirms that the RBI is yet to comply with the order.
In the meanwhile, the RBI pulled out its data on NPAs being written off in 2019. Its latest banking trend report of 2018-19 gives adequate information on NPAs in the agriculture sector and how much is being written off, but not for private industries.
Come to think of it, the Gross NPAs of agriculture sector constituted just 8.6% and 12.4% of the total in FY18 and FY19, respectively, but those of private industries constituted 91.4% and 87.6% for those years.
The following graph maps the two sectors' GNPAs of four years between FY16 and FY19.
Why does the RBI protects private corporate loan defaulters is not a mystery. Here is another aspect.
It is by now well-known that former RBI Governor Raghuram Rajan had given a list of big bank frauds to the central government in 2015 asking for "coordinated investigation", which included firms run by Modi, Choksi, among others. No action was taken for the next three years and both Modi and Choksi ran away in 2018.
The RBI's 2018-19 banking trend report does reveal the annual NPA write-offs in a graph (but no data) - as reproduced below. Taking the average write-offs at 20% of GNPAs for the SCBs during FY16-FY19 (for which data is given in 2018-19 and 2016-17 reports), the write-offs work out to Rs 6.7 lakh crore (total GNPAs being Rs 31.35 lakh crore).
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Much else to consider for private sector efficiency
There are several other aspects to consider while examining the efficiency of private sector vis-a-vis public sector.
To its advantage, the cost of many benefits that private sector gets are not counted: tax holidays at the start, tax concessions through the ages, stimulus packages during crisis, virtually free use of public sector assets like infrastructure and human capital (even basic skilling is provided at public expense), allocation of public assets like land (through government acquisition), minerals (until recently given on a paltry royalty, not auctioned), forests, etc. at concessional rates.
Besides, the social and environmental costs of operations that cause pollution and deforestation leading to diseases and deaths are also not counted. The burden is passed on to people and government (healthcare).
To its disadvantage, there is much that the public sector does with taxpayers' money but not counted: building public goods and services (infrastructure, hospitals, schools, colleges and universities), funding all major technological and scientific breakthroughs on which the modern ITC revolution is built (Internet, GPS, touchscreen, Apple's Siri (virtual assistance) and Google's algorithm), taking care of poor and needy during normal times and everyone during calamities like droughts, floods, cyclones, earthquakes and even the current pandemic in all of which the private sector plays a very small role, if at all, without seeking profits (private healthcare for example).
(NB: Primacy of the US experience is warranted because the world has followed in its footsteps in social and economic governance, first after World War II when the reconstruction of war-ravaged Europe began with its money, followed by neoliberal push by the World Bank-International Monetary Fund (IMF) in 1980s when they provided loans to crisis-hit countries like India.)
It's all govts , public institutions.....it always have been.
Only one with non accountability is India corrupt pvt sector, political class & now even military no one else.
Govt employees OTOH are sitting home comfortably taking money from taxpayers account. Isn’t it even worse?
BTW here is an example of corporate accountability for you
Defective ammunition: Whose life is it anyway? - The Sunday Guardian Live
A Special Forces soldier or an artillery or armour regiment serves no purpose if equipped with defective or dud ammunition. Much of the problem lies with
www.sundayguardianlive.com
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BS... Indian pvt sector was facing default on 43% of long term loan even before Covid-19 hit. It's the most debt stressed sector globally.
You don't fund govt & there employees Buddy. Govt fund your a** which avg joker with new money think is made up of gold.
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Agreed pvt sector will only deliver when they have skin in the game, if not they will just look for projects/products which where they can make fat commissions. Most of the large pvt sectors in India simply dont have any R&D all that they do is take huge loans for operating expenses and keep padding financial books. Govt banks will not ask for repayment as it would mean shutdown of cmpnies and loss of employment. Other than few sectors Indian pvt sector rarely is known for product innovation. They simply have a tie up with foreign cmpny and rebrand the products. More or less it is also due to our emphasis on easy money making culture & values. No point in just blaming them.
A good example is our software Industry even after 30 years or so we are still famous for body shop companies there are very few companies which can be compared to western companies. We need to learn from china , the way they have grown their industry and are trying to compete at world stage.
And who is funding govt ? PSU babus?
It’s our/taxpayers money, these assholes are wasting on PSU babus, for their vote bank politics.
These are leeches who suck our money and act high and mighty.
This is the reason I have terminated my BSNL FTTH home connection and switched to Airtel Xtreme Fibre. My Father was so frustrated with the bribe loving babus at BSNL Naini office that we are paying the bill of so called ‘Broadband’ without even able to use it since the beginning of the lockdown. Anyway this their service was always shit and the customer support was nonexistent. We have to pay bribe literally every single time there was any fault in the line to a local guy(unofficially appointed by local office).
Hope they show some sympathy to us and clear the termination request promptly, which I doubt they will do without paying at least something.
India Setting Up A New Complex To Develop A 110 KN Fighter Jet Engine; Will Power The Future Fighter Aircraft Of The IAF
by Swarajya Staff
Sep 25, 2020 02:08 PM
Snapshot
A report in the Economic Times says the complex may develop a completely new jet engine, one that can provide a thrust of 110 kilo newton (kN).
