India adrift, optimism hard to sustain

Jean Drèze and Amartya Sen 

The recent estimate of GDP growth for the third quarter of 2019-20, at around 4.7 per cent, has prompted a predictable sense of gloom. However, even the 4.7 per cent estimate is deceptive, since in per-capita terms, the corresponding figure would be just above 3 per cent. This, sadly, is no more than half the growth rate of per-capita GDP that India enjoyed five years ago.
The reasons for alarm, however, go much beyond the slowdown of GDP growth. If anything, there is too much rather than too little concern with growth estimates. We have to look beyond per-capita growth to what the people of India get from economic progress — health, education, social security and other necessities of a reasonably good life. If per-capita GDP is distant from better indicators of human development (such as life expectancy, mortality rates, morbidity indicators, literacy, schooling rates), even more distant are measures such as the total size of the economy. And yet policymakers today seem obsessed with India’s becoming a 5-trillion dollar economy and with its ‘overtaking’ — in this oddly devised race — more prosperous economies with much smaller population size. Confusion in economic objectives yields confounded economic policies. From the comfort of the total size of the economy for a large nation, we have to shift our gaze to the incomes of individuals and families, and from there to the capabilities to lead good lives that people can in fact enjoy. Optimism is hard to sustain as we get closer and closer to the miserable lives that a great many Indians have to live.
Economic indicators today related to people’s living conditions are indeed depressing. For instance, real agricultural wages have barely risen in the last few years. According to National Sample Survey data, there was an unprecedented decline in per-capita consumer expenditure between 2011-12 and 2017-18 (just after demonetization), and unemployment rates have never been higher since the mid-1970s. It is hard to avoid a sense of malaise if not a crisis.
Even in terms of macroeconomic indicators, many of them have turned for the worse in recent years: the investment rate, export growth, and bank credit, among others.
All this has been widely noted and discussed. What is less well understood is that this economic slowdown has been aggravated by the resilient inertia of social policy. In the first edition of An Uncertain Glory: India and Its Contradictions, published in 2013, we argued that India’s development strategy is fundamentally flawed in so far as it overlooks the central role of human capabilities, both as valuable in themselves and as means of further progress. That basic deficiency has not been removed over the years — quite the contrary.
To illustrate, there has been no significant initiative in the field of education under the NDA government. Six years have been spent waiting for the New Education Policy, which is yet to materialize (a draft was finally released last year, from which it is hard to get much encouragement). Meanwhile, it is business as usual.
The Indian public is perhaps insufficiently aware of the pathological nature of the country’s frail and fragmented education system. According to Unesco data, the proportion of children having to study in private schools at the primary level is just 12 per cent in the world as a whole. Among those who study in private schools, many are enrolled in non-profit educational institutions run by NGOs, churches, trade unions and other civic organizations. In India, by contrast, the proportion of children studying in private schools is around 35 per cent and rising, and the bulk of private-school enrolment is in profit-oriented schools. As elementary education turns into a market commodity, and quality depends on ability to pay, the schooling system reproduces the social inequalities it is meant to reduce. Even within the government sector, there are enormous variations in the quality of education facilities, with the worst being normally reserved for the poorest families and communities. Every year, millions of underprivileged children, who have much the same abilities and potential as other children, see themselves condemned to a life of harsh labour as they leave the schooling system without the most basic educational skills. None of this, however, seems to be a subject of major concern or even of serious discussion in Parliament, the media, the courts or other public forums.
Similar things can be said about other critical fields of social policy, such as health and social security. Spending on the Central government’s flagship health programme, Ayushman Bharat (farcically called “the world’s largest government funded healthcare programme” by the finance minister two years ago) was a microscopic Rs 3,200 crore in 2019-20 — that’s less than 0.02 per cent of GDP. The neglect of primary healthcare for all is appalling. Social security is also neglected, with the Central government’s contribution to old-age pensions frozen at a measly Rs 200 per month since 2006 and maternity benefits restricted to Rs 5,000 for one child per family in violation of the National Food Security Act. Even child welfare programmes, such as school meals and the Integrated Child Development Services, are still reeling from the deep budget cuts inflicted by the Narendra Modi government’s first full-fledged budget in 2015-16. The more essential a public service, the less interest it seems to receive today. Meanwhile, the country’s attention and energies are endlessly diverted by Hindutva’s pet projects, from cow vigilantism and the abrogation of Article 370 to the Citizenship (Amendment) Act and the construction of a temple at Lord Ram’s alleged birthplace. These distractions, deplorable as they are in their own right, also exact a heavy price in the form of reduced engagement with economic and social issues.
Alas, the prospects for the future have also been damaged by another recent setback — the retreat of democracy. ‘Retreat’ is a mild term in a situation where all democratic institutions are under attack and the most elementary democratic norms are being undermined — starting with the freedom of expression and dissent. The government is actively promoting a dangerous notion of good citizenship aligned to blind obedience to the State. Criticism of the government is increasingly seen as ‘anti-national’, and discouraged in every possible way. Anyone who speaks out against the government is at risk of being harassed in one way or another: NGOs may lose their FCRA, media agencies may be deprived of advertisement revenue, political leaders risk a tax raid, and poor people can simply be beaten up — or worse — for speaking up. Even mild criticisms of the government on social media can lead to sedition charges, a colonial relic in the Indian Penal Code. These tactics have huge chilling effects, as more and more citizens and institutions are anxious not to get on the wrong side of the government.
Along with the general weakening of democratic freedoms goes the championing of Hindu sectarian pursuits in the political arena, so there is a simultaneous weakening of democracy and India’s long commitment to secularism. What is no less disturbing is that resistance to these attacks on democracy and secularism has often been hard to present. Editors who defy State pressure to print strongly critical headlines, vice-chancellors who defend their students’ right to protest, judges who try to be fair without favouring governmental points of view, often face — direct or indirect — punishment from the ‘authorities’. There have still been defiant voices and dissents, and they have been very encouraging from the suppressed public, but there is room for many more.
In this respect, the recent nonviolent protests against the Citizenship (Amendment) Act and the National Register of Citizens are a tremendous source of inspiration and hope. The sit-in at Shaheen Bagh in New Delhi and the peaceful demonstrations it has inspired across the country are a living expression of the constitutional values of liberty, equality and fraternity. They have forged new solidarities across old divides and unleashed an unprecedented wave of creative thinking and action around democratic ideals. It is not surprising that these protests, too, have become a target of attack. Few things are more important at this time than to defend and expand these democratic spaces.

Jean Drèze is visiting professor, department of economics, Ranchi University; Amartya Sen is professor of economics and philosophy at Harvard University. A new edition of their joint book, An Uncertain Glory: India and Its Contradictions, has just been published by Penguin

Faced with severe challenges to the economy, the government has proved to be clueless and timid

P Chidambaram

The so-called tax concession given to the income tax payer in the lower brackets has cluttered the tax structure and created confusion.

Budget 2020-21 was presented on February 1, 2020. It made the headlines and was the subject of editorials on February 2 but, on the next day, it practically vanished from the front pages of newspapers and from television channels. It was like a movie that bombed on the first day.

The BJP, the Prime Minister and the Finance Minister have to blame themselves. They cannot blame the Chief Economic Adviser (who gave some sound advice in the Economic Survey) or the economists and the businesspersons who met the PM for pre-Budget consultations. There were many ideas on the table. Reflecting the buzz in the markets, I had, in my column of January 26, listed 10 things that the FM could do in the Budget.

If the FM did not heed the advice of the CEA or the economists or yield to the demands of businesspersons, it was because of the following reasons:

1. The government is in denial

The government has not accepted that demonetisation and a flawed GST were monumental mistakes that killed MSMEs and destroyed jobs. It has not acknowledged that the slowdown is due to declining exports, instability in the financial sector, inadequate credit supply, lower household savings and reduced consumption, collapse of mining and manufacturing, and pervasive uncertainty and fear. Unfortunately, the FM made no reference in her speech to these negative features of the economy.

2. The government’s assessment of the state of the economy is hopelessly wrong

The government believes that the slowdown of the economy is due to cyclical factors and the upturn will happen if they do more of the same — scrounge for money, put more money into on-going programmes, and announce new programmes. If the causes of the slowdown are more structural than cyclical — as many economists believe — the government has virtually foreclosed the options it had to revive the economy.

