Pleasant news about the economy is rare. It is mostly negative ones which are getting trounce day by day. Lack of timely reforms and COVID made the situation worse.
Growth in the gross domestic product (GDP) has declined for consecutive quarters. It plummeted to a low of 3.1% in the first quarter of January. The nominal GDP growth rate and unemployment touched a 42-year low, consumption failed to lift. Likewise, investment sentiments remaining grim, agrarian crises deepening, and manufacturing distress aggravated. Companies after companies reporting a loss and small and medium enterprises shutting down rapidly. Indian financial situation is damaged severely post-second wave of COVID-19
Is the government adequately doing the steps for recovery? Not to mention, Chest thumping and sheer nationalism are not going to pump up the economy. Basic reforms are still pending. India cannot dominate China until she is financially strong.
Back to back inadequacy
Quarter Baked GST Plan without any Pilot State recommended by Manmohan Singh in his original plan or without any long work simulation. The result is evident to this day. Revenue incurred through Taxes has fallen badly and GST Share is becoming hard to collect. India’s tax system is a total mess. GST doesn’t seem to be capable of clearing this mess.
In China, the government levies taxes according to the demand of the service. If the demand is low, the government decreases the tax subsequently and this allows the particular company to hold on to the decreased sales and maintain the price hike. Following, Chinese companies pay more than Indian companies to their employees even when the product price is low when compared to their Indian counterparts.
Other countries are using the perks of India being populated than ourselves. Decade long demands like land and labor reforms are still due. Halfwit Tax reforms are of no good. Subramanian Swamy is desperate for the FM post for a long time. But PM Modi is reluctant to replace Nirmala Sitharaman because firing Nirmala means acknowledging that he has made a mistake.
Indian Banking amid COVID shock
Banks in the country are likely to witness a spike in their non-performing assets ratio by 1.9 percent and credit cost ratios by 130 basis points in 2020, following the economic slowdown on account of the COVID-19 crisis, says a report.
Noted that an additional USD 300 billion spike in lenders’ credit costs and a USD 600 billion increase in (NPAs) will occur in 2020 due to the adverse impact of coronavirus pandemic.
“After the Sub Prime Mortgage Crisis in 2008, Manmohan Singh and Co made their first mistake by issuing orders to release credit cards without a second hesitation, to issue home loans with minimal scrutiny, 49 personal loan schemes were introduced by PSU Banks and followed by Private Banks. Of course – All the Loans given did not go for expansion or development or research or manufacture. Almost 70% of the Loans would become NPA and around 21% has already been declared as NPA.”Balasubramaniam Kanthaswamy, Former Chief Manager at Central Bank of India
Alarming NPA crisis as salt into the wound
The Non Performing Assets (NPAs) of Public Sector Banks (PSBs) stood at ₹7.27 lakh crore as on September 30, 2019. From 2000-2008, the Indian economy was in a boom phase and banks, especially public sector banks, started lending extensively to companies. However, with the financial crisis in 2008-09, corporate profits decreased and the Government banned mining projects. The situation became serious with the substantial delay in environmental permits, affecting the infrastructure sector – power, iron, and steel – resulting in volatility in prices of raw materials and a shortage of supply. India should focus on everything to overcome this Indian financial situation.
Another reason is the relaxed lending norms adopted by banks, especially to the big corporate houses, the foregoing analysis of their financials, and credit ratings.
Hope into growing Concern twined with fear
The government is an untied kite and has no idea where to start. The mess, the previous government left has been made more twisty and complicated. Except for some moves to get more FDI, there are no core changes in the babu culture or Red Tapism. Setting up a company in India is still a hard job and this is not doing any good for PM’s Vocal for Local campaign.
The overwhelming power of state governments is making the system staggering. There must be systems that boost the infrastructure development pan India with lesser state government interference. State-to-state differences in land and labor laws are a nightmare to every foreign investor(for example KIA motors & TATA motors). There should be a unified law and a proper channel to make it possible.
The time to wait for the demand and letting the economy boom, has left the scene. There must be adequate measures that can be effective ground levels.