Slowdown unresolved

Yoginder K Alagh | Updated on September 12, 2019

No funds set aside for public investment

The announcement of a ‘stimulus’ by the Finance Minister, asking Central PSUs to increase investments, was a damp squib. Such appeals without cash support don’t mean a thing.

I consulted some senior CPSU chiefs, now retired, who confirmed my worse fears. It is amply evident that the growth slowdown is unprecedented. This columnist wanted public investment to show the way, given the steep fall in gross capital formation in the recent years. This would also revive the index of industrial production.

The Budget was a disappointment. It ignored the distress on account of the delayed monsoon, in terms of the scarcity of drinking water and preferred crops not being grown even when the monsoon picked up later.

Although the monsoon picked up, the kharif sowing area is almost a tenth lower. The Budget ignored all this, leading to much adverse comment. It made long-term promises but no money to back them up, funding only a welcome SHG trust fund.

The Finance Minister’s recent press conference came as a ray of hope. It provided the taxpayer some solace, helped PSBs by announcing a corpus for them and said businessmen would not go to jail for CSR lapses.

Many of us were reconciled to the idea that PSBs would perhaps have to manage restructuring with an allocation of ₹70,000 crore. Little did we realise how shaky the financial foundations were.

There is now an unconfirmed report that NPAs in this quarter have amounted to ₹20,000 crore. It’s an amazing slide. No wonder the allocated ₹70,000 crore as a corpus looks inadequate.

Also the FM’s press conference had a package for small and medium enterprises (SMEs). These steps will help in the medium term if the economy picks up.

But in the absence of money, none if these exhortations can really matter. In fact, before starting the process of revival in the short run, the question to be asked is: Where is the cash?

It is rubbish to say ‘global headwinds are negative’. China has pushed a stimulus, and the US economy has fared well under President Donald Trump so far.

We are the policy outliers, and the FM has sadly confirmed that. There is also the burden of answering questions that are being posed on Kashmir by the US and the European Union. All these aspects have an economic impact. We are both down and out.

In the absence of a concerted effort, it is possible that 2019-20 will be lost with a rock-bottom growth performance. Two percentage points being shaved off the GDP could very well amount to about a million jobs being sacrificed.

The Ministry of Statistics and Programme Implementation has now announced an Economic Census every three years, which is all very well. Economic statistics are a cruel thing even when they are questioned, as they tend to conceal human misery.

The writer is a former Union Minister

Published on September 12, 2019

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