Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

India's own bailout package
Fri, 19 Feb Pre-Open

It is not the business of the government to be in business. A few years ago, staunch capitalists would have agreed with the statement. But such a stance would now be difficult to take. After all it was the government that bailed out the collapsing financial sector in the strongest bastion of capitalism - the US.

India didn't walk down a completely capitalist path after independence. It chose a more balanced approach where Five Year Plans co-existed with private enterprise. The Indian government has a large presence in business. Many times with unfortunate consequences. Corporate decisions are overridden by political objectives. Perhaps the best example is the fate of oil marketing companies - Indian Oil, BPCL, HPCL- in India. Their products, i.e. fuels, have few viable substitutes. The companies have highly valuable assets in place. Their distribution network reaches far and wide. Yet, they incur heavy losses. Due to the simple fact that market determined fuel price is a bitter political pill to swallow.

The oil marketing companies have company in their misery. The aviation sector. State owned carrier National Aviation Company of India Limited (NACIL), runs India's national carrier Air India. Not very profitably though. The airline had posted a loss of Rs 72 bn in the last two financial years. The reason is not government interference. It has more to do with the lack of focus on efficiency which comes naturally to private sector companies. Things are so bad that now the government has approved a bailout package for Air India. It will get Rs 8 bn in fresh equity from the government. It will go towards tiding over the carriers' cash flow problems and fleet acquisition.

Interestingly, the government has asked NACIL to take several steps. Rationalise manpower and link incentives to productivity. Integrate the erstwhile Indian Airlines with Air India. Review all agreements on operational matters. Return all leased aircraft. Cut down on wasteful expenditure. Close all overseas offices which are not required. Basically, cut costs. Become more efficient.

So then, is it really the business of the government to be in business? Government's presence often defeats genuine commercial interests. Quite often it leads to an easy going attitude and inefficiencies. Hence there is definitely a case of lesser involvement of the government in business. But before we go overboard with the idea, we must remember the dangers of unbridled private enterprise. After all, unchecked and poorly regulated free market mechanism was at the heart of global financial meltdown. In our view, the government should get involved only when it absolutely must. That role should usually be that of a helpful but alert regulator.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "India's own bailout package". Click here!


Stock Market Updates

SGX Nifty Up 51 Points, India's Fiscal Deficit, Anand Rathi Wealth IPO, and Buzzing Stocks Today (Today's Market)

Dec 1, 2021 Pre-Open

Top cues to track in today's stock market session.

View More Indian Share Market News

Most Popular

Infosys vs TCS: Which is Better?(Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake(Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks(Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market(Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing.(Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 1, 2021 12:06 PM