India waved a green flag to unlock the capital in smaller airports two years ago. However, the plan is not very assuring. It is worrying for investors that privatization of all the six airports on the block went to one bidder.
The disturbance has hiked as the multimedia reports say that Gautam Adani, Gujarat-based billionaire, early and fervent supporter of PM Modi, may also get the already privatized Mumbai-airport and the new one on its outskirts.
If we have one tycoon owning several airports, natural monopolies, is not a good news, especially for airlines, businesses operating in the premises, and fliers. There is a broader trend going in the country for the concentration of economic power in the aviation infrastructure. Similarly, in other businesses where the key ingredient is the supplies of government like the telecom spectrum.
In the Current Scenario, Foreign Investors Ardor in India is Unclear
Investors are worried that there may not be enough space in the market due to the dominance of narrow capitalists. They may not be willing to compete since, in most sectors, state policy determines the winner. The business class in India overextended apart from certain exceptions. It is confined in the rubble of assets built on the loans from state-run banks. These directed loans are from pliant money lenders, where a call can decide who gets the credits.
However, it is tough for India to carry on this way. In the post-COVID-19 world, government-owned banks of the country would require about 28 billion USD in external capital for at least two years. It would raise the loss provisions in the rancid loans to 70%, says the Moody’s Investors Service (1). They further added that gaining such capital would also help banks double their credit scores from the previous financial year by 4%.
The capital must come from an organization that can’t keep a lid on its borrowing costs. Hence, there is no question to recover the economy sharply and fueled with credit recovery. It could be why the policymakers are letting tycoons with the healthy financial muscle take what they can.
The investors got a new ray of hopes when India unveiled a new bankruptcy law in 2016. The investors were expecting an equal chance to take productive assets from weak hands. However, this may not be where the country is heading. The government of India must ensure a competitive economy with state assets. Else, the corporate in India, may start looking like a board of Monopoly.