IIndian economy rarely had the kind of problem it is facing. The country is in a quandary. It is looking for ways to come out.
In 1991, India pawned its gold with Bank of England and Union Bank of Switzerland to raise $ 600 million to meet the balance of payment crisis. But the rest of the economy did not seem to suffer much. The GDP in 1989-90 grew by 5.2 percent and in 1991-92 it rose by 5.7 percent.
It was the post-Soviet Union collapse period. India had large exposure to trade with Soviet Union. Despite that overall impact was not felt at the local markets or rural economy.
In 1997-98, the East Asia tigers saw a severe meltdown largely led by the real estate boom and banking failure. India was not hit.
From 1992 to 1997 was the period of largest scams in the stock market, collapse of UTI, siphoning of LIC and many bank funds through fraudulent manners by the ilks of Harshad Mehta and Ketan Parekh. It surpassed the records of scams in the first 40 years since independence
But in 2007-08 the Lehman sub-prime crisis owing to unethical and corrupt banking practices in the West singed India despite no direct exposure to the crisis. The government panicked and succumbed to combined chorus of the large private corporate. They had seen how the sub-prime procedures had soared profits of the western corporate despite an economic crash.
By this time the Left parties had parted ways with the UPA. It lacked practical advisers and opened up PSB coffers to looting companies. The fifty private giants took the bulk of the PSB loans then called “incentives” never to repay. It was almost repeat of what had happened to banks in UK and the USA, including the largest AIG.
The banks started tottering. Their NPAs soared. People’s deposits were squandered away and continue till now. In short, Indian crisis started in 1992 and the pattern continues till now.
The banks, PSBs in particular but now many so called private banks as well, are being systematically swindled away leading to a crisis of confidence. Officially NPAs are touching Rs 9.1 lakh crore but otherwise estimated at Rs 14 lakh crore as there has been lot of window dressing through mergers. The digital economy has made swindling easier.
It has hit savings – staple system for funding India’s growth. The Economic Survey 2018-19 says household savings dropped to 16.3 percent in 2018 from 23.6 percent in 2012. It coincides with the loot of the deposits by the giants
That is serious and no government has addressed the issue. In 1960s and before even a 25 paise deposit was encouraged to fund the development projects. Now deposits are literally punished with high bank charges, TDS and other accessory fee on withdrawals.
The recent surge in cash hoarding, as per RBI figures, is a sequel to impractical usurious banking procedures. It has worsened with fly by night mutual fund operators, where deposits are made but it dwindles every day.
Earlier, such issues were carefully studied by Planning Commission and remedies suggested. The NITI Ayog last mulled over it in July 2017 when Arvind Panagariya said, “Low levels of savings and investment rates are still a cause of concern. Intense and dedicated efforts are needed”
But little came after that. Demonestisation has virtually denuded household savings. Those who think India’s vast economy, the biggest in the world in the 100 crore hands, could function through a faulty, slow and inefficient digital system apparently are living in a paradise of the wise.
There used to be probing people in the political system. They used to drive home sanguine points but somehow in a too much politicised world such voices are stifled and stigmatized.
The discussion in the public domain remains muted and given taints which really are not there. Like if someone suggests boosting savings, groups with vested interests shouts for channelizing it to the speculative, but most unethical, stock market or such instruments, where the money can easily be swindled away. Or if it is suggested that Jewar airport (UP) like projects would desertify the national capital region, the real estate agents in chorus say there is no aquifer in that region, as it suits the construction industry!
Or if poor owners of vehicles call for rescinding impractical ten-year junking rules, they are branded “anti-development”. The simple truth is the country is junking wealth creation. All over the world car owner is allowed to have the car for 40 years or more. Junking cars is bad policy. It leads to slowdown.
But those in power succumb to the lobbies be it real estate, industry or car makers. The pollution lobbies are minting tons and the national economy is impoverished.
Yes, the country is drifting because sane voices are not heard. Rather such voices are stifled. Else Rs 1.76 lakh crore of the central bank would not have been squeezed out. That is people’s money.
Often it is said that Indian’s are sitting on stockpile of money. May be most poor do not know. But they are unable to pay for the tuition fee of their wards even in socially-funded (that’s not subsidy) government institutions. Drop-out rate is increasing in private universities and institutions as the fee has to be high. But the lobbies are making it unaffordable be it IITs or IIMs. Education in this country is not subsidized. It needs social funding more so as households are losing savings.
The antyodaya is all-encompassing word. It does not mean mere uplift of the last unattended man. It means the system should be such none remains unattended. But if one is attended and ten are not tended it would have deleterious effect.
Prices are rising and the number of unattended is growing. Rhetoric would not solve it. The government must have dialogue with all, even with the political rival and the common man, to chalk out a way. That would lead to growth else the society and economy would drift. Mere tinkering with rules would not lead to solution. The Narendra Modi government must take the right holistic action to correct about three decades of loot and misdirected Manmohanomics.

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