3. The government’s ideological pre-dispositions are obstacles to revival

The government believes in outdated philosophies like protectionism, import substitution, a ‘strong’ rupee etc. It does not believe in the multiple benefits of external trade and seems to have given up the effort to find ways to boost exports. It has embraced the retrograde idea of increasing import tariffs. It also appears reluctant to let the rupee find a more realistic level. Given these pre-dispositions, the government finds itself short of solutions.

4. The government is unwilling to reverse measures that have deepened the distrust between the government and business

The government has criminalised many economic laws. It has conferred extraordinary powers on even the lowest-rung officers of the tax-collecting departments and the investigating agencies. Tax collection has become tax terrorism (remember V G Siddhartha). The process of contesting or paying the taxes that are demanded — the process itself — has become the ultimate harassment. The Charter of Rights of Taxpayers promised by the FM has provoked a cynical reaction — why doesn’t the government simply withdraw the carte blanche given to the authorities and agencies?

5. The government has proved itself to be an incompetent manager

From demonetisation to GST, from Swachh Bharat Mission to electrification of homes, from Ujjwala Yojana to UDAY, every programme has serious shortcomings. Unfortunately, the government lives in an echo chamber and hears only adulatory responses. Hence, while humongous amounts of money have been spent on these programmes, the outcomes have been unsatisfactory. The administrative machinery lacks the capacity to improve the implementation or report the true outcomes.

Therefore, there is no surprise that the FM settled for a lacklustre Budget, modest nominal growth of GDP and misplaced optimism about tax revenues. While nominal GDP is estimated to grow at 10 per cent, gross tax revenues are estimated to grow at 12 per cent — an unlikely outcome. Further, the estimated revenues were distributed among a number of programmes — good and bad — as a result of which there was little scope to allocate more funds to programmes that would have ensured that more money reached the hands of the poor quickly. Funds have been unspent in the current year or slashed in the next year for MGNREGA, the Mid-day Meal Scheme, food subsidy, PM Kisan Samman etc. I do not foresee a rise in rural incomes/wages or household consumption.

The so-called tax concession given to the income tax payer in the lower brackets has cluttered the tax structure and created confusion. The estimated benefit of Rs 40,000 crore is not certain and, any way, too small to be impactful.

Nor is there any incentive that will boost private investment. The abolition of DDT has merely shifted the burden of the tax from the company to the shareholders. Besides, when capacity utilisation in manufacturing is at about 70 per cent (thermal power generation is at about 55 per cent of installed capacity), there is little scope for new investment.

In sum, the FM has not addressed the needs of a demand-constrained and investment-starved economy. Nor has she appreciated the multiplier effect of boosting exports. She was compelled to rely on one engine — government expenditure — but that engine too is short of fuel and the spectre of fiscal instability looms over the government. She has also ignored the two most pressing issues — massive unemployment and closure of MSMEs.

Faced with the most severe challenges to the economy in recent years, the self-proclaimed strong and decisive government has proved to be clueless and timid.

A Brief Exercise in Not Taking the Economic Survey 2020 Seriously

S. Subramanian
This is a quick summary review of the latest Economic Survey (2019-20). I have to admit that this quickly-written assessment is a product of an equally quickly-read Survey. If I have not quite pored over it, it is because I found no evidence in the Survey to suggest that it is a document that was intended to be taken seriously – solemnly perhaps, but not seriously. Under the circumstances, I hope I will be forgiven for having spared myself the ordeal of a detailed study of the Survey, and the reader the even greater ordeal of a detailed review of it. Hence this considerately brief commentary.

The Survey is in two volumes, Volume 2 being given over to a purported assessment of the state of the economy, and Volume 1 to the—ah—philosophical perspective guiding it. As far as one can tell, the Vision directing the enterprise seems to be inspired by an infatuation with the perceived virtues of wealth creation and the market. These virtues are seen to be embedded in our civilisational origins (there is much talk of Kautilya and the Thirukural in this tract), and they are extolled with a somewhat startlingly passionate ardour for freedom of the market and against intervention by the government.

In the event, Volume 1 reads like a bewildering advertisement of ancient wisdom seeking and finding endorsement in an essentially rudimentary business school view of the world. This combination of ideas and orientations, executed in somewhat individualistic prose, is inspiring—or at least weird if, like me, you are an elderly codger groping in the dark, and old enough to remember that this country once had a CEA of the likes of Ashok Mitra.

And when you encounter reference to our ‘dalliance with socialism’ (presumably in the dark ages before this New Dawn), then things begin to fall into place a little more clearly: you are enabled to see that if the ‘democratic’ and ‘secular’ aspects of our republic, as vouchsafed in the preamble to our constitution, are currently under a new fix, then so is its ‘socialist’ aspect. That, regrettably, is when the jaw starts sticking out and you begin muttering to yourself.

Not that that’s of much help in enabling you to understand why the Survey believes that there is no basis to the criticism that recent growth rates under the NSO’s revised methodology might have been overestimated. Yes: there is actually a chapter in Volume 1 titled ‘ Is India’s GDP Growth Rate Overstated? No!’ All that stuff on civilisation and culture and tradition must have been infectious, because when I encountered the chapter, I was reminded of that old Tamil saying: ‘my father is not in the granary’ (this being the young boy’s defensively blurted declaration in the story about the debt-collectors from whom the lad’s father was hiding).

In the bibliography to the chapter, I found references to quite a few articles taking issue with Arvind Subramanian’s recently expressed reservations on growth rate estimates, but one will search in vain for any engagement with the work of R Nagaraj, the most consistent and meticulously careful commentator on the subject. Just saying.

Finance minister Nirmala Sitharaman is flanked by junior finance minister Anurag Thakur as she arrives to present the budget in Parliament in New Delhi, February 1, 2020. Photo: Reuters/Altaf Hussain

The best is reserved for the last chapter of Volume 1. The chapter, titled ‘Thalinomics’, is an affecting reminder of the Survey’s continuing concern, first reflected in its 2018-19 number, for the common man: ‘What better way to continue this modest endeavour for forcing economics to relate to the common man than use something that s(he) encounters everyday—a plate of food?’ In this cause, we are treated to an extraordinary exercise. Vegetarian and non-vegetarian thalis are constructed and costed in terms of the quantities and prices of their respective ingredients.

A linear trend line for the cost of a thali at current prices is fitted on price data from 2006-07 to 2015-16, from which point in time the price of the thali tends to fall away from the trend line. The difference between the trend (‘counterfactual’) price and the actual price in 2019-20 is calculated, and annualised estimates of the difference—for both a vegetarian and a non-vegetarian thali—are computed and presented as gains to the common man from benign government policy on thali prices: these gains, one understands, are notional estimates of savings arising from things being not as bad as they might have been under a particular, different scenario. The greatest good that can be done to the common man, it appears, is to invite him to count his blessings, considering that things might have been a good deal worse than they are.

Having said this, there is something else in the numbers put out on thalis by the Survey which seems to have quite completely escaped its authors. From Figure 1 (‘Thali Prices at all-India Level’) of Chapter 11, it appears that the cost of a vegetarian thali in 2019-20 is in the region of Rs. 23, and of a non-vegetarian thali, Rs. 37. With weights of 0.3 and 0.7 for vegetarian and non-vegetarian thalis respectively—these are the population proportions of vegetarians and non-vegetarians in India—the weighted average cost of a thali for 2019-20 might be taken to be in the region of Rs. 32.8. The Survey allows for two thalis a day per person, which works out to Rs. 65.60 as the cost of food per person per day.

The Tendulkar Committee poverty lines favoured by the Niti Aayog are Rs. 27 (rural) and Rs. 33 (urban)—or, crudely, say, an average of Rs. 30—per person per day at 2011-12 prices; allowing for a 150% rise in prices (which is roughly what is displayed by the Consumer Price Indices of Agricultural Labourers and Industrial Workers) between 2011-12 and 2019-20, the poverty line in 2019-20 at current prices would be of the order of Rs.45—which is less than 70% of the Rs. 65 (according to the Survey’s own estimate) that would be needed to avoid hunger! That is to say, a person with an income that is 144% of the official poverty line can keep hunger at bay only by completely emptying out his pockets. Thalinomics, in short, shades off into Khalinomics. My apologies, but as indicated earlier, the mood and language of the Survey tend to be painfully catching.

As for Volume 2, well, it doesn’t always quite tally with what a number of economists have read into recent trends in the economy. No doubt it is benighted, if not downright sinister, to entertain the thought that we are looking at a profoundly demand-constrained downturn in the economy, marked by serious rural distress, depressing tendencies in manufacturing output and exports, unprecedentedly high levels of unemployment, opaque estimates of the fiscal deficit, and governmental suppression or/and criticism of data sources that paint an unflattering picture of the economy.

