Sprouting seeds of anti-incumbency

In a democracy where officials are officious and blind to the needs of the people, the electorate can only voice its displeasure by casting anti-incumbency votes. Recent elections in three North Eastern States served to prove this point for the ruling party, but two elections in UP proved it for the Opposition. These, like high BP, are warnings to the body politic, to govern better and lend a ear to citizens’ grievances, or risk being unseated. With general elections due in 2019, the warning is stark.

Good measures

Several economic reform initiatives have been taken by the government. Demonetistion, though criticised by some people, has resulted in greater transparency and digitisation of the economy. The passing of the GST Bill will, once it becomes smoother, result in a more transparent tax regime and higher tax revenues. The passing of the Insolvency Act is also resulting in large-scale sale of corporate assets by defaulting borrowers to repay bank loans.

Yet much needs to be done. The huge NPAs, honestly a legacy of the previous government which has lots to answer for, will prevent a credit growth necessary to fund economic growth. Bankers will be even more wary of granting loans than they were before.

Bring down numbers

The performance, as judged by the stock markets, of PSU banks, ,has been abysmal. Since Q2 of 2013 to date, the Nifty has risen 73 per cent. Barring SBI, which rose 14.7 per cent, all PSU banks have lost value for their investors, with Dena Bank losing 79 per cent, and IOB losing 75 per cent, and being the worst performers. Why is it necessary for the government to continue holding these banks? They have outlived their purpose. True, they serve a social purpose by going into areas private banks would consider unviable. But this purpose can be served by two or three banks that can be retained as PSUs, and the rest ought to be either sold, if there is a buyer, or shut down, to prevent further catharsis and value destruction.

The global scene is not encouraging either. An article ‘There will be no economic boom’ by Lance Roberts points out that the US Congress has just passed a Continuing Resolution to keep the government funded through the 2018 elections. What this means is that the US government will be able to spend an extra $2 trillion over the next decade, over and above its current spend. The tax concessions recently announced by Trump will reduce revenue by $2 trillion over the decade. Thus, the deficit will widen to $4 trillion.

In the last week, three PSU defence companies floated their IPOs - Bharat Dynamics, HAL and Mishra Dhatu Nigam. Each country will want to improve its armaments and be able to defend itself. According to r Statista, between 1950 and 2017 India has been the largest arms importer, at 119 TIVs (trend indicator value, not US$). The three Defence PSU IPOs are sale of shares by the government not fresh issues, hence, the money will go to GOI, not to the companies.

One is truly saddened at the wastage of global resources because nations are either aiming to conquer, or are fearful of being conquered, instead of these resources and human efforts being used to better the life of citizens.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)

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