2020 VISION ON 2019

To us it was a year of big bang disappointment because the economic crisis that we face today, could have been averted.

With 2019 coming to an end, it is time to look back at the year that was, with a 2020 perfect vision. To us, it was a year when the unfolding economic crisis was evident all around, but was unfortunately ignored by the government, for sheer political reasons. Ironically, the attitude of the ruling party to let things languish and worsen further and be indifferent to the deteriorating livelihood and job creation, the mainstays of the middle class, surprisingly got it rich political dividends, as it was returned to power, with much bigger numbers. To us it was a year of big bang disappointment because the economic crisis that we face today, could have been averted, if it had been recognised on time and suitable remedial measures were taken. Let us look at what 2019 revealed on our economic front.

1. With Karvy and other broker firms joining the infamous gang of the likes of DHFL, ILFS, Altico, PMC Bank and the NPA crisis continuing unabated, a rot has been revealed across our banking and financial systems. It is still loaded with bad loans, which continue to rise despite government measures. The gross NPAs of banks which stand at 9.3% as at September 2019, are expected to rise to 9.9%, by September 2020, with the MSME and MUDRA loans presently brimming with NPAs, yet not recognised.
2. In a situation where interest rate cuts are not passed on by banks to borrowers and where entrepreneurs are devoid of confidence in the economy, monetary policy measures of tinkering with interest rates and money supply have their limitations. Five successive interest rate cuts failed to rejuvenate the economy, compelling the MPC of RBI to take a pause in December, shifting the revival burden to the government.
3. Tax collection targets which are not in sync with the GDP growth rates, will fail to be met. At a time when the GDP growth rate is below 5%, the tax collection targets have been thoughtlessly increased by a whopping 19% and are thus failing to be realised.
4. With its attitude of one of denial, the government has not just failed to read the sharp decline in India’s GDP growth, but has also erred in predicting and claiming that green shoots of revival are visible. The government simply got it wrong on both fronts, erring with a huge margin. That also explains why it fails to get its economic revival strategy right.
5. The NPA saga of banks and NBFCs remains unresolved and is going to increase further. Thus till economic growth does not catch momentum, banks and NBFCs will continue to struggle. And the NPA kingpins ie. the top babus and netas who directed bankers to give such dud loans, will not be revealed.
6. The government is more a predator than a facilitator. With disastrous policies like demonetisation, complex GST and draconian company law, it knows how to close down entities and decimate jobs and certainly does not know how to revive them thereafter. The government thus remains the biggest threat to entities.
7. Interest rate cuts and tax rate cuts are not the magic formula to revive animal spirits of entrepreneurs and encourage them to invest. The trick lies in reviving the confidence of the consumer and the investor, both of which are missing.
8. The US-China trade wars gave a golden opportunity to India, to occupy global markets being vacated by China. India is not replacement for it, while Bangladesh, Thailand, Vietnam, Philipines and Indonesia are.
9. The government continues to doctor statistics, whether it be GDP etc.
10. The balance sheet of every corporate today is suspect and the bigger the auditors, the bigger the fraud as we see in the case of ILFS, DHFL, HDIL, PMC, RCom, RCap, Jet Airways etc.
11. And finally as the FMs husband Mr. Prabhakar says, the BJP has no economic philosophy or economic architecture of its own and that reflects in its hollow big bang announcements like the USD 5 trn economy and the ongoing measures to revive the slowing economy also reveal that the government has no big picture of the economy and its revival that it is pursuing and its efforts will only be patchy and in bits and pieces.

So 2019 turned out to be a year of revelations and not revival, and we wish that 2020 turns out to be different, when the slowdown of the economy stops and its revival and rejuvenation begin.