The Labour Force Participation Survey was released only after the elections, and no doubt it would be sensible to wait for the budget to be presented before releasing the NSO’s Consumption Expenditure Survey for 2017-18, the leaked report for which presents a sorry tale of consumption downturn between 2011-12 and 2017-18. As for what the long-term term effects of demonetisation or the continuing impact of GST on the economy might be, why delve into recent history when we have the comforts of ancient history to see us through? Even the IMF and the World Bank, not to mention various credit-rating agencies, have downgraded projected growth beyond what the Economic Survey will do.

And why not? This Survey is about wealth and entrepreneurship and free markets and privatisation, not about poverty or inequality or public employment schemes. The philosopher P.G. Wodehouse frequently reminds us of the girl Pollyanna who was given, at all times, to being ‘glad, glad, glad’; and like his immortal character Gussie Fink-Nottle, we too must set our faces against pessimism. That would be in the spirit of the Economic Survey, which has no use for the low opinion of his fellow-humans’ interest in their own wellbeing that a scurvy fellow like David Hume (unlike Kautilya, apparently) entertained. Indeed, the reader is exhorted along the following lines in the Preface: ‘We hope readers share the sense of optimism with which we present this year’s Survey.’

In one of his essays, Albert Camus describes a brutal boxing match which is preceded by the soothing strains of a violin. He calls it ‘the sentimental music before the massacre.’ For all that the reader might have been led to believe otherwise from this review, the Economic Survey is just like that. It is the sentimental music before the massacre.
 

For on the day after came the budget, with its distressingly inseparable twin, the budget speech.

The author is an economist, independent researcher, former National Fellow of the Indian Council of Social Science Research, and a retired Professor of the Madras Institute of Development Studies.

Eyes wide shut

Ashok V. Desai
We have received the government’s view of the economy in the past week, which is understandably rosy. It did not mention another view, which was made public just before Washington closed down for Christmas: the letter of the International Monetary Fund’s executive board to our government, enclosing what its staff saw when it came to Delhi for its annual consultation.

The government put some fresh capital into its banks, and transferred their bad debts and started suing some bad debtors under its insolvency and bankruptcy code. As a result, banks are a bit better off; the share of bad debts in their loans fell from 11.5 to 9.3 per cent in the year till March 2019. As a result, bank credit growth rose for a while. But non-bank financial institutions were not helped; so their credit shrank. The corporate sector’s profitability and capacity to service debt continued to be below normal.

Unlike in industrial countries, unemployment is estimated only once in four or five years in India. The last estimate is for 2017-18; it is the highest in 45 years. Rural unemployment is normally 3-4 per cent; in 2017-18 it shot up to 8 per cent. Amongst urban women, it is usually 8-10 per cent; it rose to 13 per cent. People can be unemployed only if they have had a job or are seeking one; between 2004-05 and 2017-18, the male participation rate fell from about 85 to 75 per cent, whilst the female participation rate fell from 40 per cent to almost 20 per cent. Participation rate can change with age structure; children and old people do not usually work, and are not regarded by the government as being in the workforce. But that cannot account for the halving of female participation.
The gross domestic product growth in the second quarter of 2019 was 5 per cent — the lowest since 2008. The slowdown is demand-led; headline inflation in 2018-19 was 3.4 per cent, the lowest in eight years. This is new; India has generally maintained an indecent inflation rate of 8 per cent or more.
IMF observers were of the view that the government should concentrate on three policy reforms. First, the governance of government banks should be strengthened, and so should the regulation and oversight of non-bank financial companies. Second, the government must follow the recommendation of the Fiscal Responsibility and Budget Management Review Committee and reduce debt-GDP ratio from the current 70-odd per cent to 60 per cent. Fiscal deficit should be brought down by bringing individuals and households into the income tax net and reducing subsidies. More measures would be needed; the IMF suggested extension of property taxation, higher coal cess, and applying normal income taxation to agricultural income. Finally, land, labour and product markets should be reformed; the distinction between formal and informal sectors should be removed, and the labour market should be made more flexible (that is, the restrictions on dismissal of workers in the formal sector should be removed).
The IMF noted the cyclical downturn, but opposed fiscal stimulus to counter it; it was more important to bring down the ratio of public debt to GDP from its current level of 69 per cent to 60 per cent. From this viewpoint, what matters is not the Centre’s fiscal deficit, but public sector borrowing requirement, which covered fiscal deficits of the Centre and the states plus borrowings of public enterprises. The PSBR-GDP ratio is unlikely to come down in the current financial year; on the contrary, the weak state of the economy may cause tax revenues to decline and PSBR to rise further. The IMF showed that, year after year, the actual fiscal deficit exceeded what the budget forecast: the finance ministry is systematically over-optimistic. The Indian government pays about 5 per cent of GDP in interest; BRICS pays about 3 per cent, and the Asean 2 per cent. Hence fiscal stimulus would be wrong; the IMF favoured fiscal consolidation — a reduction of the PSBR-GDP ratio. It suggested cutting subsidies on food, fuel and fertilizers. The goods and services tax should be streamlined and extended to electricity and petroleum products. Income tax should be levied at a lower income, and its peak rate should be raised. And the government’s habit of not showing all its expenditure in the budget should be given up.
Since there is no room to use fiscal stimulus against the current slowdown, the IMF supported the government’s use of monetary policy — the Reserve Bank of India’s reduction of policy rates by 135 basis points from 6.5 to 5.15 per cent this year, and projected reduction in statutory liquidity ratio to 18 per cent by April this year.
The IMF mildly approved the government’s efforts to help banks recover their non-performing loans, and cryptically noted that 12 major banks continued to be in government ownership — and hence did not have the incentive to make profits. It called for improvement in banks’ risk management. The government should privatize its banks; meanwhile, it should appoint independent boards, and remove RBI people from them. It should set up a specialized institution for liquidating bankrupt banks and introduce deposit insurance and emergency liquidity assistance. The government did not like these suggestions; it is still very happy to own banks and keep them under its thumb.
The National Housing Bank was supposed to regulate housing finance companies; but it slept while they gave unwise loans and went bankrupt. Their supervision has been transferred to the RBI. The IMF approved, but told the RBI to keep their supervision separate from bank supervision. It is important to prevent stress spreading from them to banks; for this, the RBI should start collecting more up-to-date and detailed data.
The IMF noted improvement in India’s corruption perceptions index: it was lower than in emerging markets and developing countries in 2012, and exceeds theirs now; but it is much lower (worse) than in industrial countries. The ease of doing business has also improved; but contract enforcement, land acquisition and insolvency resolution remain problem areas. Faster regulatory approvals, more single-window clearance and greater judicial efficiency would help.
India has reduced import duties, but they are still high and are changed too often. Trade costs and processing times continue to be high. Trade in services continues to be subject to entry restrictions on foreign people and firms, barriers to competition and non-transparent regulation.
The IMF pointed out for the umpteenth time the terrible effects of India’s labour laws which make it impossible to dismiss workers whether they work or not. They have made India’s industry lag in efficiency and lose out in international competitiveness; India has virtually lost out on industrialization. The GST created a chance to make India a single market; but it cannot be because states have different labour laws. The IMF may continue to preach on this for years, but nothing is likely to change.
The IMF staff report also gives the responses of the Indian government, which are mostly defensive and uncooperative. For the Indian government, its laws and practices are holy; it is least likely to reform them on the suggestion of the Fund or the World Bank. But their critique is worthy of attention at a time when domestic dissent is being discouraged.

Budget 2020: Hope for the best, prepare for the worst

P Chidambaram
Another year has started, another Budget is round the corner, and another fateful year for the Indian economy.

Since 2016-17, every year has brought surprises and tears. 2016-17 was the year of the catastrophic demonetisation. 2017-18 was the year of the flawed GST and its hurried implementation. 2018-19 was the year when the slide began and the growth rate dipped in every quarter (8.0, 7.0. 6.6 and 5.8 per cent). 2019-20 was the wasted year when the government refused to heed warnings and allowed the growth rate to collapse to below 5 per cent.

