Eco Survey red-flags debt waivers, with banks shut Govt terms public sector banks as inefficient

Mumbai: In a convoluted way the Center in its Economic Survey for 2019-20 does admit to economic slowdown, growth rate of 5 percent, weak Agricultural growth rate and an even poor 0.6 percent rise in Index of Industrial Production (IIP) which points to unemployment, rise in retail inflation, increase in imports.

The Economic Survey does give a picture that the government is dead against debt waivers by States like Maharashtra where farmers are facing the aftershocks of a weak monsoon. “Debt waivers disrupt the credit culture. They reduce formal credit flow to the very same farmers, thereby defeating the purpose. Full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver”.

On a day when all the Public Sector Banks (PSBs) are on a strike, the Economic Survey has this to say “public sector banks are inefficient compared to their peer groups on every performance parameter. In 2019, investment for every rupee in PSBs, on average, led to loss of 23 paise, while in NPBs (non-public sector banks) it led to the gain of 9.6 paise”.

In an after-thought to the Vijay Mallay’s, Mehul Choski’s and Nirav Modi’s, the Centre suggests that the PSBs use technologies for screening and monitoring of large borrowers.

And the panacea for all this that the beleaguered Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) government has to offer is – “aggressive disinvestment of Central Public Sector Enterprises (CPSEs)”. It argues that strategic disinvestment of government shareholding of 53.29 percent in BPCL led to an increase of around Rs 33,000 crore in national wealth. The government has now put up the national carrier Air India for sale.

The other ideas that the Economic Survey has to offer to turn around the faltering economy are – raise export market share to 3.5 percent by 2025 and  6 percent by 2030, create 4 crore well-paid jobs by 2025 and 8 crore jobs by 2030 by using a strategy similar to one used by China, specialization at large scale in labour-intensive sectors, especially network products and export primarily to markets in rich countries.

A suggestion that will surely set off alarm bells in the trade union world is the Survey suggests enhancing ease of doing business and implementing flexible labour laws can create maximum jobs in districts and thereby in the states.

Amidst all this the government in the Economic Survey does admit that the Consumer Price Index (CPI) has increased from 3.7 percent in 2018-19, to 4.1 percent in 2019-20, that the Imports of manufactured products increased by 12.7 percent as against Exports that grew by 13.4 percent. Although the Survey expects Gross Domestic Produce (GDP) to grow in the range of 6 to 6.5 percent in 2020-21, it sheepishly admits that the current GDP is at a modest 5 percent.

Despite the gloom all around, the government exudes confidence on higher growth in the second quarter and claims employment growth in the formal sector increased by 22.8 percent. Still the government hopes that India can become a $ 5 trillion economy by 2025, through ethical wealth creation.