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Does India need this Rs 2,000 cr 'gift'? - Views on News from Equitymaster
 
 
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  • Apr 4, 2012

    Does India need this Rs 2,000 cr 'gift'?

    If you have ever flown to New York, you must have observed a magnificent sculpture of a torch-bearing female that ascends 93 meters into the sky. In case you haven’t already guessed it, we are talking about the Statue of Liberty. But another statue in-the-making is set to dwarf this colossal structure. In fact, it is planned to be twice as high as the Statue of Liberty. And once it is ready, it is going to be known as the world’s largest statue. The interesting part is that it is going to happen in India.

    Statue of Unity

    More than a year ago, Chief Minister of Gujarat, Mr Narendra Modi put forth his grand vision of building a 182-meter tall sculpture of Sardar Vallabhbhai Patel, one of the most prominent heroes of India’s freedom struggle. This historical monument which will be erected downstream of Narmada dam, will be called the Statue of Unity. Everything hunky-dory so far, isn’t it?

    Rs 2,000 crores for a statue!

    When you are living in a country where a substantial population still lives in poverty, you cannot do away with the most important question: how much is the statue going to cost? The answer to that question rang the alarm bell for us. Against earlier estimates of Rs 1,000 cr, the project is now set to cost a whopping Rs 2,000 cr. Given the size of the project and the usual delays involved, it would be hardly surprising if the cost shoots up even further.

    We have no objections with the idea of paying tribute to a great person. But we have strong reservations against such extravagances. As a nation that is still developing, we have several other priorities. We need greater investments into education, healthcare and infrastructure. Moreover, these investments have long term benefits for the overall well-being of the economy. On the other hand, a Statue of Unity would just remain a statue. Apart from attracting tourists and creating awareness, the statue would have very little to add to the country’s welfare.

    There are no free gifts

    As per the Chief Minister, this will be his gift to India and the world. But like there are no free lunches, there are no free gifts. Someone has to pay for it, right? So the next question is- who is going to pay for this statue? The project is being built on a public private partnership model. Most of the money is planned to be raised by public contribution.

    But here is the distressing part. We came across a recent news report that the Gujarat government has taken commitment from about a dozen public sector undertakings (PSUs) to contribute an amount of Rs 64 cr. The list includes PSUs like Gujarat State Petroleum Corporation (GSPC), Gujarat Industrial Development Corporation, Gujarat Mineral Development Corporation, Gujarat Alkalies and Chemicals Ltd, Gujarat Narmada Valley Fertilisers Company, Gujarat State Fertilisers and Chemicals, and Gujarat Industrial Power Corporation Ltd. Let us tell you that these PSUs were made to contribute a similar amount last year as well. Each time, despite their reluctance, they have been persuaded to make a contribution.

    The ultimate irony

    A recent Comptroller and Auditor General (CAG) report has revealed that state PSUs have been making losses worth thousands of crores of rupees. For GSPC alone, CAG has calculated a loss of about Rs 5,000 cr. Moreover, other state PSUs have made losses of about Rs 4,216 cr over the last three years.

    This shows the ironical state of the Indian economy. The economy could be facing a slowdown. The fiscal deficit could be going out of hand. Businesses could be reeling under huge losses. But the government will continue to keep its political ambitions above the interests of the economy.

    Do you think India can afford to build such expensive monuments?

      Ankit Shah (Research Analyst) is the editor for Equitymaster Insider and Vivek Kaul's Inner Circle. A journalism graduate turned Research Analyst, Ankit joined Equitymaster when he was just 23 years old, right after getting his MBA from NMIMS, Mumbai. Having been an avid reader of Equitymaster's research through his college years, Ankit knew he would fit right in!

    In his seven years with Equitymsater, Ankit rose quickly, leaving his mark on almost everything from: Travelling thousands of miles to find the next small cap stock, as part of the Hidden Treasure team... Designing Equitymaster's Secrets, an online value investing course based on the company's 20-year journey... Bringing global investing ideas to Indian readers through Vivek Kaul's Inner Circle... Right to launching his brand-new service, Equitymaster Insider.

    Ankit is a firm believer in Charlie Munger's multidisciplinary approach on juggling between various disciplines...He is not just a research analyst, but also a voracious reader and an avid traveler...Born and brought up in Mumbai, he now prefers to keep away from the noisy megapolis as much as possible. In any given month, you could find him exploring the ancient ruins of South America, the beaches of South East Asia, or the organic cafes of Pondicherry.

     

     

    Equitymaster requests your view! Post a comment on "Does India need this Rs 2,000 cr 'gift'?". Click here!

    1 Responses to "Does India need this Rs 2,000 cr 'gift'?"

    Bhavin

    Apr 5, 2012

    There is nothing wrong in aspiring to be a great nation and the symbolism associated with it.

    For example, even though the Statue of Liberty was gifted by France to the US, the US struggled a lot to raise finances to erect just the pedestal on which the statue stands.

    How they raised the funds is a very interesting and inspiring story. Imagine collecting $102,000 in public donations from 120,000 citizens with 80% donations less than $1 !

    That shows how the 'will and might of the people' is much bigger than the 'will and might of the politicians'.

    Mr Modi should do well to read up the full history of America before trying such, forced and expensive imitations.

    But, to give some credit to this visionary 'Bhai' from the west, at least he is not erecting statues of himself unlike a certain 'Behenji' up north !

    Like 
      
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