Extent of Collapse

It is now pretty clear that

* 2019-20, when the final revisions are made, will record a growth rate of less than 5 per cent;

* that the government’s revenues will fall significantly short of the BE (Budget Estimates) under both major heads (net tax revenue and disinvestment);

* that the fiscal deficit will breach the BE target of 3.3 per cent and will be close to 3.8 to 4.0 per cent;

* that both imports and exports of merchandise will record negative growth over the previous year;

* that private sector investment (measured by Gross Fixed Capital Formation), in current prices, will be about Rs 57,42,431 crore (or 28.1 per cent of the GDP), indicating investor risk-aversion and weariness;

* that private consumption remained sluggish throughout the year;

* that the agriculture sector remained under acute stress and will return a growth rate of about 2 per cent;

* that the job-creating sectors like manufacturing, mining and construction shed jobs in 2019-20, leading to a reduction in total employment;

* that credit growth to industry as a whole, and to the SME sector in particular, will be negative over the previous year; and

* that year-end CPI-based inflation will be over 7 per cent (with food inflation at over 10 per cent), adding to the distress caused by rising unemployment and stagnant wages/incomes.

According to Dr Arvind Subramanian, former chief economic adviser, the economy is in the ‘intensive care unit’. According to Nobel Prize winner Dr Abhijit Banerjee, the economy is ‘doing badly’. None of the observations of critics seems to have worried the government, that maintains that the upturn will happen in the ‘next quarter’! Because of its ostrich-like attitude, the government has rejected every correct remedial measure and has, instead, taken the wrong measures. For example, if taxes had to be cut, the government should have cut indirect taxes; instead it gave a bonanza amounting to

Rs 1,45,000 crore to the corporate sector and got nothing in return in terms of higher investment. The government should have boosted demand by putting more money in the hands of the poor; instead it cut back on the outlays (BE) for MGNREGA, Swachh Bharat, White Revolution and Pradhan Mantri Awas Yojana and may actually spend even less.

PM’s budget: What will he do?

When the Prime Minister met with 12 top businesspersons (without Ms Nirmala Sitharaman or aides), it showed nervousness as well as lack of confidence in the Finance Minister. According to sketchy reports in the media and hints dropped by some of the participants, the following are possible in the Budget that will be presented on February 1, 2020:

1. A cut in the income tax rates for individuals earning up to Rs 10 lakh a year.

2. Abolition or reduction of the tax on Long Term Capital Gains realised after holding the security for two years.

3. Reduction of the rate of Dividend Distribution Tax.

4. A promise to introduce the Direct Taxes Code.

5. Selective, short-term reduction of GST for a few sectors like construction.

6. Increase in the PM-KISAN amount from the current level of Rs 6,000 per year and/or extension of the scheme to more categories of beneficiaries.

7. Large increases in the outlays for defence; MGNREGA; SC, ST, OBC and minority scholarships; Ayushman Bharat (health insurance) etc by over-estimating tax revenues or borrowing heavily.

8. Setting up of one or two Developmental Finance Institutions (DFIs) for providing long-term finance to industry in general and SMEs in particular.

9. A massive disinvestment programme and/or asset monetisation programme with the narrow objective of raising resources.

Economy a Drag

All of the above is in line with the thinking of the government that relies heavily on the corporate sector (for funds), on the middle class (for votes) and on the defence of India (for distraction). Its capacity to think of structural reforms is limited. It has no confidence that the banking system will provide credit. Thanks to its protectionist lobby, it has given up on foreign trade as an engine of growth. It does not wish to curtail the exuberance of the stock markets. It cannot define its relationship with the RBI and determine how the two can maintain financial stability, promote growth and contain inflation.

The economy is not the main concern of the BJP government; it is the Hindutva agenda. On the other hand, the people are concerned with issues tied to economic growth such as more jobs, better producer prices, wages and incomes, relative price stability, access to better education and health care, and improved infrastructure.

It is painfully clear that the people have got a government that has turned the Indian economy into a “drag on the world economy”. That is the damning verdict of the IMF.

Truth about global inequality

Telegraph Editorial Board
The latest Oxfam report, Time to Care, which was published ahead of the World Economic Forum’s 50th annual meeting, has estimated that the top one per cent of people in India hold more than four times the wealth held by the bottom 70 per cent of the population or about 950 million people. All the 63 Indian billionaires put together have more wealth than the total annual budget for 2018-19 for the Indian economy presented by the government. This finding is consistent with the shocking global trends of rising economic inequality. According to the report, the world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 per cent of the world’s population. While hardly anybody would disagree with the fact that some amount of inequality is inevitable in any society or that a modicum of it may actually serve as a stimulus for raising aspirations and hence economic growth, the current levels are completely unacceptable.
The implications of this massive degree of inequality are many, and almost all of them are socially, politically, and economically disruptive. Deep inequalities, more often than not, engender social unrest. People tend to be more intolerant and corrupt in a social ambience that is perceived as unfair by the majority. Typically, the few who are rich and powerful insist on — and fund — a decisive government that cracks down on dissent, tries to divide and rule in an attempt to maintain social stability, and might even try to amend Constitutions to make power more centralized. Inequality becomes an enemy of an open, plural, and democratic society. These trends are being observed in many countries of the world, even though the tolerance limits of people and the tipping points of social instability vary from nation to nation. Another implication of deep economic inequality is that it is biased against women. Among the poor and dispossessed are a disproportionate number of women and young girls. The report suggests that in India it would take a female domestic worker 22,277 years to earn what the CEO of a top technology company earns in one year. It is estimated that women and young girls put in 3.26 billion hours of unpaid work each day. Their contribution to the Indian economy amounts to 20 times the entire education budget of the nation. Finally, on the economic front, if this trend of rising inequality continues, then in just two or three decades the only way to become rich would be to be born rich. The great appeal of market capitalism that allowed equal opportunities for people to work and grow might disappear forever.

The budget should increase spending in rural areas, cut taxes and bring back trust in financial system

Soumya Kanti Ghosh

The Union budget will be presented in the context of an entrenched slowdown that is becoming increasingly difficult to overcome. Coupled with this, the recent increase in inflation (notwithstanding the current methodology) has complicated the budget-making exercise. We believe that this budget could make a substantial difference by challenging the conventional wisdom that does not stand the test of scrutiny.

The primary purpose of the budget is to lay out a receipt-expenditure statement and thereby the fiscal deficit estimates. This year is, perhaps, different as the slowdown has derailed the fiscal arithmetic. Our estimates show that the shortfall might be anywhere between 0.5-0.7 per cent of the GDP in the current fiscal after adjusting for revenue shortfall and expenditure rationalisation.

Given that the government is now facing such a huge mismatch, the fiscal deficit glide path is likely to be recalibrated. But, here lies strong resistance from the votaries of fiscal consolidation, which is echoed in government circles too with independent reports pegging the fiscal deficit estimate at 3.5 per cent for 2020-21. We believe the government must not target a number in FY21 that is not credible and achievable. The growth dynamics suggest that with a nominal GDP growth that could be at 10 per cent, a 3.5 per cent target will result in the absolute fiscal deficit in FY21 being lower than in FY20, and that again will be unachievable.

In this context, the fiasco in FY12 bears mentioning. The government wanted to reduce the fiscal deficit from 4.8 per cent of the GDP to 4.6 per cent. But, in absolute terms, the difference between the fiscal deficit in FY11 and FY12 jumped four times as the 3.3 percentage point collapse in growth was not factored in. Thus, the temptation of having a 3.5 per cent deficit target in the budget must be avoided at any cost as we face a similar growth slowdown. Instead, the fiscal deficit must be kept only at a marginally lower level or the same level in FY21 (vis-à-vis FY20). We must focus on growth. A large fiscal compression in the budget, through a reported expenditure curtailment of Rs 2 lakh crore, could be an unmitigated disaster for growth and will definitely raise the possibility of lack of transparency in the fiscal numbers of FY21 in the eyes of the market.

So, what are the options before the government? First, is the apparent trade-off between tax concessions and stimulating the economy by giving a fillip to the rural economy. There is now an apparent consensus that with only 4 per cent of people paying income tax, a tax concession might be a wrong approach to stimulate demand. There are, however, two fallacies with this argument. First, even when 2 per cent of the people paid income tax during 2004-08, the Indian economy expanded by close to 8 per cent on average. Second, the 4 per cent population accounted for a significant part of overall consumption, and in FY19, the overall gross taxable income of this population was Rs 46 lakh crore, which is 40.8 per cent of the overall private final consumption expenditure. Hence, it is possible to tweak both the slabs and the tax rates to increase consumption, which is key to growth. The only issue with such tax changes that could make the government wary is the revenue foregone. Our estimates suggest that a 5 per cent cut in taxes across income buckets can result in a revenue shortfall of only 0.5 per cent of GDP.