The engine, which may come up within seven years of starting work, will be used for the future class of Advanced Medium Combat Aircraft (AMCA), the fifth generation fighter currently in development for the Indian Air Force.
“The new engine complex is being set up as a national mission to develop a 110 kilo newton powered engine for the future class of AMCA and could produce the engine within seven years of starting work,” the report says.
This development comes at a time when the Comptroller and Auditor General of India has come down heavily on the government’s offset policy for defence procurement, saying that the transfer of technology to DRDO for reviving the stalled Kaveri engine programme, part of the deal, has not been completed.
“DRDO wanted to obtain Technical Assistance for the indigenous development of engine (Kaveri) for the Light Combat Aircraft. Till date, the Vendor has not confirmed the transfer of this technology,” the CAG says in its report.
It was not clear if the transfer will even take place, the CAG added.
In this respect, the Economic Times report says the new complex may receive French assistance in the development of the new jet engine and discussions for the same are currently on between the two sides.
Safran, a French company that manufactures engines used in Rafale fighters, has reportedly offered complete technology transfer to develop the engine under the terms of the offset clause part of the Rafale deal with India. The French manufacturer, the report says, is also tying up with Hindustan Aeronautics Limited (HAL) for transferring manufacturing technology for high-end engines.
“We are signing an agreement related to the technology needed for high thrust engine manufacturing. The technology will be common to the Rafale engines that can be supported by us and would also be useful for the 110 kN engine project,” HAL Chairman R Madhavan was quoted in the report as saying.
While the new complex currently in the works will deal with high thrust engines, like the 110 kN thrust engine being considered currently, HAL will look into less technologically challenging and lower thrust engines for use on future helicopters, light transport aircraft, unmanned aerial vehicles and trainers
At the same time, HAL will be a manufacturing partner in the 110 kN thrust engine programme of the new jet engine development complex.
While the new engine may not be ready in time for the first few squadrons of the AMCA fighter of the IAF, the future squadrons may be equipped with it.
The development of a new high-thrust engine will rid India of its crippling dependence on Russia and the West for engines to power its fighters.
A homegrown engine will raise the level of indigenous content in future Indian fighter jets and bring down their cost significantly
by Swarajya Staff
Sep 25, 2020 02:08 PM
Snapshot
- Here’s all you should know about the new engine.
A report in the Economic Times says the complex may develop a completely new jet engine, one that can provide a thrust of 110 kilo newton (kN).
The engine, which may come up within seven years of starting work, will be used for the future class of Advanced Medium Combat Aircraft (AMCA), the fifth generation fighter currently in development for the Indian Air Force.
“The new engine complex is being set up as a national mission to develop a 110 kilo newton powered engine for the future class of AMCA and could produce the engine within seven years of starting work,” the report says.
This development comes at a time when the Comptroller and Auditor General of India has come down heavily on the government’s offset policy for defence procurement, saying that the transfer of technology to DRDO for reviving the stalled Kaveri engine programme, part of the deal, has not been completed.
“DRDO wanted to obtain Technical Assistance for the indigenous development of engine (Kaveri) for the Light Combat Aircraft. Till date, the Vendor has not confirmed the transfer of this technology,” the CAG says in its report.
It was not clear if the transfer will even take place, the CAG added.
In this respect, the Economic Times report says the new complex may receive French assistance in the development of the new jet engine and discussions for the same are currently on between the two sides.
Safran, a French company that manufactures engines used in Rafale fighters, has reportedly offered complete technology transfer to develop the engine under the terms of the offset clause part of the Rafale deal with India. The French manufacturer, the report says, is also tying up with Hindustan Aeronautics Limited (HAL) for transferring manufacturing technology for high-end engines.
“We are signing an agreement related to the technology needed for high thrust engine manufacturing. The technology will be common to the Rafale engines that can be supported by us and would also be useful for the 110 kN engine project,” HAL Chairman R Madhavan was quoted in the report as saying.
While the new complex currently in the works will deal with high thrust engines, like the 110 kN thrust engine being considered currently, HAL will look into less technologically challenging and lower thrust engines for use on future helicopters, light transport aircraft, unmanned aerial vehicles and trainers
At the same time, HAL will be a manufacturing partner in the 110 kN thrust engine programme of the new jet engine development complex.
While the new engine may not be ready in time for the first few squadrons of the AMCA fighter of the IAF, the future squadrons may be equipped with it.
The development of a new high-thrust engine will rid India of its crippling dependence on Russia and the West for engines to power its fighters.
A homegrown engine will raise the level of indigenous content in future Indian fighter jets and bring down their cost significantly
India Setting Up A New Complex To Develop A 110 KN Fighter Jet Engine; Will Power The Future Fighter Aircraft Of The IAF
Here’s all you should know about the new engine.
swarajyamag.com
10 years for development or 10 years for production ? If its development then AMCA is in big trouble. How is the IAF going to get 450 indigenous fighter by 2030 then ?
Coz the Mk-2 is expected to make first flight by 2034-35 & we can expect to have around 200 new fighters by 2030 including Mk1 / Mk1a & Rafales
I have jumbled up all timelines in my head. When was Mk1 going to take first flight ?
Also Mk1 will have F414 ?
But IAF chief just said we will have 450 Indian fighters by 2030.