I am happy that Rajiv Kumar, the Vice Chairman of the Niti Aayog, had braved and remarked of an ‘unprecedented liquidity crisis’ that has affected India. The Finance Minister, obviously aware of the crisis, soon after that announced a plethora of relief covering many segments, Auto, Housing, FPI and MSME in particular.
Banks have vast deposits, and in the face of poorer trade activities, there are no borrowers. The lending terms have also become stringent, with the collaterals tightened to include the directors. From a high of 7.2 GDP, the year is being recast to 6.2 by rating agencies. Merely by loosening the purse strings of the banks, no miracle can be achieved. I wonder how much money was disbursed on the PM’s 59-minute promise of collateral-free loans of up to Rs. 1 crore to MSMEs? That would explain the reality.
I did write on the impossibility of any substantial GDP growth in the absence of enormous government spending on infrastructure. There is the talk of Rs.100 lac crores to be pumped into infra development, which is long overdue. The sops and subsidies that are announced every year in various names and formats for the benefit of the poor and weaker sections could be creating a nation of the reluctant workforce, who are happy returning to their homes and enjoying the doles doing practically nothing. The shortage of workforce in the urban areas is intensely now. Capitalisation of the money spent on welfare should be the focus of the government.
Farmers want to sell off their lands for a windfall gain as the land prices soar. Manufacturers do not want to invest. Realty sector is in shambles, and the sickness has percolated to the service sector too. The pains of the export sector cannot be all mitigated by India alone, as several global changing scenarios influence it. These could perhaps reveal the depth of the problems that the government can alone address with the infusion of huge funds into infrastructure.
The global trade is churning with the standoff between the US and China. The US president has warned of 30% tariff on Chinese products from Oct 1, which presently have 25% cess and the Chinese have threatened to retaliate appropriately. The US president has also remarked that it is time that the US looks for a country other than China. Better infrastructure and cheaper financial costs could help India garner a portion of this trade.
Notwithstanding the apprehensions, India has weathered even worst storms and will conquer the present difficult period. I did not miss Subramaniam Swamy’s advice to abolish the personal income tax, increase in Fixed-Deposit interests and reduction in lending rates. It could be a bold move rather than periodically bailing out PSU banks at the cost of taxpayers’ money, besides strengthening the liquidity of the banks while encouraging more borrowings for overall business growth.
I keenly await the government’s next move of economic reforms but add that a 6-6.5% growth should be an acceptable figure for India in the present circumstances.
Sampath Kumar
Intrépide Voix
