Economic Highlights

New Delhi, 17 December 2018

Loan-Waivers Not Solution

DELETE IT, TOLL, BANK CHARGES

By Shivaji Sarkar

India’s economy is in a cyclical phase of loan waivers as the Congress comes back to power in three large States.

Banks with people’s deposits, not Governments’, seem to be an easy prey. Nobody is addressing the distress of the farmers. Four years back, in 2014 there were loan-waivers and now again it is happening.

There is a problem of perception too. The new RBI Governor Shaktikant Das says that the Government is not just a stakeholder, it runs the economy and manages financial institutions.

Das is correct to the extent that it manages the institutions. That is the task the Government has been given by the people. It has to be as per people’s wishes and not as anyone in Government decides. Alas! People are rarely even consulted.

The economy is run and managed by the people --- entrepreneurs and financial institutions. The Government is an institution that was formed by the people to take of care of issues of daily management as a custodian and not owner. The Governments’ that adhere to it, as possibly the Atal Behari Vajpayee did and to some extent the United Front functioned, made the people happy.

So the Governments’ of any colour have to adhere to the basics and should not have euphoria of numbers. People want that as custodians of people’s money and the manager of institutions, the Governments’ protect their wealth and help increase it.

Since 2014 seven States have unveiled loan waivers totalling nearly Rs 182,802 crore. Agriculture economist Ashok Gulati reckons that the total farm loan-waiver may touch Rs 4 lakh crores in the run-up to the general elections in 2019 as other States join the fray.

Let the nation not feel that sudden changes in the RBI have made the stock market buoyant. In March, 1992, also this had happened. It later opened up a can of worms --- the Harshad Mehta stock scam. The present one may be a real boost but the stock market is not an indicator of the economy. Presently, it is definitely not. The reasons for its boost often are behind the scenes operation.

The situation is difficult. The rupee, despite occasional gains, remains volatile, economy unstable, job markets uncertain, investors wary, thus unreal stock movement needs to be seen with a pinch of salt.

For much of this year, the Urjit Patel-led RBI was seen resisting pressure as well as entreaties from the Government, industry and financial firms to ease lending and capital norms for stressed PSBs, particularly those under the prompt corrective action (PCA) framework, open a special liquidity window for non-banking financial companies (NBFCs) with a precarious asset-liability position and push the flow of credit to small enterprises.

Das has not dwelt on any of these specific issues that caused the strain in the relationship between the Government and the RBI.

The political Parties manifestos of the five States were also silent on these issues. Of course, voters do not understand intricate issues. So populism marked it. Finance Minister Arun Jaitley is right in saying that populism does not help in the long run.

Parties practise it to get numbers to form the Government. Ignoring the numbers of finances however causes  problem. The industry, the biggest defaulter in loan repayment, is also known to have withdrawn the largest cash along with many other players before the elections. Why? Everyone knows.

So except for cosmetic treatment not much could still be realized and the public sector banks (PSB) having capital of people’s deposits today are in a severe crisis called the NPAs. It is true this Government did not proffer the bounties. Their predecessor did.

But now once again people have the problem of a cyclical nature of politics. So if this Government is finding it difficult would the next Government do it? Or would they again play with people’s money to which no Government has the right to lay their hands on.

The suffering of the people, forget about mitigating, is increasing. The RBI is supposed to increase the rates to help poor depositors, senior citizens, women and the deprived Jandhan account holders, who put their earnings in the coffers of the banks.

The rate rise is required not just to help the depositors but to protect the nation’s wealth. People’s money is not for the large or largest corporate. The farmer and MSMEs – small entrepreneurs – also have a claim to it.

But loan-waiver creates an unwanted culture. As the elections to the States started, those farmers who could repay also are known to have stopped the repayments. The industry is willfully not doing it. The Government is recapitalizing banks with taxpayers’ money. It is a vortex.

These issues have to be addressed. Farmers’ income through their product sales have to be increased. The farmers are known to lose but the insurance companies are known to earn high profits. This is not welfare. A proper farm policy is a must.

The Parties if they want good governance have to do away with income tax. Citizens are not supposed to pay unnecessary taxes that deprive them of over four months of their earnings. Bank charges have to be lowered.

A relook before 2019 polls is a must. It is not populism but a national necessity.

The Government and Opposition also have to answer why people should pay high road tolls, when they are paying Rs 8 per litre as road building and maintenance cess. Toll is loot by organized mafia. It delays highway traffic, causes harassment and large pilferage. The NHAI is on record of not getting paid the toll and IL&FS would not have collapsed with Rs 90,000 crore losses had there been honesty in toll collection.

Even GST needs a relook. It is tax on tax in many cases.

Inflation as per RBI’s latest monetary policy assessment is bound to jump because industrial products have become expensive. Food prices cannot remain low for long. Rate rise is logical.

The nation’s economy is in crisis. People need succor and protection. 2019 will belong to those who can ensure the relief and safety of banks. Yes, the Government has been given the task to direct the economy, not run it, and it has to do that without hurting the people, their deposits or threatening to play with their wealth in banks or RBI. India needs pro-people, pro-farmer approach for livelihood creation. ---- INFA

(Copyright, India News & Feature Alliance)