Why nationalisation is bad

Bank nationalization was the pivot of a broader political economy strategy followed in the s—a decade when economic growth barely outpaced population growth. Average incomes stagnated. It was a lost decade for India.

There is no doubt that exogenous shocks, such as rising energy prices or failed monsoons, played a part in the stagnation, but economic policy also hurt. Bank nationalization succeeded in specific areas such as financial deepening because of the rapid spread of branches, but it eventually did more harm than good. Never miss a story! Stay connected and informed with Mint. Download our App Now!! It'll just take a moment.

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Learn more and compare subscriptions content expands above. Full Terms and Conditions apply to all Subscriptions. Or, if you are already a subscriber Sign in. Yet the line was handed back to the private sector in , when an eight-year contract was taken up by Virgin Trains - only to be cancelled in , after the company ran into money problems.

Wages and job security are being slashed. Some industries that have been privatised become so-called natural monopolies, whereby entry into the market is so costly that nobody can compete against the first firm that took control.

For example, privatising the water sector negates the oft-cited theory that privatisation drives innovation and lowers costs, because the creation of a network of separate water pipes that can compete with the owner of the pipes originally handed over from the public sector would be prohibitively expensive. Proponents of privatisation claim that allowing the free market to influence industry drives innovation and improved service, as private firms typically have more operational and financial flexibility than supposedly bureaucratic government-controlled entities.

However, this is not always the case. In , control of maintenance of the physical infrastructure of the railways - including tracks, signals, bridges and tunnels - was handed over by the government to Railtrack, a group of private firms. CityLab reports that by , 38 people had been killed and more than injured in two major crashes on the Great Western Main Line, while a third major crash in in the town of Hatfield killed four more.