Economy needs reforms, not words and repackaged programmes

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Human beings and the contrivances of human ingenuity like institutions and governments have their limitations. The powers that be often tend to ignore this reality. A recent instance is the Finance Minister nudging banks, most of which are in the public sector, to lend more. The expectation is that this would boost private consumption and quicken growth.

The move is unlikely to produce the desired results.

For the Covid-19 pandemic has not only caused lakhs of deaths but the ensuing lockdowns have also badly hurt the economy in various ways. The cure for economic woes does not lie in top-down commands to (public or private) business entities, but greater breathing space for the economic ecosystem. This is possible only by drastic deregulation which, unfortunately, is not happening.

Economic recovery is shaky. This is the reason that the International Monetary Fund (IMF) last month downgraded India’s growth projection for the current fiscal from 12.5% (made in April) to 9.5%.

The Reserve Bank of India also pegged growth at 9.5 for 2021-22. In the minutes of the central bank’s Monetary

Policy Committee meeting on 6 August, RBI Governor Shaktikanta Das said, “The economy is struggling to regain the momentum that had gathered in the second half of 2020-21. There is still considerable slack in the economy. Domestic demand is picking up, but at a slow pace.”

“Growth prospects in India have been downgraded following the severe second Covid wave during Marchmay and expected slow recovery in confidence from that setback,” the IMF had said earlier.

The recovery will remain sluggish so long as there are those who, instead of working in tandem with wealth creators, keep berating India Inc for not doing enough. Consider this gem from a senior Union Cabinet minister: “,ZB BBQLF KBJTJ DPNQBOZ FL EP BBQOF TIBBZBE LPJ WJEFTIJ DPNQBOZ LIBSJE MJX 6TLB JNQPSUBODF [ZBBEB IP HBZB EFTI IJUI LBN IP HBZB (A company like yours, maybe you bought one or two foreign companies, now their importance is greater than national interest?)” the minister chided business tycoons at the recent annual meet of the Confederation of India Industry. This is how the minister regards the Tata group, a widely respected business house. At any rate, it is not run by some neta’s cronies.

The minister went on to lecture the captains of industry with such socialist homilies as “too much profit in a few hands can lead to a lot of problems for a country” and “let the greed of some deprive the need of many”.

At this time of crisis, what the country and wealth creators need is a solid dose of reforms, not remarks in tune with the discredited ideology of socialism. As it is, the ideology has done enough damage to the people of India. An example: The per capita income in our country is below $2,000, which is almost 22 times less that of South Korea. In the 1950s, there was scarcely any difference between the two.

Then we have another Cabinet minister, who slammed the auto industry for not being fast enough to shift from petrol and diesel vehicles to electric powertrains and engines running on other fuel variants such as ethanol and biofuels. The minister threatened punishment. “I am going to do it, whether you like it or not. I will bulldoze. Petrol diesel CBOBBOF XBMPO LBB CBOE CBBKBB CBKBBOBB IBJ (I will make the lives of petrol/ diesel vehicle makers miserable),” the minister said in September.

Being an honourable man, he was true to his word. So, the automobile sector faced its worst decline in two decades in 2019. Thankfully, Prime Minister Narendra Modi cut him to size. The minister lost the MSME portfolio in the recent reshuffle.

Despite PM Modi’s efforts, compliances remain tough and rules and regulations stifling, despite the major gains in the World Bank’s Ease of Doing Business rankings. It’s not easy to do business in India, said the latest US State Department report on the investment climate in India.

These are the reasons that recovery in our country is slow and weak. “India Inc’s asset-turnover ratio declined to a new low of around 70 per cent in FY21, indicating a further decline in capacity utilization across sectors last financial year owing to the pandemic. This raises a question on the companies’ ability to kick-start a fresh round of capacity expansion,” said a report in a business newspaper.

The ratio was 78% in FY20 and a record high of 116% in FY06, it added. “Analysts expect a rise in the assetturnover ratio and capacity utilization in FY22 but say companies go for capacity expansion only when the figure approaches around 100 per cent.”

Official data support this. The latest index of industrial production or IIP data shows that capital goods output, reflecting capacity building and fresh investment, registered a growth of 25.7% in June, as against a contraction of 37.4% in June 2020. Which means that capital goods are below the 2019 level.

Clearly, this is the time for real action, real reforms, not just dialogues. By the way, not even bad Hindi movies have such dialogues. And certainly no need of loan melas, a discredited scheme, which another senior minister’s zeal for augmenting credit offtake may lead to. 3BWJ 4IBOLFS ,BQPPS JT B GSFF MBODF KPVSOBMJTU

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