By Shivaji Sarkar
Various packages announced cannot cope up with the losses and slowdown as a result of lockdown. The economic situation as repeatedly mentioned is difficult if not grim. Amid this a new thought process and abandoning ornamental projects is necessary for toning up the economic and financial contours for taking the nation to the dreamt heights.
Ambition is indubitably good. The $5 trillion economy is a nice goal, but the path chosen has to match it. Since the April-June quarter of 2019 the economy has been nose diving. The industry has continuously been bringing to notice the demand plunge. Belated freeing of taxes up to Rs 5 lakh of income was a prudent decision and so was relief to corporate. Several other factors and contraction of factory output, job losses, salary cuts and other issues had taken 2019 to a virtual abyss.
It has started reflecting since December 2019, when the government started pruning allocations of the departments. In many cases, during the last quarter, before being hit by corona, the financial situation had turned severe.
Reviewing the reasons or putting blame on anyone is neither prudent nor a solution. However, a stock taking is needed for taking decision to give up many projects that the nation can wait for. The bureaucratic and the political processes become wary of retracting an announced step. But mostly it would not affect image makeover.
People have wisdom to understand the difficulties and course corrections. A visit to the hinterlands would make it clear how the village elders instead of being critical welcome such retractions. The village elders say that if you are in difficulty desist from buying ornaments to keep your family happy. It is raw wisdom. The nation must imbibe it.
In difficult times contemplation of selling assets is natural. The process of putting the public sector undertakings (PSU) on sale reflects that. No family, however, easily parts with their hard-earned assets or institutions built with diligence. The nation has to rethink. The family silver, PSU, much maligned, has been paying high dividends, including RBI, to help the government sail through difficult times. Some PSUS like BPCL needs Rs 400 crore to sell and a mere Rs 72 crore to refurbish and rerun.
The PSUs have been harbinger of the progress of the country with measly investment. The 59th Public Enterprises Survey 2018-19 says as on March 31 2019, there are 339 CPSEs with a total investment of Rs 16,40,628 crore. The total revenue earned in 2018-19 is Rs 25,43,370 crore. The dividend paid by only seven of these is Rs 21,000 crore. Is that a bad performance?
In terms of giving jobs with living wages, the central PSUs are better than their private sector competitors. They employ 20 lakh people (sustain at least 80 lakh) and give indirect employment to almost equal numbers. The coal, steel, engineering, power and textiles have the largest number of employees.
The PSUs have beaten the private sector in 2017-18 with 8 per cent employment growth. The private sector growth was only 6.3 per cent, says a Care Ratings study of 700 companies. The study noted that overall job growth in the private sector had declined in 2018. The total employment was 4.57 million, of these 2 million in PSUs. Additionally, the companies with net sales of Rs 50-100 crore, Rs 100-250 crore and Rs 500-1000 crore underperformed and pulled down the overall employment growth.
The development indicates that the slide had started in 2017. However, the country had not taken the developments of 2017 to 2019 in a serious manner leading to almost a crisis situation post lockdown. It has raised a fundamental question of total stoppage of production, functioning and processes since March 22 janata curfew. Still the unlock period is also marked by several restrictions and unlimited powers enjoyed by the local administration and police.
The lockdown has not been a prudent decision. An unseemly comparison with neigbouring Pakistan is one such hint at it. Except for local containment areas, there was no general lockdown. Industrial or economic or official activities were not stopped. Pakistan economy is growing and not as hit as large economies such as the US or Europe or smaller ones like South Africa.
Islamabad interestingly has also received rave reviews from the World Health Organisation on September 11. Its Director-General TA Ghebreyesus says Pakistan is included among the seven countries that the world can learn how to deal with the COVID-19 pandemic.
The State must be caring but not to the extent that it jeopardises activities. Many problems including severe job and income crunch today emanate from it. However, it has happened and nation need not rue over it. It has to chalk out a prudent path to move ahead.
It has to move beyond it, beyond falling factory outputs, infrastructure investments and less productive investments. Even Indian investments abroad, by companies like the Tata, are having tough calls on Europe business, according to Global CEO or Tata Steel, TV Narendran. It means India is not going to have good returns for some time from its foreign investments as the Organisation of Economic Cooperation and Development (OECD) predicts deeper contraction of world GDP at a minimum of 10.2 per cent.
The time is to give up all luxuries, and hold PSUs and the Railways sales on hold. It must give up many euphoric projects that the country does not need. These include Rs 1.1 lakh bullet train; Rs 862 core proposed new Parliament complex; Rs 20,000 crore New Delhi Central Vista project; Rs 29560 crore Jewar airport that may cause environmental degradation; Rs 22000 crore new memorial projects in Mumbai and may modify many including ecologically sensitive Char Dham linking in Uttarakhand.
If these are delayed or some even scrapped, the development process would not hamper. Instead it would save large finances when resource generation is becoming difficult. The move to charge more on rail or road travel and impose costs on people too should be put off. The GST procedures need relief so also many other taxes. Let people breathe and as Reserve Bank of India says increase interest rates to pep up deposits.
Come to think of it, most of these are simple calls. If adhered, the complications would reduce and the nation can recover with ease. Prime Minister Narendra Modi has the capacity to start these simple corrections. It is time he begun. — INFA