To hell with the markets

It sounds like a mandatory social responsibility order on profit making public sector enterprises (PSEs) in Gujarat. Below is the brief from Times of India:

In a controversial order, the Gujarat government has asked all profit-making public sector enterprises (PSEs) in the state to contribute up to 30% of their annual profit before tax to Gujarat Socio-Economic Development Society (GSEDS), set up to support weaker sections of society.

What adds a twist to the story is that many of the companies are listed in the country’s leading stock exchanges. How would the investors react? Well, the PSEs have lost hundreds of millions in market valuation:

‘‘It’s a retrograde step from the capital market point of view. A better way to implement CSR is to ask PSEs to increase the dividend payouts so that the Gujarat government receives higher sum to donate to any society of its choice,’’ said V K Sharma, the head of Anagram Securities.

To hell with the markets? Maybe not. It’s a little bit of an irony that Gujarat is arguably one of the most market-friendly states in the country with strong captialist idealogies. In fact, Mr. Modi recently won the state elections running on a platform of economic growth and prosperity!

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