Edit & Opinion

Replace IMF-WB rip-offs: Time for new economic model

The latest privatization of five Government entities is a move to raise Rs 1.05 lakh crores by diluting Government equities. Simultaneously the gasping private telecom companies have been given two more years to pay Rs 1.47 lakh crores of Government dues.

Alongside, State Finance Ministers of Kerala, West Bengal, Delhi, Rajasthan and Punjab have sent an SOS asserting they are facing “acute pressure” on their fiscal situation due to delayed payment of their GST share.

Add to this the Reserve Bank of India has initiated insolvency proceedings action against DHFL which has liabilities close to Rs 84,000 crores of which Rs 19,000 crores was diverted to its related entities, according to KPMG’s forensic audit. Undoubtedly, it is one of the largest swindles after the IL&FS scam in less than two years and is responsible for one of the worst financial crisis leading to the crash of the PMC bank.

Certainly, the SEBI tells listed firms to disclose default within 24 hours from the 30th day of the month. It also raises portfolio management schemes (PMS) to Rs 50 lakhs from Rs 25 lakhs which indicates that the sector has more to spill out than apparent.

Importantly, this has hit the growth of different sectors and jobs are not easy to find. The Government’s own data and the latest Care Ratings study on employment growth shows that the slowdown is affecting the job market. It has come down from 3.9% in 2017-18 to 2.8% in 2018-19 as core industries witnessed virtually negative growth in hiring. Even the booming secondary sector of services and IT now appear to be gasping as packages are reduced. Worse, consumption is coming down as per data.

Clearly, certain experimentations like note-ban have not apparently helped. True, the year of the ban witnessed 16.9% growth in jobs but the following years show critical trends. The NITI Ayog Vice Chairman has now a second opinion about this shaking event.

Does it mean that black money s really not that dark as it is painted?

Undeniably, the Modi Government should see it as an opportunity and not a problem as the economy has never been easy for any Government to understand.

Is there something amiss in the financial sector? Has the 1991 promise of liberalisation and a new finance model, euphemistically called Manmohanomics, not succeeded? No one answers this question. Neither does anyone try to look for a new model or initiate a discussion.

In the face of this, another spree of disinvestment in bluechip companies like Bharat Petroleum, Indian Railway’s Concor, Tehri Hydro (THDC), North East Power Corporation and a move to transfer management control of a few others is not easy to understand.

The Government often states that it is not its job to manage business. Indeed, if this is correct it speaks volumes. It can even lead to a question whether there should be a Government or not.

Are the private corporates efficient? The answer is again a no. Does it mean that neither the Government nor the private sector can manage economic affairs?  The nation needs to find the right model to come out of the morass which is leading to rising prices, large swindling, larger extortion by banks like SBI and higher rate of failures of private sector companies and systematic move to hand over the country’s navratnas to the same private player.

The nation has seen that conspiratorial mergers of Air India and Indian Airlines led to momentary profits of some private sector giants like Jet Airways but ultimately they failed the country.  Now Spicejet is in a billion dollar crisis. Other airlines too may not be in ship shape. As it stands developing airfares are bound to create new records.

Besides, the recent mergers of banks have shaken public confidence. People feel their deposits are in unsafe hands and are questioning the “success” of the largest bank, SBI which earns more from levying illegal and unethical charges on depositors than from its core business.

Further, the PMC bank failure might not be an isolated incident in the cooperative sector as monitoring of 1542 urban cooperatives and thousands of rural cooperative banks is weak. Else it would not have been possible for the RBI to ignore the links between DHFL’s Chief Wadhawan and HDIL. A whistle-blower who sang and sent an alert was ignored! This failure is leading to an untold crisis of confidence in the finance sector.

GST too needs a relook. Levying it on small units has led to closure of many units — a reason for job losses. It has also forced many entrepreneurs to turn traders, perhaps this might be a reason for slowdown in many sectors.

Arguably, in a situation like this the rising fees in the education sector is setting not an ideal model. It is throwing capable people out as they cannot afford an oppressive model. Additionally, private education is in a financial and ethical mess.

Alas, the Governments are more into window-dressing, including the latest, supposedly one of the largest, disinvestment in an era where private and public are not succeeding.

That is the most critical question. The Nobel Foundation can give awards for poverty studies but they have not given one award for suggesting the right financial model to rescue the world since the fall of the Soviet Union. The following decades have only seen looting of the public sector across the world — the most glaring being the 1997 collapse of the Asian tigers and the 2007-08 Lehman crisis of western giant banks.

Unfortunately, India has got into the IMF-World Bank trap of privatization. It has failed the world even as it claims to be the vishwaguru. It needs to devise a new model and junk the old.

The Modi Government has the opportunity to call for an open and structured discussion on the failure of the private sector across the world. The country needs an effective solution and sustainable new economic and financial model.

Successive failures for three decades of the private sector are not cause for celebration. It definitely calls for looking at the era of building the public sector and nationalization of the 1950s and 1960s. That was the era when private loot was stopped. Post-1991, the same loot model was reinforced and to justify this even people-oriented banks were forced to become exploiters.

In sum, piecemeal steps by the Government will not solve the most critical problem of public welfare. Let the people and Government come together for a new economic model. If that means selective closure, as the nation did in case of RCEP, let it be so.

…INFA

 

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