Second, the idea of a rural push through PM-KISAN scheme is understandable, but efforts must first be made to cover all the farmers under the scheme. It is quite puzzling that despite 92 per cent of the land records being digitised, PM-KISAN still covers only half of the eligible beneficiaries. As was promised in the 2018 budget, a tenancy certificate must be issued to every tenant farmer — 70 per cent of farmland is cultivated by tenant farmers, who are not entitled to any benefit because they do not own land. Third, the government should think about increasing the Rs 6,000 yearly amount in a calibrated manner (say Rs 500 per year over the next four years) as the incremental cost will be negligible. As this will create a feel-good factor across the farming community, why not start from this year itself?

Third, the government must think about the trade-off between tax adjustment and incentivising savings. When the government notified an increase in the public provident fund (PPF) limit by Rs 50,000 to Rs 1,50,000 in August 2014, its impact on household savings was enormous. For example, an increase in the 80C limit by Rs 1 lakh to Rs 2.5 lakh for individual households will lead to additional savings of more than Rs 2 lakh crore as compared to a revenue and interest foregone amount of Rs 40,000 crore. The question is thus of incentivising consumption, or savings or both?

In this context, let me also comment on the repeated fallacies of commentators who advocate in favour of fiscal conservatism on the ground that entire household financial savings are being used to finance government borrowings. The numbers suggest otherwise. Of the Rs 11.2 lakh crore of net financial savings in FY18, total claims on government were around Rs 70,000 crore, while Rs 7.74 lakh crore were claims on insurance, pension and provident funds (assuming FY17 ratios). Household claims on pension, insurance and provident funds are purely savings for the households’ retirement corpus and it is completely naïve to equate such claims as financing government borrowings. The decision of such retirement funds on where to invest their corpus is a purely portfolio-decision, just as is the household decision to investment in small savings.

Apart from such fiscal measures, the budget must announce its intent to bring back trust in the financial system. To this end, a simultaneous recognition of stressed assets of NBFCs and thereafter immediately initiating measures to help them to raise capital by initiating takeovers/mergers if required and giving the rest a clean chit, thereby, increasing the confidence to lend, is required. We must not repeat the mistake we made with banks when we first initiated recognition of bad loans through the asset quality review in 2015, then brought resolution through the IBC law in 2016, and then resorted to recapitalisation in October 2017. The sequence should have been resolution first, and recognition and recapitalisation simultaneously thereafter.

We can also think of forbearance for large NBFCs by deferment of principal repayments by systemically important NBFCs and HFCs. These NBFCs and HFCs can allow similar deferments to their clients. Since interest would be paid during this period, lenders would not make a loss. This should be adequate to get the cash flows from stuck projects going and to ensure the fulfillment of the prime minister’s vision of Housing for All by 2022.

Interestingly, as we write on the budget priorities, the Supreme Court judgment on telcos’ adjusted gross revenues could just about tilt the budget arithmetic in the government’s favour. On the flip side though, this order could lead to significant market disruptions and possibly impact consumption as well.

This article first appeared in the print edition on January 21, 2020 under the title “The deficit bogey”. The writer is group chief economic advisor, State Bank of India. Views are personal.

Hard times for sure

Renu Kohli
The early gross domestic product estimate (GDP) released this month by the national statistical agency assessed India’s growth at 5 per cent this financial year. It is the slowest pace of growth in the last 11 years, the third successive year of deceleration, and the fall in real GDP growth this year is a hefty 1.8 percentage points over last year (6.8 per cent). Still, the official advance GDP numbers were not a

surprise because all forecasters had downgraded much before, as did the central bank last December. In fact, many private analysts expect the growth out-turn to be even lower, below 5 per cent, as consumer spending failed to revive as anticipated in the October-December festival quarter and the steep decline in tax revenues has forced the government to restrict spending to one-fourth of the annual budgeted amounts for various ministries. The real worry is about what lies ahead.

Hard times seem inevitable. As the budget day approaches, all expect the government to respond appropriately to the stretching economic weakness. But rather than taxation and spending changes to stoke demand, it is the reverse or subduing effects of the withdrawal of chunks of expenditure that will play out. A retreat or slower pace of government spending exerts itself through reduced purchases, orders, and contracts whose impact radiates across other segments of the economy. The extent of such drag can be seen by the enormous spending support to growth by the government in recent times: about 45 per cent of the July-September quarter’s 4.5 per cent GDP growth came from such spending that grew an exceptional 16 per cent year-on-year and double its pace in the first quarter of April-June; minus this booster, GDP growth was below 3 per cent. Similarly, government expenditure raced phenomenally at 15 per cent and 9 per cent in the last two years (2017-18 and 2018-19); for 2019-20, estimated growth is a further 10.5 per cent.

Lower this pace and aggregate GDP will feel the pinch. The troubling thought is not only for the remainder of this year, when pressures to make ends meet typically intensify at the end. Government spending is likely to be forced to slow down next year too. This is because of the widening gap in public revenues and expenditures. Spending has expanded significantly in the past two years, especially its current or revenue component; this consists mainly of salaries, interest payments, subsidies and other transfers (for example, schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, the Pradhan Mantri Kisan Samman Nidhi). At the same time however, tax revenues have trended in the reverse direction, that is, slowed down. This tightens financing of expenditures, the committed component of which is impossible to cut. Tax revenues fell short by Rs 1.65 trillion last year and the deficit is likely to be larger this year — Rs 2.6-3 trillion is the commonly cited range as both direct and goods and services tax collections are hit by the rapid slowing of output. Non-tax sources, that is, divestment and asset sales, have not matched expectations so far. There are frequent reports of frantic dividend revenue-seeking by the government, namely, from oil companies and the Reserve Bank of India; plans of yet another immunity scheme allowing direct taxpayers to declare any additional incomes in the past five-six years without penalty or prosecution, and the recovering of past dues from telecommunication firms for adjusted gross revenue payments, which may be partly paid. The extent of the public revenue shortfall is unlikely to evaporate very fast. At the least, an upswing in activity is essential for higher growth in revenues. But the portents for this are uncertain and underwhelming at this point.

So even as all look towards demand support in the upcoming budget, the government does not have the wherewithal for pleasing booster shots. Over-optimistic revenue projections would erode credibility, as happened last July. Raising taxes in one segment to finance a stimulus for another part will be counter-intuitive in a slowing economic context. Moreover, fresh taxation could invite backlash, further depress sentiment in a replay of last year’s budget. Under these resource-scarce circumstances, public expenditure would have to slow down, which would be a weakening force.

Rising inflation is the next spoiler. The RBI eased policy rates by 135 basis points last year, devoting equal policy attention to ensure that the borrowers benefit from its pass-through via banks and are encouraged to spend more. But the inflationary expectations of households have adjusted quickly to food prices that are rising since mid-2019. Retail food inflation galloped from 3 per cent last August to 14 per cent in December, pushing up overall retail inflation, on which monetary policy is based, to 7.4 per cent. These developments, along with some other factors such as hikes in telecom tariffs, fuels and liquefied petroleum gas, possible fiscal expansion in the forthcoming budget, have injected caution in the otherwise softer interest rate environment. The RBI rested its easing cycle last month, turned more watchful. The bond market has reacted with higher inflation risk premium, keeping the 10-year yield — benchmark for banks’ loan rates elevated.

Many assure the food price rise is temporary; it will pass over, leaving the easier monetary situation unchanged. But matters may not be all that sanguine. If inflationary beliefs of the public get entrenched owing to the persistence of food inflation for several quarters, that

increases the risk of feeding into wages (for example, public servants’ salaries are indexed to retail inflation) and thereon to other prices. This could make things more difficult than at present: high inflation reduces real incomes or purchasing power; instead of additional spending encouraged by lower interest rates, consumers and producers are pulled down by lower disposable incomes and costlier input.

Finally, new or unanticipated risks and shocks surfaced in the past few months from civil disturbances and protests that in turn, elicited disruptive internet shutdowns and prohibitory orders by various state administrations in many parts of India. These hurt consumption and business: for example, several companies explained that their previous quarter sales suffered from store closures, lower footfalls in showrooms and disrupted supplies, last month. Food orders, restaurant visits, e-commerce were affected likewise, according to news reports. Growth in the travel and tourism industry also reduced because of cancellations and cautionary advisories from foreign governments. Output losses caused by internet shutdowns in 2019 (estimated above 100, for about 4,196 hours by Top10VPN, an internet research firm) are calculated about $1.3 billion for 2019, according to The Global Cost of Internet Shutdowns report released earlier this month; this figure is an underestimate, says the report, as the focus was region-wide shutdowns, which tends to exclude many incidents. Further repeats of such shocks cannot be ruled out ahead. It is notable that the influential global risk-assessment consultancy, Eurasia Group, has reportedly placed India as one of 2020’s top geo-political risks.

