The Guardian June 18, 2003

In defence of the public sector

by Sitaram Yechury

May 21, 2003, saw the largest ever strike action by the working class in 
independent India. One of the issues was the protest against privatisation 
of public sector undertakings by the Vajpayee Government. On that very day, 
in one of the private TV channel's studio, I was asked by the 
representative of the CII and the anchor conducting the discussion as to 
what the job of the government was: To serve, or to run business? They were 
actually paraphrasing Margaret Thatcher, who had, in the '80s, while 
embarking on the dismantling of Britain's public sector, infamously 
remarked, "It is not the business of the government to be in business."

The government's job is, of course, to serve. But to serve whom? The people 
at large or the ruling classes, especially the corporate world? This is the 
moot question. Those who opposed the May 21 action are those who, under the 
guise of advocating people's interests, actually work towards making the 
government abdicate its social responsibilities towards the people and 
function only in the interests of the corporate world.


The resounding success of the strike has prompted sections of the national 
press to shamelessly advance such an anti-people reasoning. The Hindu 
editorially comments ("Inconveniencing the Public", May 23, 2003), "whether 
the trade unions that called for the strike achieve their goals or not, 
they have succeeded in inconveniencing the public once again."

Which public? It is the public that went on strike in the interests of the 
Indian republic! The inconvenienced are the ruling classes who are looting 
both the public and the republic.

The Indian Express in an editorial titled "India Hijacked" (May 22) was 
more forthright when it stated, "The economic demands of the bank 
employees, as indeed of other PSU workers, are not warranted, and their 
political demands are not legitimate. Why should employees strike work to 
protest against policies of a duly-elected government in a democracy?

There are better and more democratic ways of protesting against government 
policy in a democracy than striking work. The economic cost of not working 
is something India can hardly afford."

Really? What is left unsaid is, however, obvious to all. Can India afford 
the looting of its public assets in the name of privatisation? Can India 
afford the human, social and finally the economic cost of reducing the vast 
majority of its people to a life of penury and deprivation as a result of 
these economic policies?

The right to strike by the workers is a hard earned democratic right 
guaranteed by the Indian constitution. The working class employs the strike 
weapon to make the government halt, if not reverse, the policies that are 
detrimental to the interests of the country and the people. Like Bhagat 
Singh said when he threw a bomb in the then Central Assembly: this was 
necessary to make a deaf government hear!


In any class-divided society, the character of the state is always to 
protect and advance the interests of the ruling classes. The state, itself, 
is an instrument of such a class rule. Under the present phase of 
globalisation, however, this inherent character of the state becomes more 

Even the usual pretences and disclaimers like "working in the people's 
interests" or the "country's interests", are abandoned and the state 
aggressively pushes the agenda for bolstering the profit-making drive of 
the corporate world.

The process of privatisation of public assets is a part of this overall 
aggressiveness. It is a different matter that Britain, after over a decade 
of privatisation of its railways, was forced to re-nationalise it recently! 
The basic objective of privatisation is to place at the disposal of the 
corporations, huge public assets built by people's savings over the 

It has now become a fashion in India to denigrate the public sector. In 
fact, the advocates of globalisation and the corporate pundits portray the 
public sector as the biggest blunder of independent India. We continue to 
hear much about the so-called inefficiency of the public sector.

Never once is the present generation told that the bulk of the currently 
sick public sector units were those that had to be taken over by the state 
from the private sector, which had made them sick due to their inefficiency 
and capricious profit drive. The state, in other words, had to shoulder the 
burden of the private sector's inefficiency! (This continues even today 
with the private sector refusing to return loans from nationalised banks.) 
Many of the other sectors like banking, insurance, coal, etc were 
nationalised primarily in the interests of the country and to protect its 
people from the mercenary swindling of their savings and resources by 
private capitalists.

In other words, part of the public sector emerged in pursuit of protecting 
the country and its people from the predatory loot of profit by the private 
sector. Consequently, it emerged to serve the people better!


It is often wrongly believed that the public sector emerged as a part of 
some socialistic ideas India's first Prime Minister, Jawaharlal Nehru, was 
presumed to have. The concepts of the public sector and state planning were 
undoubtedly introduced to the world by the first socialist state in the 
USSR. In India, however, the inspiration and the urge for the public 
sector, however much many may wish to disbelieve, came from the capitalist 
class itself.

In the initial years following independence, the monopoly bourgeoisie 
(which provided leadership to the Indian ruling classes), through the 
nationalisation of the Imperial Bank and the legal displacement of foreign 
(mainly British) capital, came to possess the access to both finance and 
industrial capital.

Through state legislation, it virtually cordoned off the Indian market by 
imposing several tariffs and a long list of import restrictions. Thus, it 
protected its market and raw materials, vis-`-vis imperialist intentions.

Capitalist development, however, required the creation of an economic 
infrastructure and facilities of communications  an investment that the 
monopoly bourgeoisie itself could not undertake at that stage.

Even if it had the resources, the nature of such investment meant long 
gestation periods, i.e., their capital would be tied up without returning 
profits for a long period: an option that they were reluctant to undertake.

The state, therefore, was to step in to undertake this task. This, the 
state had to do by raising resources, not from the ruling classes, but from 
the people. The excessive reliance on indirect taxes for raising revenue as 
opposed to direct taxes, i.e. taxes on commodities as opposed to those on 
incomes, meant pushing the burden of this method of creation of the 
infrastructure on to the shoulders of the poor. The public sector's role 
was thus defined.

The clearest expression of this strategy, in fact, came three years before 
independence (1944), in a memorandum drawn up by Sir Purushottamdas 
Thakurdas and seven others including Ghanshyam Das Birla, J R D Tata and 
Shriram, incorporating a 15-year plan of economic development.

