It is recession time and PSUs are the last resorts

If there is anything that global slowdown has pointed out before the world ever sharply, it is the durability of PSUs as compared to the private sector companies. It seems like the socialist regime is back again to control the world with public sector undertakings faring much better than their private counterparts. Country like US where capitalism is the basic word in economy and most of the top rated companies are under private rule, the intensity of recession is felt more deeply.

In India, when leading private sector undertakings are witnessing a gradual decline in the rate of profitability, it is the PSUs, which are going steadily and strengthening its base. This sector is now looked upon as a stable segment of Indian economy which has the potential to reassure solidity and economy of scale. Even the investors have realized the importance of PSUs, which is revealed in the fact that LIC?s market share in collection of insurance premium was 60%, which is a 4% increase from 56% in the same period last year.

The PSU banks have not been least affected by the global financial crunch and on the contrary, it has continued to increase their business and profitability. In the 3rd quarter (October-December) of 2008-09 mobilization of many private sector banks has dipped but that of public sector banks has increased. Figures suggest that the deposits of SBI has increased by 36% (Rs 1,83,00 crore) while the entire private sector banks have experienced a growth rate of around 24%. When it comes to credit disbursal SBI and other PSU banks have surpassed the private sector banks.

The differences between the PSUs and private sector undertakings is felt more vividly by the fact that in the third quarter of 2008 SBI?s profit increased by 37% and ICICI Bank?s profit rate declined by around 3.5%. Bharat Heavy Industries CMD K Ravikumar opined that innovative and conservative approach of the PSUs along good corporate governance is the secret of success for these banks even in recessive times. PSUs were able to face handle recession much better than the private ones since they had highly dedicated and motivated workforce. A major point highlighted by a PSU chief is that public sector companies offered job security to the employees which motivated employees during these trying situations.