When growth falls as steeply as it has this year, and the slowing is extended to the medium-term, emerging out of it takes longer and is more difficult because households and firms are more enduringly weakened than in a short-lived, cyclical downswing. And if policymakers lack resources or policy levers to arrest the sliding, a painless recovery is harder to achieve. The current economic situation is precisely at such a confluence — the government can do little by way of fiscal responses, an easing monetary cycle expected to manage the downswing faces uncertain inflationary challenges. Unless fortune unexpectedly smiles, hard times seem inevitable ahead.

Only way is up for interest rates after inflation hits 6-year high

By Paran Balakrishnan

Goodbye interest rate cuts. The leap in headline consumer price inflation to its highest level in nearly six years means the interest-rate cutting cycle is over and that the next interest rate move will be up, say analysts.

While good news for savers, this is the latest piece of bad news for Prime Minister Narendra Modi’s government under whose watch the economy’s been tanking. For finance minister Nirmala Sitharaman, the adverse inflation climate only makes her job of preparing her “pro-people, pro-growth” budget, due to be presented February 1, even tougher.

The government has been pushing for rates to come down further, even though the monetary easing medicine hasn’t had an effect. Financial institutions have been slow to pass on the rate cuts and in any event, businesses are more inclined to hang on to their money and repair balance sheets than make investments when demand’s sluggish. (The extent of how sluggish demand is was highlighted when India’s flagship auto industry reported car sales dropped a record 19 per cent year-on-year in 2019).
Despite a string of cuts in this rate-cutting cycle which began in February last year, economic growth has kept falling with second-quarter growth hitting 4.5 per cent, its lowest in six years. The government now projects Indian economy will expand in the full-fiscal year by 5 per cent, down from 6.8 per cent which would be the lowest pace in 11 years. But privately economists say the growth figure could well be lower with Fitch Ratings, for instance, pegging it at 4.6 per cent, citing “weakening business and consumer confidence.”

Now, throwing a further spanner into the works is accelerating inflation. India looks to be in the embrace of that toxic mix known as stagflation -- defined as slow economic growth, increasing unemployment and rising prices. Traditionally, when an economy is in the doldrums, the remedy is cutting rates. Now, though, it’s virtually certain that the Reserve Bank of India will keep its benchmark policy rates unchanged when it meets next in early February. And inflation could also mean that rate hikes will come earlier than expected.

“The jump in headline CPI (consumer price inflation) to its highest since 2014 almost guarantees that the RBI will leave policy rates on hold at its next meeting in early February. And with core inflation likely to rise over the coming quarters... policy rates will be hiked much sooner than most are expecting,” say Mark Williams, Capital Economics chief Asia economist.

Williams said that the available data for January show that food inflation has yet to ease and, “If we are right in forecasting a rise in global oil prices this year, fuel inflation looks set to rise further as well.” Heading the list of vegetable-inflation drivers are onions (which traditionally make Indian governments weep) Shutterstock

So why does the interest rate-easing party seem to be over? Let’s remember first of all that the central bank’s target for headline inflation is 4 per cent and inflation has only been heading northward of that figure. CPI inflation jumped from 5.5 per cent year-on-year in November to 7.4 per cent year-on-year in December -- a staggering 181 basis-point jump. That is the biggest rise since July 2014.

The rise was broad based but mainly driven by food inflation -- specifically vegetables which are up a staggering 60.5 per cent year-on year. And heading the list of vegetable-inflation drivers are onions (which traditionally make Indian governments weep). The headline figure is the highest it’s been since July 2014. By the way, this upward move was far bigger than expected by the financial markets which expected the December rate to be around 6.7 per cent. There’s also been shocks from the rise in oil prices.

Core inflation, which excludes the volatile movements of food and fuel, is looking more stable, edging up to 3.75 per cent even after mobile phone companies substantially raised subscriber costs and railway fares rose. But economists believe core inflation will also creep higher to around 4 per cent.

“We expect the central bank to switch to tightening mode much sooner than is generally expected. We are forecasting modest rate hikes in 2021 with the first move possible before,” says Capital Markets’ Williams.

Economists figure it’s already a given that the financially strapped government will have to burst its fiscal deficit target in the budget. Adding to the government’s woes on this score are the lower-than-forecast revenue collections. It all means that the government will likely have to leave out any feel-good, economy-boosting income tax cuts.

“The upcoming budget in February would be closely watched for fiscal stance and sector-specific actions. Even so, our estimates suggest inflation will likely remain above 6.5 per cent in the fourth quarter of 2020 and could constrain a rate cut in February,” financial services firm Edelweiss says.

HDFC Bank Chief Economist Abheek Barua says the government needs to put more attention on the agricultural sector as higher food prices have a big driver of the higher inflation via better food stock management to avoid shortages. But there’s a big unknown with the rabi crop. Economists also say that the 45 per cent weightage of food prices in the consumer consumption basket may be unrealistic and needs to be reassessed.

What’s ahead for prices? Well, economists expect inflation to stay high in January as well but say it could retreat in the second and third quarters to 4.7 per cent or a little lower, and then head sharply south to possibly 2-2.5 per cent in the fourth quarter.

And if all this bad economic news wasn’t enough, the slow growth is now having a “visible impact” on job creation, notes the State Bank of India. In fiscal year 2019, India created 89.7 lakh new jobs. “In fiscal 20, as per currently projected, this number could be at least 15.8 lakh lower, the SBI said on January 13.

The Confederation of Indian Industry in its pre-budget recommendations to the government says, “All engines of growth are showing sluggishness – consumption, investments and exports, placing the burden of kickstarting the economy on government expenditure.” The CII adds that, “a flexible, yet prudent fiscal policy is the need of the hour.” That’s a tall order under the circumstances, especially as the government has its plate full on the political front, struggling to control the after-effects of passage of the Citizenship Act.

A rough patch

Editorial Indian Express
Latest inflation data seems to corroborate fears articulated by the Monetary Policy Committee (MPC) in its December meeting when it refrained from cutting the benchmark repo rate. Retail inflation, as measured by the consumer price index (CPI), has surged to 7.35 per cent in December 2019, up from 5.54 per cent in November, according to data from the National Statistical Office. With headline inflation well above the RBI’s upper bound target of 6 per cent — it is expected to remain elevated in the coming months, may well surpass the RBI’s estimate for the second half of this fiscal year — it reduces the space for further easing of policy rates, even after clarity over the extent of the Centre’s fiscal slippage emerges. The 10-year G-sec yields have reacted sharply to these developments, rising to 6.67 on Tuesday, partially offsetting the impact of the RBI’s recent open market operations. This combination of weak economic activity and higher than expected supply-side inflationary pressures has put the inflation-targeting regime under test.

Much of the rise in the headline inflation number can be traced to higher food prices. Food inflation has risen to a near six-year high of 14.12 per cent in December 2019, up from 10.01 per cent in the previous month. Much of this spurt is due to vegetable prices, which have surged to 60.5 per cent in December, contributing nearly 3.7 percentage points to the headline numbers. Prior to this data, there was an argument for overlooking this spurt in food prices, and easing rates further, as this spike in inflation is likely to be transitory. But the price rise has been much more pronounced. And while vegetable crop cycles tend to be short, and supply-side pressures may ease in the coming months, the stickiness in prices of protein items is likely to provide a floor for food inflation. Put differently, food inflation is unlikely to revert to previous levels in the short term. And as household inflation expectations, a key metric in the MPC’s assessment, are more responsive to food inflation, this uptick will further exert upward pressure on them. Add to that the uncertainty over oil prices on account of hostilities in the Middle East, and the outlook for inflation looks muddled.

It was expected that the MPC would lower rates further once clarity over the Centre’s fiscal position emerges after the Union budget. But the current trends in inflation suggest that those expectations are likely to be belied. Space for further easing may now open up only towards the second half of the next fiscal year. Soon, attention will turn to the Union budget. With limited fiscal space for a meaningful stimulus, the finance minister should spell out how the government intends to support the economy during this rough patch, and return growth to a higher trajectory.

