Economic Highlights
New Delhi, 30 December 2019
GLOOMY
2019
POLICY
STIMULI WISHED FOR
By
Shivaji Sarkar
A year passes with some gloom and the New
Year enters with hope and aspirations. 2019 has had both good as well as heated
moments. Expectations are high from 2020. Both the Industry and the common man
are wishing for a lot from the new Budget, a month away.
By now they are cheesed off from
Manmohanomics and expect to have an effective Modinomics that should ensure
growth, reverse slowdown, bring down taxes, safeguard savings, ensure higher
interest returns, healthier and cheaper banking, low-cost transportation and an
end to successive downgrades.
The wish list is long. It goes on increasing
as finance ministers across different governments speak the same clichéd
language. They have committed similar mistakes, similar losses and except for
occasional euphoria, the country could hardly come out of the difficulties.
Reforms are confusing. Governments are
implored to do structural reforms but the window is getting narrowed.
Accumulated reform action and policy stimuli are being watched to give returns.
The government is hit by inflations and
higher spending. Except during the time of NDA-I led by Atal Behari Vajpayee
not much effective action was taken to keep inflation in check. It ensured
growth, end of unnecessary queues from ration shops, to LPG stores, to driving
license to telephone companies and an affordable regime. In fact with such ease
of life, ingrained corruption too subsided.
It’s a wonder why successive governments
could not do that. Manmohan Singh is credited for liberalising the economy as
Finance Minister in 1991. But there on it followed up with tremendous siphoning
of funds from banks and financial institutions. The NDA-I set up systems to
stem it.
The process also followed ushering in an era
of strengthening of rules, suspecting people and repeated KYCs and submission
of identities, PAN and TIN numbers since UPA-I. Though the aim was honest, it
complicated access and delivery by most institutions. Everyone felt hassled if
not harassed.
With each year complications have grown. The
governments introduced laws that increase unease of the people for instance a
stringent, irrational new Motor Vehicle Act has increased rates for hush money.
The toll instead of becoming a facility has become extortion. An unnecessary
‘fastag’ on highways appears extortive to support an exploitative system.
Everyone wonders why after realizing Rs 1
lakh crore from fuel cess of Rs 10 per litre and paid by every citizen for road
construction, should there be a system of toll. It delays and adds to the cost
of travelling. The very concept of toll torments farmers, villagers, travelers
and transporters, who unfortunately but probably the governments consider are
super rich.
It fails to realise that the multiple
taxation, despite is inflationary and brunt, has to be borne by the official
machineries. This adds to the cost of governance, discomfits people and
discontent grows. The present protests against citizenship laws are mere
pretext of the people to express their anger. On the eve of the New Year it has
further slowed down the economy contrary to pacing it up.
The Reserve Bank of India, the International
Monetary Fund, and various rating agencies including Moody’s scaled down GDP
projections. On the monetary side, a cumulative 135 basis points easing since
February 2019 is yet to spread out. The premise is based on a notion that
industrialists need relief on account and be allowed liberal and low-cost financing.
This has been rigorously followed since 2008.
It ignored that the banks – people’s savings - had been the worst sufferers
leading to high NPAs – over Rs 12 lakh crore and writing off large loans. It
has led to hit credibility of even public sector banks (PSB) and financial
institutions. The RBI has now come out with the fact that most of the MUDRA
loans given for encouraging start ups and small entrepreneurs have turned into
NPA.
The nation has initiated favourable system
for the industry, including corporate tax cut to 25 per cent. On the contrary,
the industry has been sitting on its reserves, which was at Rs 2 lakh crore
about seven years back and has swelled since. The lobbies have only been
demanding more funds from bank, custodian of people’s deposits, on pleas of
boosting industry. It has continuously been misused and the banks have gone
into severe problems because of supportive actions at official level.
They did not check whether such interventions
were ethical or not. No official agency should have right to facilitate such
loans. Industry ethics too is suspect, as 50 large houses as per Economic
Surveys are the largest defaulters. This has led to the collapse of banking
system and thus being tried to be salvaged through mergers.
Even as 2020 is at the doorstep, no concerted
view was taken to safeguard the system of banking and FIs. Instead, the banks
were defrauded of Rs 95,700 crore between April and September 2019, Finance
Minister Nirmala Sitharaman had told the Rajya Sabha.
The regulators too have ignored the
continuous erosion of values of mutual and so-called pension funds and
irrational rules that gobble up beneficiaries’ funds without allowing them
refund. Ultimately, this leads to cheating and siphoning of funds by most private
MFs. The IRDAI has been lax.
Such negligence at different levels shakes
the confidence of investors and erodes financial stability. The policy makers
need to have holistic thinking. Despite pressure from the industry, the
government needs to severely check grants of loans. An errant system needs
correction. That may change the course of the decade beginning with the New
Year.
The obsession to privatise at the cost of the
PSUs also needs a review. The deals with Aramco of Saudi Arabia for BPCL or
ONGC takeover of Gujarat Petro are wise or not needs reassessment. The nation
has to learn from the Air India and BSNL debacle, wherein strong PSUs were
lost. Neither did private players help the economy, be it Jet, Kingfisher or
various other telecoms or other giants. They are thriving on delaying payments
of the government departments or agencies.
There is need to take a view on high
petroleum prices despite low international crude prices. The rate cut has
helped none but caused despair among savers. This needs a review and interest
rates must firm up to encourage investment.
Despite the gloom, 2020 is expected to change
the lives of the people for better. But the people at all levels, having seen
some of the recent disruptions, expect that the year would be more rational and
have fewer restrictions and apprehensions. If this happens, the nation could
take a leap.---INFA
(Copyright,
India News & Feature Alliance)
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