Hardly the time for a tight fisted Budget
2020-21
FM in her second year of budget
presentation has very unenviable task in performing a balancing act. GST
revenues are looking southwards and the input tax credit, the key for success
of GST is mired in data upload controversy and hostile inverted duty structure.
Markets do not seem to worry about this going by the forward movement of
indices, blowing against the wind.
PSBs absorbed all the capital that the
government buffeted and yet did not perform. On top, some banks have acquired
the notoriety in manipulating balance sheets. Frauds have surfaced like never
before to Rs.71,543cr – a rise of 74% over the previous year in the financial
sector. NBFCs too joined the cry for capital or regulatory relaxations.
Through legal process – IBC, SARFAESI
Act, DRT and Lok Adalats, 14.9% in 2017-18 and 15.5% in 2018-19 is the amount
recovered out of the claims lodged. Recovery through IBC at 42.5% is the
highest, while it is 3.5% through DRTs, the lowest, according to RBI -M&M
Economic Research.
No economic recovery will be possible
with a crippling banking sector like the one we have today. Some Banks having
Insurance and Mutual Funds are still entrusting targets under these
subsidiaries to the regular banking staff taking away their productive time for
selling banking products like deposits, credit and digital services.
Creating demand in rural, semi-urban, and
urban areas would occur when the people have enough money in their hands.
Credit has not moved in tandem with the demand from farmers and MSMEs in
manufacturing. RBI doing its job by reduction of 135 basis points in the base
rate has no spread effect in retail lending market as there is no risk appetite
among banks.
Knowledge in banking products and
services has come down significantly among line staff and this is the reason
for credit origination risk escalating to failure in repayments. Capital
infusion without rectification of the basic malaise and governance, will not
address the problems.
Why worry about fiscal deficit when the
denominator GDP has many undisclosed data escaping entries? Several economists
make mountain of mole hill while speaking about fiscal deficit. Right from the
Union Finance Ministry to the regulators, all converge on the fact that the slowdown
of the economy is real and need demand boosters. There were occasions when we
reached around 6-6.5 percent (2008-11) of GDP and the economy registered growth
thereafter.
The worry on employment growth is real.
Unemployed youth hitting the streets would exacerbate the security risks.
Industry, despite the skill development initiatives, bemoans that they do not
find the right persons for the right job.
Sector-wise, agriculture grew 2 percent
while manufacture showed less than 1%. Make in India, the flagship
manufacturing initiative has not shown uptick during the last four years in
continuum. Services sector too is showing decline.
Priced education and health have made
increasing demands on the government. Several States and Union Government have
schemes like Arogya Sri, Kutumba Sri, Ayushman Bharati etc., and yet their
reach to the intended is still facing issues in payment for the services to the
hospitals. Affordability is still an issue.
What should be the measures in the budget
to boost employment? Which sectors need focused attention from such perspective
by way of fiscal incentives? How can the States be brought on the same page as
the Union Government?
The slowdown is both cyclical and
structural. There should be consensus between the States and Union Government
on the way forward. Union Government should release post-haste all the payments
for the pending works under MNREGS.
Several States and Union Government have
huge arrears to suppliers, contractors and sub-contractors for several project
works that has choked the bank working capital releases and all these payments
should be released to the last pie.
The paltry pension to farmers at Rs.6000
per annum should be altered to Rs.12000 per cultivator whereby even the tenant
farmers would be eligible for pension payment after 60 years. Since the scheme
envisages payment by the farmer between 40 and 60 years of age his/her
contribution, several farmers who are of 60 and above right now, would not be
benefitting from the scheme. The scheme should benefit those who are above 60
now. Adequate budgetary provision is necessary.
Budget allocation for health sector
should significantly go up to a minimum of 6% of the total outlay from both the
States and Union. Health infrastructure is pretty poor and needs improvement.
Education budget should target universal
education up to Class 12 and this happens when teacher pupil ratio
significantly improves, and school infrastructure also improves. National
Education Policy shall indicate the prospect of resource allocation as well.
Ensuing Budget should convert intent into
actionable allocations in the critical sectors and lay a path firmly for
cleaning up the banking sector. Frustration should not be at the breaking
point.
Published in the Hindu Business Line, 3.1.2020
No comments:
Post a Comment