Having completed three years of rule of the five year tenure, the BJP headed government has openly accepted that the economy of the country has slowed down. The Central government was unable to dispute the GDP growth of 5.7 per cent, the lowest in the performances witnessed during the 13 quarters since April 2014. The union finance minister said that the economic fundamentals are strong and the slowdown would be overcome at the earliest. The enlightened economics analysts are emphatic that the fruits of recovery would be reaped only after 2 years even if consistent and committed initiatives are started now by the government.
Still the move of the rulers continues in the same old fashion of promise – prone speeches unmindful of the outcomes of the follow up action. Instead of effective restart, only rhetoric excess is being carried out by them. The announcement spurt and action initiatives of the BJP government are likely to favour the very rich and the business corporates and simultaneous burdening the poor and the down trodden citizens. The appeasing approach on the exporters was well begun through the stimulus packages which would end in the substantial hike in the foreign exchange reserves of the country by creating positive impact on the balance of payment of the country.
The BJP which assumed power by the promises of unearthing the domestic black money and bringing back its corpus blocked in foreign banks abroad failed miserably. The country wide move of demonetisation of high value currency notes has proved explicitly its insignificant impact on imparing black money besides causing a lot many hardships to the common man, who is not related to black money economy. Invariably all sections of the country’s population are being harassed and monetarily strained by the tax terrorism, introduced as Goods and Services Tax (GST) with complicated interpretation of the ways and means of collecting and remitting the tax to the concerned authorities. Even though the level of taxation has been curtailed for 27 items based on the advice of GST council, the tax burden has not subsided. Still people are compelled to believe that the GST will be beneficial in the long run as advocated during the demonetisation period through ‘wait and watch’ by shouldering the burden for the cause of the growth of economy.
The recovery initiative of the Central Government to unearth black money was introduced as ‘no need to show the permanent account number (PAN) or any other identification to purchase gold above the limit of Rs 50, 000 and up to Rs 2,00,000/-. This package would enhance further the flow of money into the laundering process, weakening the move of bringing the black money out. It is like searching black cat in dark night. By such stimulus of recovery the economy will move through reverse gear, facilitating only the gold merchants to enhance their turnover, resulting the erosion the forex reserves to import of more gold from abroad to match the stimulated demand.
One more reason for the economy slowdown was the dismal performance of banks, particularly public sector banks (PSB), the major driver of credit delivery. Controlling and recovery of bad credit assets (NPAs) are crucial to ensure financial stability and capacity to deliver credit. The PSBs find stress and difficulty in attaining the capital adequacy to match the international standards under BASLE III as at the end of March 2019. The demonetisation exercise has also hampered the normal commercial business activities of the PSBs for the period by deploying the entire work force on the exchange of devalued currency notes from the public. Recently the Finance Minister has announced recapitalization of PSBs to the tune of Rs 2.11 lakh crore ($ 32.43 billion) over a period of two years. The amount of recapitalization, announced may appear significant but the modes of recapitalisation reveal the defeat of the purpose for which it is announced. It is said that the total recapitalisation of Rs 2.11 lakh crore has been categorised as mobilising Rs 1.35 lakh crore through Government bonds. Rs 18,000 crore by budgetary allocations and Rs 58,000 crore by disinvestment of the government stake in equity. The mode of mobilising Rs 1.35 lakh crore is vicious. The PSBs have to lend to the government for the issuance of government bonds and the money mobilised by the process would be ploughed back into banks in the form of recapitalisation. It is like borrowing by the government by left hand and recapitalising the bank through funding by right hand. What is the real effect of it in the capital adequacy of the banks which has got vital bearing on the lending capacity of banks?
Overall, the road for recovery from slowdown is not correct and the modes of journey announced are not likely to bring substantial improvement of the economy even in the longer run. Besides, the elimination of subsidy for the ration items under the public distribution system would aggravate hardships to middle, lower and downtrodden sections. It will add fuel to the fire ‘price rise’ of essential commodities when no specific plan is announced to put it under check.
When the earlier rhetoric promises are still pending for accomplishment, the stimulus packages, announced remain unbalanced and unjust which would widen the gap between haves and have-nots, resulting in wider economic disparities. The course correction moves itself need many corrections indeed!
