《PRIVATISATION IN INDIA CHALLENGING ECONOMIC ORTHODOXY》

Introduction1

1.1Public sector versus private sector: the policy debate in India1

1.2 Public ownership in India: origins3

1.3 Winds of change5

1.4 The Memorandum of Understanding6

1.5 Competition and disinvestment10

1.6 The 'Navratna' concept13

1.7 On to privatisation15

1.8 Disinvestment in the banking sector20

1.9 The public sector in the Indian economy21

1.10 Conclusion24

2Privatisation: theory and evidence25

2.1 Introduction25

2.2 Theory25

2.3 Empirical evidence32

Case studies32

Cross-sectional comparisons of public and private enterprises35

Statistical analysis of pre- and post-privatisation performance37

Privatisation in less-developed countries39

2.4 Conclusion42

3. l lntroOuctlon44

3.2 Our methodology45

3.3 Results49

Aggregate data49

Sectoral analysis55

Pre- and post-privatisation performance65

Case studies71

Comparison of industry-adjusted performance of sample firms79

3.4 Conclusion79

4 Comparison of performance in industry, using input-outputquantities84

4.1 Introduction84

4.2 Performance measures and DEA85

Overview of DEA85

Technical efficiency86

Tornquist and Malmquist indices87

Cost efficiency93

4.3 Previous studies and our methodology93

Previous studies93

Methodology: firm sample, output and inputs95

4.4 Results97

Technical efficiency scores97

Malmquist total factor productivity growth103

Tornquist productivity index106

Cost efficiency109

Aggregate results111

4.5 Discussion of results113

5 Performance of public- and private-sector banks in India and the impact of privatisafion15

5.1 Background: Indian banking before and after deregulation115

The nafionalisation era115

The post-reform era116

Reforms and performance118

Public sector banks in the post-reform era121

5.2 Review of literature125

5.3 Methodology128

Comparison of performance using financial ratios128

Comparison of performance using input-outputquantities130

Comparison of pre- and post-disinvestment performance133

Comparison of perormance using Input-Output quantities139

Pre- and post-privatisation performance of listed PSBs144

5.5 Conclusion148

6 Method of sale: is strategic sale the best option?150

6.1 Introduction150

6.2 From disinvestment to strategic sale151

6.3 Does strategic sale maximise efficiency and revenues?153

Reserve prices153

Auctions, efficiency and revenue maximisation154

First-price sealed bids156

Collusion in auctions158

6.4 Empirical evidence160

6.5 Popular misconceptions about strategic sales163

Share-price movements and market structure164

Superior valuations in strategic sales164

Market impact of strategic sales166

A false comparison167

6.6 Conclusion168

7 Governance and privatisation170

7.1 Institutions and governance170

7.2 Governance in the public sector173

7.3 Governance in the private sector177

7.4 Conclusion181

8 China’s privatisation: a synoptic view183

8.1 SOE reform in China: an overview183

8.2 Disinvestments and performance of Chinese enterprises186

8.3 SOE reform versus privatisation190

8.4 Conclusion192

9 Summary and implications for privatisation policy194

9.1 Comparing public and private-sector performance194

9.2 Comparing financial performance194

Aggregate level results194

Sectoral level results195

Post-privatization performance196

9.3 Comparison based on input-output quantities197

9.4Banking sector197

Comparison of financial performance197

Comparison of bank performance based on input-output quantities198

Post-pfivatisation performance198

State ownership in banking versus state ownership in industry199

9.5 Pfivatisation and the fiscal deficit200

9.6Implications for privatisation policy and role of SOEs in India202

Limitations imposed by weak governance202

A role for SOEs203

9.7 Implications for privatisation policy205

References207

Index213