Is private sector really superior to public sector?

The big crib about the 2009 Union budget is that it doesn’t send out any signal whatsoever on “reforms”. That there is no talk of disinvestment, no talking of parting with the family silver. And this despite the Left parties not having any role in or control over the new UPA government.

The negative reaction of the chattering classes is what has forced Manmohan Singh and Pranab Mukherjee to bend backwards to reassure investors and the stock markets since B-Day.

Siddharth Varadarajan argues in today’s Hindu that privatisation of public assets is not a panacea for plugging the fiscal deficit or for stemming the perceived ineffciencies of the public sector. Reason: “privatisation” is predicated on the presumption that public ownership of industry is inherently inferior to that of private.

“In his recent book, Privatisation in India: Challenging Economic Orthodoxy (RoutledgeCurzon, 2005), by far the most comprehensive and rigorous study of the issue in the Indian context, T.T. Ram Mohan of the Indian Institute of Management, Ahmedabad, conclusively debunks the assumption that the private sector is more efficient than the public.

“After carefully reviewing both financial performance and input-output related physical productivity in the two sectors, he concludes that “the evidence thus shows that the perception that the private sector is uniformly superior to the public sector … rests on a weak evidential foundation.” This does not mean other aspects of the reform package are necessarily bad.”

Read the full article: Go easy with the family silver

Also read: Three reasons why everybody loves to hate IT