റിസർവ് ബാങ്ക് എന്ന ഗോമാതാവ്

ജോർജ്‌ ജോസഫ്‌

സാമ്പത്തികപ്രതിസന്ധി അതിരൂക്ഷമായ സാഹചര്യത്തിൽ റിസർവ് ബാങ്കിന്റെ കരുതൽ ശേഖരത്തിൽ വീണ്ടും കൈയിട്ടുവാരുകയാണ് കേന്ദ്ര സർക്കാർ. ഇടക്കാല ലാഭവിഹിതമായി 40,000 കോടി രൂപ അനുവദിക്കണമെന്നാണ് റിസർവ് ബാങ്കിനോട് കേന്ദ്രം ആവശ്യപ്പെട്ടിരിക്കുന്നത്. രാജ്യത്തിന്റെ സാമ്പത്തികവളർച്ച താഴോട്ടായ സാഹചര്യത്തിൽ ,‘അസാധാരണമായ' ഒരു വർഷം എന്ന സ്ഥിതി പരിഗണിച്ച്, പണം അനുവദിക്കണമെന്നാണ് ആവശ്യം.

സാധാരണഗതിയിൽ ആർബിഐ ഇടക്കാല ലാഭവിഹിതം അനുവദിക്കുന്ന പതിവില്ല. എന്നാൽ, കഴിഞ്ഞ മൂന്ന് സാമ്പത്തിക വർഷങ്ങളിൽ തുടർച്ചയായി ഇടക്കാല ഡിവിഡന്റ് നൽകുന്നതിന് സർക്കാർ നിർബന്ധിക്കുകയും റിസർവ് ബാങ്ക് അത് അനുവദിക്കുകയും ചെയ്തു. ഏതാനും മാസങ്ങൾക്ക് മുമ്പാണ് 1 .76 ലക്ഷം കോടി രൂപ ഈ ഇനത്തിൽ സർക്കാരിന് കൈമാറിയത്. ഇതിൽ 1.48 ലക്ഷം കോടിയും നടപ്പ് സാമ്പത്തികവർഷത്തിൽ മുൻകൂറായി നൽകിയതാണ്. ഇതിനു പുറമെയാണ് 40,000 കോടി കൂടി നൽകണമെന്ന് ആവശ്യപ്പെട്ടിരിക്കുന്നത്.
നികുതിവരുമാനം ഉൾപ്പെടെയുള്ള ധനാഗമ മാർഗങ്ങളിൽ വലിയ തോതിൽ ഇടിവുണ്ടായിരിക്കുന്ന സാഹചര്യത്തിലാണ് സർക്കാർ റിസർവ് ബാങ്കിനെ പിഴിയുന്നത്. പരോക്ഷനികുതിയിൽ, പ്രത്യേകിച്ച് ജി എസ്ടിയിൽ നിന്നുള്ള വരുമാനത്തിലെ ഗണ്യമായ ചോർച്ച ധനകമ്മി രൂക്ഷമാക്കി. ധനകമ്മി പ്രതീക്ഷിച്ചിരുന്നതിനേക്കാൾ 115 ശതമാനം അധികമാകുമെന്നാണ് ഇപ്പോൾ കണക്കാക്കപ്പെട്ടിരിക്കുന്നത്. ഫെബ്രുവരി ഒന്നിന് നിർമല സീതാരാമൻ അവതരിപ്പിക്കുന്ന ബജറ്റിൽ ആദായനികുതി ഇളവ് ഉൾപ്പെടെയുള്ള ചില ജനപ്രിയപ്രഖ്യാപനങ്ങൾ പ്രതീക്ഷിക്കുന്നുണ്ട്. ഇത് ചെലവുകൾ കുത്തനെ ഉയർത്തും. ഇത്തരത്തിൽ സാമ്പത്തികപ്രതിസന്ധി അതിസങ്കീർണമാകുകയും അത് പരിഹരിക്കുന്നതിന് സർക്കാരിന് മുന്നിൽ പോംവഴികൾ കുറഞ്ഞതുമാണ് വീണ്ടും റിസർവ് ബാങ്കിനെ സമീപിക്കുന്നതിന് കാരണം. ക്യാപിറ്റൽ റിസർവ് എന്ന രീതിയിൽ ഇത്ര വലിയ ശേഖരം ആവശ്യമില്ല എന്ന നിലപാടാണ് കേന്ദ്ര സർക്കാരിനുള്ളത്. അതുകൊണ്ട് മൂന്ന് ലക്ഷം കോടി രൂപയെങ്കിലും സർക്കാർ ഖജനാവിലേക്ക് കൈമാറണമെന്ന് ഒന്നാം മോഡി സർക്കാർ റിസർവ് ബാങ്കിന് മുന്നിൽ നിർദേശം സമർപ്പിച്ചിരുന്നു. രാജ്യത്തിന്റെ സമ്പദ്‌വ്യവസ്ഥയെ അസ്ഥിരപ്പെടുത്തുന്നതും ആർബിഐയുടെ സ്വയംഭരണ അവകാശങ്ങളിലേക്ക് നേരിട്ടുള്ള കടന്നുകയറ്റവുമായ ഇതിനെ അന്നത്തെ ഗവർണർ ഉർജിത് പട്ടേൽ ഉൾപ്പെടെയുള്ളവർ എതിർത്തു. എന്നാൽ, തങ്ങളുടെ ഇംഗിതം ഒരു വിദഗ്ധസമിതിയുടെ റിപ്പോർട്ടായി കൊണ്ടുവന്ന്, അത് റിസർവ് ബാങ്കിന്റെ ഡയറക്ടർ ബോർഡിനെ കൊണ്ട് അംഗീകരിപ്പിച്ചാണ് കേന്ദ്രസർക്കാർ തീരുമാനം നടപ്പാക്കിയത്. തുടർന്ന് റിസർവ് ബാങ്കിന്റെ ചരിത്രത്തിൽ രാജിവയ്‌ക്കേണ്ടിവരുന്ന അഞ്ചാമത്തെ ഗവർണറായി ഉർജിത് പട്ടേലിന് മാറേണ്ടി വന്നു. പകരം ഒരു പാവ ഗവർണറെ അവരോധിക്കുകയും അദ്ദേഹവും ഡയറക്ടർ ബോർഡും മോഡി–-അമിത് ഷാ കൂട്ടുകെട്ടിന്റെ താളത്തിന് തുള്ളുന്നതുമാണ് ഇപ്പോൾ ആർബിഐയിൽ നടക്കുന്നത്. വിയോജിപ്പ് തുറന്ന് പ്രകടമാക്കിയ ഡെപ്യൂട്ടി ഗവർണർ വിരൽ ആചാര്യയും കേന്ദ്ര ബാങ്കിന്റെ പടിയിറങ്ങി.

ലാഭവിഹിതം അവകാശമല്ല
കേന്ദ്രസർക്കാരിന് ഇങ്ങനെ ലാഭവീതം ആവശ്യപ്പെടാൻ അധികാരമോ, അവകാശമോ ഇല്ല എന്നതാണ് നിയമവും കീഴ്‌വഴക്കങ്ങളും ഇതഃപര്യന്തമുള്ള പ്രവർത്തനരീതിയും വ്യക്തമാക്കുന്നത്. കമ്പനി നിയമങ്ങൾ പ്രകാരം ഡിവിഡന്റ് നൽകുക സാധാരണമാണ്. എന്നാൽ, അത് ഒരിക്കലും ഓഹരി ഉടമയുടെ അല്ലെങ്കിൽ ഉടമകളുടെ അവകാശമല്ല. ഒരു കമ്പനിയുടെ ഓഹരികൾ കൈവശമുള്ള ഒരു വ്യക്തിക്ക് എനിക്ക് ലാഭവിഹിതം തരണം എന്ന് ആവശ്യപ്പെട്ട് കോടതിയെ സമീപിക്കാൻ കഴിയില്ല. അത് നിയമപരമായ ഒരു അവകാശമല്ല. കമ്പനി മെച്ചപ്പെട്ട അറ്റാദായം നേടുമ്പോൾ ഓഹരി ഉടമകൾക്ക് അവരുടെ നിക്ഷേപത്തിനുള്ള പ്രതിഫലം എന്ന നിലയിലാണ് ഡിവിഡന്റ് അനുവദിക്കുക. സാധാരണരീതിയിൽ ഇത് കമ്പനിയുടെ ഡയറക്ടർ ബോർഡ് ശുപാർശചെയ്യുകയും ഓഹരി ഉടമകളുടെ വാർഷിക പൊതുയോഗം അതിന് അംഗീകാരം നൽകുകയും ചെയ്യുന്നതോടെയാണ് ഇതിനുള്ള നടപടിക്രമം പൂർത്തിയാകുന്നത്. അത് എത്ര ശതമാനം വേണം, എപ്പോൾ നൽകണം തുടങ്ങിയ കാര്യങ്ങൾ കമ്പനിയുടെമാത്രം അധികാരത്തിൽ വരുന്ന വിഷയങ്ങളാണ്. സാമ്പത്തികവർഷത്തെ ത്രൈമാസഫലങ്ങൾ വിലയിരുത്തി മികച്ച പ്രവർത്തനം കാഴ്ചവയ്ക്കുന്നു എന്ന് വ്യക്തമായാൽ ഇടക്കാല ലാഭവിഹിതവും നൽകാറുണ്ട്. ഇത് മൂലധന നിക്ഷേപ രംഗത്തെ പ്രവർത്തനരീതിയാണ്. എന്നാൽ, ഇത് ഒരിക്കലും ഓഹരി ഉടമകളുടെ നിയമപരമായ അവകാശമായി മാറുന്നില്ല. ഒരു കമ്പനിക്ക് അവരുടെ ലാഭം പല രീതിയിൽ സൂക്ഷിക്കുന്നതിനുള്ള അവകാശ - അധികാരങ്ങളുണ്ട്.

