By Vivek Pattanayak in Bhubaneswar, October 29, 2017: Eminent economists, successful businessmen and reputed professionals are engaged in a fierce debate over the former finance minister’s explosive polemical statement about the state of national economy, followed by RBI policy statement, World Bank and IMF reports and Fitch ratings.

Literally, hell broke loose in the media, both print and electronic, some coming with robust and eloquent defence of the central government’s policies and performance and while many continued to dig holes to expose that everything is not hunky dory as has been made out to be.

Let us examine the stats. Rise of industrial output by 4.3% in August and retail inflation pegged at 3.2% in September is described as steady while wholesale inflation at 2.6% cannot be construed as alarming at all. This is followed by report of raising core sector jobs at IIT, and 25% increase in placement.

News report reflects increase in contingent work force in start-up area, and there is promise of further growth. Robust sale of passenger vehicles, utility and transport vehicles and two-wheelers reflect buoyant mood in the economy.

Exports soared by 26% in September and import has also grown reflecting demand is picking up. There was consolation coming from IMF affirming that the dip is temporary in nature due to demonetization and GST.

There was also a pat on the back with an observation of IMF recognizing speed of digitization in India as exciting. In the stock market Systematic Investment Plan (SIP) has been successful and retail investment continued to pour in. These are signs of vibrancy, it is said.

At the global level demand is picking up, more robust now than six months back. In Germany and Japan employment growth is exciting while in USA it is interesting although varying. All these will contribute to the briskness to the Indian market more connected to the world economy now than before.

News that National Investment and Infrastructure Fund would attract one billion dollar  from Abu Dhabi is heartening. Then came the news of IndusInd merger with Bharat Financial Inclusion raising the hope of revival of micro-finance in stalemate for a long period hurting the rural economy.

On the downside, salaries of CEOs get lower declining from 21% to 10% reflecting slow down. News report state that 331 infrastructure projects are facing cost overrun of Rs 1.7 lakh crore and there is possibility of time overrun as well. WIPRO registered disappointing sales growth of only 0.03% bringing down its profit by 1%.

This has come in the wake of TCS having wilted and Tata Sons having not done well. The newly appointed chief of the country’s biggest PSU bank has expressed that no new big project is coming although steel sector and cement indicate positive EBIDTA.

Year-to-year Bank credit growth declined showing six decades low, the lowest since 1953. Bad loans and inability of banks to lend, mounting NPAs and pathetic hesitation in taking decision on haircuts in spite of nudging by Bank Board Bureau also reveal the sombre mood among bankers at the cutting edge level.

Some corporate houses are looking for debt and bonds although private investment continues to be tepid. Vedanta’s boss Anil Aggarwal – one of the positive and optimistic entrepreneurs of the recent times articulated why people are afraid to come to India. Foreign investors are selling.

Anil Ambani’s telecom company is closing down due to losses making 1200 employees redundant. In this background there is distressing news of flow of professionals of the Indian origin back to India due to anti-immigrant outlook in USA and Europe as was shown during election and referendum.

The rain god was occasionally erratic raising spectre of drought in certain parts including some areas of Odisha.

Meanwhile, some raving animated exchange of views took place at NITI Ayog, in the newly constituted outfit called PMEAC, in the media among pundits and mandarins in the corridors of North Block as to what steps should be taken to revive the economy. There was mention of some Rupees one lac twenty thousand crore of social security plan.

If the media reports are to be believed then it appeared new Vice Chairman of NITI Ayog pitched for stimulus package of the order of Rs 40,000 crore provided it would increase productivity and capital expenditure to take the bull by its horn after six consecutive quarters of dips of the economy. Interestingly there were contrary views to this approach.

Nomura, financial outfit was of the view there was no shortage of both revenue and expenditure in the economy hence there should be no requirement of stimulus. RBI was supposed to have not favoured this approach and so was the PMEAC.

Now after all these events there is recent announcement of “booster shot” for economy which envisaged mammoth infusion via recapitalization bonds to strengthen banks and road construction projects to generate jobs. The amount is quite hopping pegged at Rs two lakh one thousand crore. It is hailed as monumental step forward and a big bang reform.

Few questions naturally come to one’s mind at this stage. If this announcement reflects anything it is admission by the government that the economy needed treatment. In other words the economy was ailing and requiring massive dose of medicines. Then, why were the leaders at the apex level in denial mode all this while? Why were they pretending that everything was under control and asserting that economy would soon gallop? Why did they kill the messenger of bad news?

Second question which also comes up as to why there was so much of delay when huge NPA in the banking sector almost reaching astronomical level was never a secret? Has not this delay in grappling with this unruly animal escalated the magnitude of stressed assets making the banks even more vulnerable and unviable? With passing of everyday NPA was growing. There is an old saying “stitch in time saves nine”. Why was this policy paralysis?

Third question is when the malady in the economy was growing why did the government resort to demonetization that too without having an efficient mechanism of replacing the old notes and what is worse is why did government introduce GST without adequate preparation causing disruption?

Fourth question which comes to mind whom did the government consult before announcing this package? Was it another decision in haste? Is it also a knee-jerk reaction to criticism?

Fifth question is why this announcement has come on the eve of the elections in two States? What does it show?

Sixth question is how long it will take to implement the package? Seventh, will it really revive the economy? Eighth question, will it have some awkward consequences? 

Lastly, with next general election in the horizon will not politics play bigger role than rationality? How will political economy respond?

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