Economic Highlights
New
Delhi, 9 November 2020
Wasteful
Nation
RIGHT
SPEND IN QUESTION
By
Shivaji Sarkar
Periodic festive
post-lockdown sales are not indicators of the economy booming for sustainable
development as the slump may loom large. There is no denying that problems are abound
in finances, high government and corporate debt and pressure on banking hit by
low unsustainable interest rates. The Indian economy has the capability to
sprint at 9 per cent with extreme favourable policies and around 7 per cent
with constraints but actually the September growth in some sectors and
contraction in others raises concern of sustainability.
The narrative that the
six-month lockdown has caused massive damage to the economy is partially
correct. It aggravated a situation contracting for about 22 months. The 23 per cent
contraction (minus growth) is only an indicator that doctors failed to read the
pulse as physicians are wary now about the illusory disease and its existence.
The lockdown has certainly exacerbated a situation which could have been
stemmed with the right prescription.
The ratings firm ICRA has
sounded an alarm that the September recovery may not be sustainable. It says
that intra-State goods movement and GST e-way bills increased 9 per cent from a
year earlier against August contraction of 3.5 per cent. But rise in auto
production (11 per cent), power generation, petrol sales are not reflected in
actual retail growth. This apart the calculations are against the massive 23.9
per cent slump. It does not see it sustaining beyond November festivities.
The part positive outlook on
exports makes ICRA cautious as improvements in non-oil merchandise exports may
get hit in the fresh waves of supposed COVID-19 emerging in many trading
partners.
HDFC bank’s CEO Aditya Puri
says the problems are far from over. Cars and TV sets flying off the shelves
hold out promise of a return of 9 per cent growth. But the rebound is patchy
and the country may end up with 9.5 per cent contractions at the end of the
year, as per RBI projections. He says if semi-urban rural India grows and there
are right infrastructure spends 7 per cent growth is not difficult though it
might take three years.
The skewed lockdown has
devastated the hotel, tourism and eatery industry that just started to get even
with finances after a two-decade struggle. Even private health care sector has
taken a hit. Nobody questions how the car scrapping policy costs citizens a
fortune, severe wealth loss and increases poverty. It merely helps the middle
men and politicians in cahoots with auto sharks. This needs a deep probe.
India’s manufacturing share
in the economy has gradually reduced. While the ‘Make in India’ initiative at
its nascent stage may turn the tide, the competition in the region is high with
Thailand, Malaysia, Vietnam and Bangladesh. Services have done relatively
better in India, though without manufacturing it may not be easy to sustain it.
The right spend is in
question. Since 2016, the country is going through many man-made critical
situations that contracted the economy continuously with some better patches in
between. If the surging gold prices are taken as an indicator, it means apprehensive
investors are shying away from making the right investments.
Unfortunately, the country
has opted for wrong priorities. The excessive repeated rebuilding of highways
or choking the national capital territory with roads that are not needed like
the one proposed to Baghpat or projects such as Jewar airport or invasive
continual construction of excessive infrastructure. Extensive concrete
constructions as in Bihar, Odisha, in the new State capitals in Chhattisgarh
and Andhra Pradesh, eroding hills in Uttarakhand, Himachal Pradesh, North-East and
Jammu & Kashmir are damaging natural systems of the Himalayas and the fragile
ecology elsewhere.
Undeniably there’s a strong case
for constructing less as the natural disasters are man-induced. The recent
flooding of Hyderabad or a few years back in Kerala is testimony to the massive
damage human hands have done. The cost of the disasters are estimated but not
taken into financial accounts. Rather these become sources of further erosion
of financial mismanagement.
The UN office for Disaster
Risk Reduction has revealed that India is among the top five disaster-hit
countries with $79.5 billion losses between 1998 and 2017. Yes, the country has
been committing mistakes repeatedly irrespective of the party in power.
Wasteful expenditure has sadly
become a national character. The latest being the unnecessary new Parliament
building or redeveloping a developed New Delhi Central Vista costing over Rs
22,000 crore, irrational Rs 1.1 lakh crore bullet train, Rs 6000 crore high-speed rail corridors or several
six-lane toll highways (many of these are being rebuilt). The nation has simply
not learnt from the mistakes of hi-fi Hyderabad, Bengaluru or collapse of
Amaravati and Raipur.
One could argue that people
need houses. But a third of new residential constructions are unoccupied in
most cities. Jewar or Amaravati type constructions are promoting speculative
activities causing severe drain on the economy, severe pollution, difficult
living conditions and citizens being penalised. The banking system, once
world’s best, is collapsing for irrational projects, populist accounts, larger
non-repayment of debt and higher operational costs.
India is now one of the most
degraded countries on the planet with no national policy on spending, securing
of public sector units, banking, farms and land use or car scrapping that
benefit the sharks.
The 2014 General election
generated hopes of corrections. The BJP made right noises before the polls. Prime
Minister Narendra Modi instilled hope. But somewhere the system got derailed
and perpetuation of irrational policies continued. The knee-jerk reactions such
as demonetisation, stressing on wrong construction priorities at the cost of
denuding the banks, imposing high cost on travels through high fuel prices,
cess and tolls (for which the previous regimes were criticised) have only
exacerbated the economy.
The promised jobs, a crore a
year, could not be provided as the state went into penury. The lockdown has now
made income sustainability difficult as job losses rise despite the unlocking.
The exploitative situation, legally denying rights to the labour and farmers,
reminds of the heavy industrialisation of 18th and 19th century Europe with its
concomitant exploitation leading to the rise of Karl Marx and Friedrich Engels.
Course correction is
imperative to check the slippage to a deep crisis, symbolised by many delayed
payments by official organisations during December 2019 and March 2020. In turn
the private sector, during that period itself, had started tightening belts.
A national dialogue is
needed to turn the morass into an opportunity. Modi, skilled at taking
decisions, is capable of initiating it and tick the right boxes. Time, however,
is the essence. ---INFA
(Copyright, India News & Feature Alliance)
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