Modi needs to invent new Economic model

Shivaji Sarkar

The latest privatization of five government entities is a move to raise Rs 1.05 lakh crore by diluting government equities. Simultaneously the private gasping telecom companies are given two more years to pay Rs 1.47 lakh crore government dues. The state finance ministers of Kerala, West Bengal, Delhi, Rajasthan and Punjab have sent SOS as they say they are facing “acute pressure” on their fiscal situation due to the delayed payment of GST share. The RBI initiates insolvency proceedings action against DHFL. It has liabilities close to Rs 84,000 crore of which Rs 19,000 crore was diverted to its related DHFL’s related entities, notes forensic audit by KPMG. It is one of the largest swindling after the IL&FS in less than two years. The DHFL is responsible for one of the worst financial crisis leading to the crash of PMC bank. The SEBI tells listed firms to disclose default within 24 hours from the 30th day. It also raises portfolio management schemes (PMS) to Rs 50 lakh from Rs 25 lakh. It indicates that the sector has more to spill out than apparent. This all has hit the growth of different sectors and jobs are not easy to find. The government’s own data and the latest Care Ratings study on employment growth show the slowdown is affecting the jobs. It has come down to 3.9 percent in 2017-18 and 2.8 percent in 2018-19 as the core industries witnessed virtually a negative growth in hiring. Even the booming secondary sector of services and IT now appears to be gasping as packages are reduced. Consumption as per data is coming down. Certain experimentations like note-ban have not apparently helped. The year of the ban saw 16.9 percent growth in jobs. The following years show critical trends. The NITI Ayog vice chairman now has second opinion about the shaking event. Does it mean that black money is really not that dark as it is painted? The Narendra Modi government should see it as an opportunity and not a problem. The economy has never been easy for any government to understand. Is there something amiss in the financial sector? Has the 1991 promise of liberalisation and a new finance model, euphemistically called Manmohanomics, not succeeded? No one answers it. Neither anyone tries to look for a new model or initiate a discussion. In the face of it another spree of disinvestment even in bluechip companies like Bharat Petroleum, Concor of Indian Railways, Tehri Hydro (THDC), North east Power Corporation and move to transfer management control of a few is not easy to understand. The government departments often say that it is not its job to manage business. If that is correct it tells volumes. Are the private corporate efficient? The answer is again a no. Does it mean that neither the government nor the private sector can manage economic affairs?  The nation needs to find the right model to come out of the morass that is leading to rising prices, large swindling, larger extortion by banks like SBI and higher rate of failures of the private and systematic move to hand over the Navratnas – people’s jewels – to the same private player. The nation has seen that conspiratorial mergers of Air India and Indian Airlines led to momentary profits of some private sector giants like the Jet but ultimately they failed the nation. Now SpiceJet is in a huge crisis. Other airlines may not be in ship shape. As it is developing, airfares are bound to create new records. The recent mergers of banks have shaken public confidence. People feel their deposits are in unsafe hands. They are questioning the “success” of the largest SBI that earns more from levying illegal and unethical charges on depositors than from its core business. The PMC bank failure may not be an isolated incident in the cooperative sector. Monitoring of 1542 urban coop and thousands of rural coop banks is weak. Else it would not have been possible for the RBI to ignore the links between DHFL’s chief Variam Singh and HDIL. A whistle-blower sting alert was ignored! This failure is leading to an untold crisis of confidence in the finance sector. The GST also needs a relook. Levying it on small units has led to closure of units – a reason for job losses. It has also forced many entrepreneurs to turn traders – may be a reason for slowdown in many sectors. In a situation like this the rising fees in the education sector is setting not an ideal model. It is throwing capable people out as they cannot afford an oppressive model. The private education is in a financial and ethical mess. The governments are more into window-dressing, including the latest, supposedly one of the largest, disinvestment in an era where private and public are not succeeding. That is the most critical question. The Nobel foundation can give awards for poverty studies but they have not given one award for suggesting the right financial model to rescue the world since the fall of the Soviet Union. The following decades have only seen looting of the public sector across the world – the most glaring being the 1997 collapse of Asian tigers and 2007-08 western giant banks. India unfortunately has gone into the IMF-World Bank trap of privatization. It has failed the world. India claiming to be Vishwaguru needs to devise a new model and junk it. The Modi government has the opportunity to call for an open and structured discussion on the failure of the private sector across the world. The country needs an effective solution and sustainable new economic and financial model. Successive failures for three decades of the private are not cause for celebration. It definitely calls for looking at the era of building public sector and nationalization of the 1950s and 1960s. That was the era when private loot was stopped. Post-1991, the same loot model was reinforced and to justify even people-oriented banks were forced to become exploiters. Piecemeal steps by the government would not solve the most critical problem of public welfare. Let the people and government come together for new economic model. If that means selective closure as the nation did in case of RCEP let it be so. 

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