Edit & Opinion

Gloomy 2019: Policy stimuli wished for

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

 

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