The GDP growth has stunted at 5% as per information released by the government today. Given the unprecedented manipulation of government data and statistics, I hope it is not worse.
The finance minister, Mrs. Nirmala Sitaraman, announced a series of sops just the other day, strengthening the banking sector by infusion of Rs.70000 crores liquidity. She also announced of relaxing the Bharat VI norms for the cars targeted by 2020 and retreated over the hasty announcement over the introduction of electric vehicles. Older vehicles of the government can be replaced with new ones. MSMEs would be adequately supported, and banks would pass the benefit of rate cuts by the Reserve Bank. She also announced the withdrawal of the proposed surcharge on the Foreign Portfolio investments and exempting startups from angel-tax.
The stock markets reacted in a muted response, neither the slide of the rupee could be arrested.
The next act of the government was unprecedented though discussed for the past few weeks. It withdrew Rs.1.76 lac crores buffer lying with the Reserve Bank of India. This exposed the seriousness of the economic scenario not much spoken about. It will be interesting to see as to how the government spends this money, a huge windfall. The largesse will help contain the fiscal deficit to 3% in 2018-19.
Today Sitaraman further announced a major banking reform of merging ten public sector banks into four. The merger though may reduce operating costs marginally, or average out the NPAs, will not impact the GDP growth significantly.
I guess now that the figure of 5% having been announced, there should not be a delay in further loosening the strings for the trade by reducing the lending interest rates. At the more liquidity should be encouraged into the banks by hiking the deposit rates. The weak 2% agricultural growth needs a boost and cannot be done by merely giving subsidies to small farmers. Large scale mechanized farming should be promoted for higher yields and lower costs.
Amid shortfall of revenue and tax collection, the RBI tranche is a welcome step, which will undoubtedly increase the currency circulation. But the slower consumption demand and weaker investment sentiment is a mind-matter, which has to be reversed by the government alone with its transparent and well-laid policies. The trust deficit between the government and the industry has to clear soon.
For the critics of the government withdrawal of RBI funds, is like a critical case requiring a rare group of blood and a member of the family comes forward to offer to save and cure the patient. I do not see anything wrong in it, provided that the blood goes to the patient’s speedy cure. The Reserve Bank of India, in 1991, had to airlift 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of Switzerland to raise $600 million. Did anyone criticize the government? I don’t remember any!
Lastly, I was thrilled to read the commencement of the manufacture of iPhones in Sri City by Foxconn. The US president Trump has been hinting the China-based American companies to look for alternative manufacturing centers. India could fill the void if the trade war between China and the US escalates.
Let us for once keep away petty politics and keep our national interest supreme and move our country forward and higher.
Sampath Kumar
Intrépide Voix
