The country is having an interesting story to tell as it goes ahead with over six per cent growth, collects more GST revenue, tackles data protection, manages MUDRA scheme NPA and ushers in tighter lending system. This all, as Finance Minister Nirmala Sitharaman has to tackle the demands of the industry, workers and the common man for preparation of her budget.
There could be ease, as the per capita income as per the IMF has jumped 57 per cent. The 11 per cent higher GST mop up at Rs 1.46 lakh crore is a great breather. The government is trying hard to keep the fiscal deficit in check at around Rs 16.6 lakh crore or 6.6 per cent of GDP. The OECD projects growth at 6.6 per cent for the fiscal year. The NSO found 13.5 per cent growth in the first quarter but moderates it to between 6.1 to 6.3 per cent in the July-September period. The last two quarters may be a bit less. The core sector growth in October touches 0.1 per cent against last year’s 8.7 per cent.
The GDP in the second quarter was Rs 38.16 lakh, higher by Rs 6.3 per cent over the last year’s. The growth is in sync with RBI forecast. But the ongoing monetary tightening and the global slowdown pose problems. Lower manufacturing output by 4.3 per cent at Rs 5.98 lakh crore is a concern. Though economy’s gross value addition is at Rs 35.05 lakh crore, a rise by 5.6 per cent has given a moderate to private consumption. It rises by 9.7 per cent to Rs 22.29 lakh crore.
The government capital expenditure has expanded to 49.5 per cent to Rs 13.9 lakh crore. The government claims it would sustain growth at between 6 and 7 per cent. On inflation, Chief Economic Advisor V Anantha Nageswaran says with expected softening, its impact would be better. More than the individuals and families, inflation hits the government hard upsetting its budget estimates and spiralling rise in costs of infra and welfare programmes.
While Nageswaran is confident about linking Aadhar, PAN and other instruments, there is concern as this is compromising with data privacy, giving rise to cyber-attacks. It is now suggested that the digital cards should be stand alone and linking these with various instruments make the job of the fraudsters easier. As PAN records all financial details, the cyber scamsters find it a ready instrument to capture.
The NPA concern is weighing heavy despite tight fisted bank loan policy. Lending figures show rise in the personal loan sector. The most important rationale for regulation in banking is to address concerns over the safety and stability of financial institutions, the financial sector as a whole, and the payments system. Mandatory deposit insurance schemes are introduced in order to avoid bank runs.
The corporate wants softening of rates and easy availability despite 12.6 per cent more lending, highest since 2014. But neither the global conditions allow it nor the health of the domestic banking sector. There are arguments for extending cuts in debt burden through write-offs for subsidising the corporate. The counter is extended that for the last many decades the corporate had it aplenty and whether they need more subsidies. Instead, costs could be cut, prices be reduced to boost demand, jobs and the market growth. How could corporates remain parasite forever, is the concern. They are also told that post 2008 Lehman meltdown, when Indian corporate did not need, they were given heavy incentivised loans, 50 big business houses not only pocketed it, they are also responsible for the highest ever NPAs and write-offs.
It is another wonder why they cannot thrive when the public sector is virtually being eliminated. Also, it is well known that individually they have been siphoning off funds from their corporate heads and thriving while letting the company to collapse.
The tight-fisted approach of the government in regulating further lending is being appreciated widely. It is also being stated that the government is right in encouraging business competition and it’s not the government’s job to subsist forever. The government is being rational in having a tough stance and virtually giving the message that if they need funding, they could have external commercial borrowings. This government stand has a wider support. In no case, the corporate could be allowed to gobble up precious hard-earned people’s savings, that had become a culture in pre-Narendra Modi era.
The SBI Chairman Dinesh Khara tells the ninth SBI Economic Conclave that the banks have learnt their lessons from earlier defaults and want a sustainable credit system. In the past decades, a lot of promoter equity was nothing but hybrid debt. Today, the balance sheets are much stronger, and the insolvency code is a great deterrent and instils discipline. He finds liquidity is strong in the banking system.
The corporate in their pre-budget meeting with Finance Minister Sitharaman suggested broadening the tax base by rationalising GST and personal income tax slabs to boost consumption as the external scenario remains murky and demand generation as also growth is necessity, according to CII President Sanjiv Bajaj.
The Bharatiya Kisan Sangh Secretary Mohini Mohan Mishra sought an input tax credit for farmers, removal of GST from agricultural inputs, linking of the Rs 6,000 per year minimum PM Kisan Nidhi income support with inflation. While ten trade unions boycotted the meeting the Bharatiya Mazdoor Sangh (BMS), the labour wing of the RSS, demanded that the government bring back the old pension scheme (OPS) for government employees, which was replaced by the National Pension Scheme (NPS) in 2004. It also demanded increase of minimum pension from Rs 1000 to Rs 5000. It is not a burden on the government as the EPF corpus would pay it.
Many of the demands are likely to be accepted. The higher Kisan Nidhi support may also suit the political needs as eight States go to the polls in 2023 prior to the 2024 Lok Sabha elections.
The country’s remittances that had plummeted during the pandemic, is likely to see a surge. It would increase the forex reserves. The World Bank says that the remittances would touch $100 billion from the Gulf, US, UK, Singapore, Japan, Australia, and New Zealand.
The coming year is likely to have major changes in the economy. The growth pattern would go beyond the statistics and India could hope the dawning of a bright era with overall happiness being bestowed on the country. —INFA
