As usual, there is hue and cry at a mere 5% growth and a section appalled with the fall in the sales of auto-sector. I wrote just the other day about the travails of the auto sector, compounded by our country’s pretentious high standing in adherence to every global agreement, be it fiscal or environmental.
Each promotion of Bharat stage concerning auto-emission, the Bharat VI targeted for 2020 is fraught with huge investments and revisions in the engine manufacturer. India, complacent with two or three models for nearly five decades after independence is hungry for newer fancy models of cars and diesel guzzling SUVs. The auto industry was stunned with a cavalier announcement of a switch-over to electric vehicles by 2025, as it would have warranted a complete re-jig of existing production lines. The heavy vehicles manufacturers could not bear the pressure of the new axle norms reducing loads across all trucks, resulting in steep fall in the sales. The truck sales were the worst hit, down by 60% in July and could be 70% in August for a company like Ashok Leyland.
The realty sector is also struggling and may not be able to enthuse buyers too soon, despite the marginal reduction in the interest rates. Exports- ditto and the position have not altered since my last report.
The infusion of capital to the extent of Rs70000 crores could help the banks with better liquidity and lending. The banks are scared to lend, should there be a default and the enforcement agencies haunt their residual lives. The distrust between a bank and its client could not be worse and impedes any foreseeable growth.
I must add that the NPAs of the banks have not appeared in the last few years but has been happening over the last many decades. One merely had to be politically connected to enrich himself and hurry to a foreign country, leaving his defunct company in limbo. Most properties auctioned under the Sarfaesi Act are grossly over-valued and are deeply discounted while offloading by banks.
Under a 5% GDP growth situation, a massive infusion of capital into the economy is pertinent, and the government’s nudge to the RBI in releasing the surplus reserves is not altogether wrong. We have seen weak growth in UPA’s tenure with 5% in 2012-13. The third quarter of 2013 saw 4.2% only.
From a $2.03 Tn in 2014, our economy has grown to $2.97 Tn. in 2019, which is a 46% growth. Much of the present woes are inheritance from the past regimes, which have systematically destroyed integrity and transparency in governance: examples- defence purchases, 2G, Satyam, Coal, Chopper, CWG, Adarsh etc. The systems are getting cleaned up, banks are getting disinfected and bureaucracy honed. There is resistance to all these, which will be a passing phase.
Many love to criticize the government, which is all they can do. There may not be a better idea than pumping money into a strained system to be revived, and only a government can do it. The fall in GDP growth may not be necessarily due to demonetization or GST alone but could be due to an international slowdown as well. Merely gloating over government’s discomfiture is unprofessional and malignant. I am of the firm opinion that the mood will brighten up with adequate monsoons and better Rabi harvest.
My suggestion to the government is: stop acting like a developed economy, there are still a lot of poor people in India, regardless of what your data may state. Any delay in the release of figures defeats their credibility.
Jai Hind
Sampath Kumar
Intrépide Voix
