Panel-discussions on economy are somehow always strictly “FOR” and “AGAINST” – the recital in shrill binary, (in our Country we funnily carry no concept of a “GREY” in between) and lo! – a delicious recipe for a grand panel-discussion on the “economic situation” of our country on the evening prime time! The group “FOR” would fall from the high-skies – on suggestions that something is very wrong somewhere much in tunes with a Clifford (in DH Lawrence’s Lady Chatterley’s Lover) having received (outwardly) the terrible blow from a Constance’s letter seeking divorce and murmuring to himself…… “And that is how we are. By strength of will we cut off our inner intuitive knowledge from admitted consciousness. This causes a state of dread, or apprehension, which makes the blow ten times worse when it does fall.” The “AGAINST” sees “blunders” of magnitudes not to be comprehended – and it’s not much a while which could see us all running for covers!
I thought it could be worthwhile trying to analyse in simple terms why actually is it that our boys and girls go jobless, those that were fortunate to get a break after their masters, got their pink-slips fast; why are cars and flats not selling; why those of us who painfully manage a small or a medium enterprise do not easily get our funds; why do we not find labour – who mysteriously retire to their villages in the North for Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) earnings; why did out-going FDIs more than double last year whereas incoming FDIs rose just 6% or why is the farmer of India still in huge debts?
The point is one of a) accepting that things are indeed not rosy and b) priorities on course-corrections. I’m not one of those that would predict the doomsday reaching us any moment and rush to order our headstones – neither do I blame Nehru for dwindling exports.
The Warning Signal: It’s pretty disquieting that our quarterly GDP is down from 8% last year to just 5% this quarter. But that hardly means anything to the man on the street. He better knows that growth in manufacturing activity is down to just 0.6% (from last year’s 12.1%) even after ambitious plans for “Make in India”, “59 Minute-Loans”, the Skill India, the Start-up India and the “Mudra” have all been launched. The farmer must know the growth in his activities are down from 5.1% to just 2% even after proclaiming 50% of costs are his profits, it’s no wonder that construction worker perhaps find better hopes in MNREGA payments at his village rather than in construction projects where the growth is down from 9.6% to 5.7%, or that real estates and financing is down from 6.5% to 5.9%.
So, my question – where will jobs come from then or is the urban unemployment rate at 9.6% a surprise? The Ministry of Micro, Small and Medium Enterprise (MSME) liquidity was arranged thru permissions for restructuring their loans still the bad loans from this sector stays stuck at Rs 90,000 odd crores. So how will the MSMEs raise their funds? If the World Economic Forum’s “Global Liveability Index 2019” of Delhi slips 6 points to 118 and that of Mumbai 2 points to 119 out of 140 cities, how do you think manufacturing Inward FDIs would increase?
My Take: We did take positive steps in the Financial Sector – for example with the Insolvency and Bankruptcy Code in place we have been able to stop the growth of NPAs and amounts of around Rs 3.6 lakh cr reportedly recovered in the last four years. The outstandings remain however, gargantuan – lot more should be coming I suppose.
I am not sure how the mergers of the PSU Banks would materially help – if smaller units cannot be managed efficiently and accountabilities fixed only on a few clerks, how can a behemoth be managed by the same bunch of managers who are managerial and domain adeptness remains a matter of serious concern? With a huge capital structure and with Rs 70,000 cr fresh infusions to cover these inefficiencies, I think we are inflicting huge risks on the tax payers’ hard earned savings. I would rather advise – these PSU Banks be reorganised and re-trained sector-competency wise – say Central Bank should specialise in infrastructure, BOB say specialises in MSMEs, PNB say in imports and so on – this would entail better focus and domain expertise – so as to prevent delinquencies and instill competition.
I think the Government should keep on abeyance all non-economic matters howsoever important they could be for a period of say 12 months. Matters of importance like renaming of cities or finding out glitches in the NRC, building temples and statues with potential for defocussing executive attention and concentrate only on economy and 3-year targets with 6 months milestones set up. For example, in the 6 months period a bunch of reforms should be implemented, say agricultural exports, textile, tea and coffee exports. I think downsizing of the Government is of utmost importance – you may not be surprised that whereas nearly all indices turned south last one year – one number increased and that was the Public and Other Administration costs, up from 7.5% to 8.5%. Instead of increasing retirement age I would advocate reduction in retirement age in government establishments.
But the core thrust should shift to increasing private investments – which as I said is on the downslide. For this, creation of demand is essential – this would be best done thru better distribution of wealth and rationalisation of the tax framework. I’m sure we will see actions on these points soon.
And in conclusion: A freehand to professionals and domain experts and institutions – who would be ready to speak the unpleasant –much like Constance in DH Lawrence!
(Binayak Datta is a
finance professional)
