Economic Highlights
New Delhi, 25 November 2019
Replace IMF-WB
Rip-Offs
TIME FOR NEW ECONOMIC
MODEL
By Shivaji Sarkar
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
(Copyright,
India News & Feature Alliance)
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