അതുകൊണ്ടാണ് റിസർവ് ബാങ്കിനോട് ലാഭവിഹിതം ചോദിക്കുന്നത് അതിന്റെ സ്വയംഭരണ അവകാശങ്ങളിലുള്ള പ്രത്യക്ഷ ഇടപെടലായി മാറുന്നത്. അത് സ്വാഭാവികമായി കൈമാറുന്ന ഒരു കാര്യമാണ്. റിസർവ് ബാങ്കിനെ സംബന്ധിച്ചിടത്തോളം സാധാരണ കമ്പനികളെ പോലെ ലാഭ നഷ്ട അടിസ്ഥാനത്തിൽ മാത്രമല്ല പ്രവർത്തനം. അതിന്റെ പ്രവർത്തനങ്ങളിൽനിന്ന് ലഭിക്കുന്നസാമ്പത്തികനേട്ടത്തെ ലാഭം എന്ന് പോലും വിശേഷിപ്പിക്കാറില്ല. സർപ്ലസ് അഥവാ മിച്ചം എന്ന വാക്കാണ് ഇവിടെ പൊതുവെ ഉപയോഗിക്കാറ്. ആർബിഐയുടെ പ്രവർത്തനത്തിനും അടിയന്തര സാഹചര്യങ്ങൾക്കാവശ്യമായ ഫണ്ടുകളും നീക്കിവയ്ക്കുന്നത് ഈ മിച്ചത്തിൽനിന്നാണ്. റിസർവ് ബാങ്കിന്റെ ഓഹരി ഉടമകൾ കേന്ദ്ര സർക്കാരാണ്. സ്വാഭാവികമായും കേന്ദ്രത്തിന് ലാഭവിഹിതം നൽകേണ്ടത് അവരുടെ ബാധ്യതയുമാണ്. എന്നാൽ, തങ്ങൾക്ക് ഇത്ര തുക ഈ ഇനത്തിൽ നൽകണം, ക്യാപ്പിറ്റൽ റിസർവുകളായി ഇത്ര തുക സൂക്ഷിക്കുന്നതെന്തിനാണ്, ഞങ്ങൾ ആവശ്യപ്പെടുമ്പോഴെല്ലാം പറയുന്ന തുക ഇടക്കാല ലാഭവിഹിതമായി നൽകണം എന്നെല്ലാം നിർദേശിക്കുന്നത് അതിന്റെ സ്വയംഭരണ അവകാശത്തെ ഹനിക്കലാണ്, പ്രവർത്തനത്തിൽ നേരിട്ട് ഇടപെടുന്നതിന് തുല്യവുമാണ്. മാത്രവുമല്ല, ഇത് റെഗുലേറ്റർക്കുമേൽ അസാധാരണമായ സമ്മർദം ഉണ്ടാക്കുകയും ചെയ്യുന്നു. ഉർജിത് പട്ടേൽ രാജിവയ്ക്കാൻ ഇത്തരം സമ്മർദം ഒരു കാരണമായിരുന്നു.

വിത്തെടുത്ത്‌ കുത്തുന്നു
സ്വയംഭരണസ്ഥാപനങ്ങളിൽ ഏറെ പ്രത്യേകതയുള്ള ഒന്നാണ് റിസർവ് ബാങ്ക്. രാജ്യത്തിന്റെ സാമ്പത്തികഘടനയുടെ അസ്‌തിവാരം എന്ന് പറയുന്നത് കേന്ദ്ര ബാങ്കും അത് സൂക്ഷിക്കുന്ന റിസർവുകളുമാണ്. സമ്പദ്ഘടനയുടെ നിലവാരവും കറൻസിയുടെ മൂല്യവുംമറ്റും ഇതിനെ ആധാരപ്പെടുത്തിയാണിരിക്കുന്നത് . കേന്ദ്ര സർക്കാരിന്റെ ആജ്ഞ അനുസരിക്കുന്ന ഒരു സംവിധാനമല്ല കേന്ദ്ര ബാങ്ക്. രാജഭരണം നിലവിലുള്ളതുൾപ്പെടെ ഒരു രാജ്യത്തും അത് അങ്ങനെയല്ല. ഇന്നത്തെ രീതിയിലല്ലെങ്കിലും ഇന്ത്യയിൽ നാട്ടുരാജാക്കന്മാർ ഭരിച്ചിരുന്ന കാലത്തും ഇത്തരത്തിൽ സമ്പത്ത് സൂക്ഷിക്കുന്നതിന് കാണിച്ചിരുന്ന വ്യഗ്രതയുടെ ഒരു ഉത്തമദൃഷ്ടാന്തമാണ് ശ്രീപത്മനാഭസ്വാമി ക്ഷേത്രത്തിൽ സൂക്ഷിച്ചിരുന്ന നിധിശേഖരം. ആ വിത്തെടുത്ത് കുത്താൻ രാജഭരണംപോലും ശ്രമിച്ചിരുന്നില്ല. അതുകൊണ്ട് റിസർവ് ബാങ്കിന്റെ അധികാരത്തിന്മേൽ കടന്നുകയറുന്നത് വിപൽക്കരമായ നീക്കമാണ്‌. സർക്കാരിന്റെ സാമ്പത്തികപ്രതിസന്ധി പരിഹരിക്കലല്ല റിസർവ് ബാങ്കിന്റെ കടമ. അത് രാജ്യത്തെ പണവ്യവസ്ഥയുടെ സൂക്ഷിപ്പുകാരനാണ്. വിപണിയിലേക്കുള്ള പണത്തിന്റെ ഒഴുക്ക് ക്രമീകരിച്ച് സാമ്പത്തികവ്യവസ്ഥയുടെ സുസ്ഥിരത സൂക്ഷിക്കേണ്ട സ്ഥാപനമാണ് . അല്ലാതെ സ്വയം കുഴിച്ച കുഴിയിൽ വീണ് കൈകാലിട്ടടിക്കുന്ന മോഡിയെയും അമിത്‌ ‌ഷായെയും സാമ്പത്തികമെന്നാൽ ആട്ടിൻകാഷ്‌ഠമാണോ, കൂർക്കക്കിഴങ്ങാണോ എന്നുപോലും തിരിച്ചറിയാൻ കഴിയാത്ത നിർമല സീതാരാമൻ ഉൾപ്പെടെയുള്ളവരെയും രക്ഷിച്ചെടുക്കലല്ല ആർബിഐയുടെ ജോലി. ഇവിടെ ഒരു കറവപ്പശുവിനെ എന്ന പോലെ റിസർവ് ബാങ്കിനെ ഉപയോഗിക്കുകയാണ് കേന്ദ്രഭരണത്തിലുള്ളവർ. കറന്ന് കറന്ന് അകിടിൽനിന്ന് ചോരവരെ പിഴിഞ്ഞെടുക്കുന്നത് സാമ്പത്തിക മേഖലയിൽ വൻ പ്രത്യാഘാതം സൃഷ്ടിക്കും. ഈ ഓർമകൾ ഉണ്ടായിരിക്കേണ്ടവർ രാജ്യത്തെ എല്ലാ സ്വത്തിന്റെയും ആത്യന്തിക ഉടമകളായ ജനങ്ങളാണ്.