Popularly known as the "Bombay Plan", it was a 15-year plan consisting of 
three five-year timeframes, where the first "will lay the foundation for 
the second and which in its turn will be the basis for the third one."

The proposals for revenue raising by the government, under these plans, 
clearly reveal the class nature. Forty per cent was to come from the 
savings of the people collected by the government, and 34 per cent from 
government borrowing (whose burden eventually falls again on the people). 
An additional 13 per cent was to come from government resources (the 
sterling reserves held by the Reserve Bank of India).

In other words, 87 per cent of the resources were to be raised without 
touching the capitalist class while 45 per cent of the entire cost of the 
plan was to be spent to create the industrial infrastructure, and an 
additional 10 per cent for communications so necessary for 

Therefore, the decision that the government's business would be to be in 
business was at the prompting of business itself! Privatisation push

Over the post-independence decades, the private corporate sector in the 
country gained immensely from the infrastructure created by the public 
sector. Between 1951 and 1990, the assets of the top 22 industrial houses 
in the country, according to one estimate, grew at a phenomenal annual 
growth rate of 226.12 per cent. According to another estimate, during the 
last five decades of the 20th century, the assets of the 20 industrial 
houses grew by 500 times!

This enormous capital in their hands (created through the exploitation of 
the people and by utilising the state) needed to be employed for furthering 
their profits. In these five decades, the situation has so drastically 
changed that the very same capitalist class which, in the initial years of 
independence, did not have adequate capital to establish such 
infrastructures today has capital that is searching for employment! The 
clamour for privatisation of the public sector is the result of this.

This they seek by dishonestly arguing that such privatisation is in the 
interests of the country and its people. The public assets built through 
the people's savings and by the people's labour they seek to appropriate 
for a song in pursuit of their super-profits.

It is this truth they seek to obfuscate behind the deceitful propaganda 
that they unleash about the poor performance and malfunctioning of the 
public sector. They lack the elementary honesty, so typical of the 
corporate world, to tell the truth.


However, a further question arises. If the public sector ultimately 
resulted in strengthening the private sector by providing the required 
economic infrastructure, then why this big struggle against privatisation?

There are various important reasons why the public sector needs to be 
defended. The least of all, though important, is the objective of 
protecting the rights and lives of those employed by the public sector. The 
corporate world seeks to reduce the working class struggles against 
privatisation to this single reason. There are equal and more important 
other reasons.

First, the public sector constitutes an economic bulwark of India's self-
reliance. For over five decades, the infrastructure created by the public 
sector helped India to stave off imperialist efforts to reduce us into 
economic dependency.

It needs to be recollected that in the pursuit of setting up the public 
sector, Prime Minister Nehru had first approached the USA and other Western 
developed countries for help in setting up a steel plant.

It was only when they refused, by advancing the argument that India could 
buy all the steel that it wants from their companies instead of producing 
it herself, that Nehru approached the USSR which readily agreed.

This, by itself, explains the fact that the Western industrialised 
countries sought to prohibit India's industrialisation in order to make 
India crucially dependent upon them. The public sector, thus, thwarted such 
designs against India and continues to remain the bulwark of our self-

Secondly, the public sector industries were located in areas which were 
economically backward. The public sector, thus, played an important role in 
creating to an extent economically balanced development in the country.

The tendency of private capital is always to concentrate in those pockets 
where infrastructural facilities exist to enable them to make greater 
profits. Islands of prosperity in vast oceans of backwardness would be a 
source of constant and serious instability.

Thirdly, the public sector also performed a social role. It was not only 
the largest employment provider in the country but also advanced the goal 
of social justice by implementing the constitutionally guaranteed 
reservations for the scheduled castes and tribes. The private sector 
currently refuses to do this and would be loath to do so in the future as 

Most importantly, however, is the fact that the political independence of 
any country is crucially dependent upon its economic independence. Any 
erosion of its economic sovereignty will sooner than later impose 
restrictions and lead to the erosion of its political sovereignty.

This process is becoming increasingly clear as the Vajpayee government 
relentlessly advances the agenda of liberalisation, globalisation and 
privatisation in India. Saving the public sector is, thus, vital for 
safeguarding India's economic independence.

Safeguarding India's economic sovereignty, in turn, is vital to 
strengthening its political independence and protecting its people from 
economic enslavement by foreign and domestic capital. Only a government 
that can do this is able to protect its people. Such protection is the 
essential pre-requisite that enables any government to serve the people!

Managers and owners

On the contrary, it is precisely this that the Vajpayee Government seeks to 
do  the mortgaging of India and the erosion of its economic sovereignty. 
This it does because it is a government that instead seeks to serve the 
interests of foreign and domestic capital. It is a government that does 
disservice to the people and the country.

That is why scores of Indian workers joined by their brethren from all 
other walks of life arose united in defence of India on May 21. This was a 
clear signal to the Vajpayee Government that the policies pursued by it are 
not in India's interests and not acceptable to its people.

In the final analysis, it must be understood that the public sector, 
created through people's savings and by people's labour, is the property of 
the Indian people. Governments that come and go, only act as the managers 
of these assets. Now, no manager can sell the property without the 
permission of the owner. If the manager seeks to do so, then the owner is 
left with no option but to sack the manager.

That is precisely what the Indian people shall do. If this Vajpayee 
Government does not halt and reverse its economic policies in general, and 
privatisation in particular, then the Indian people, as the owners of the 
public sector, have to sack this government, who should act as the manager 
but is bent upon selling these assets without the owner's permission.

* * *
Communist Party of India (Marxist)

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