Restoring Trust – The 2020 Agenda

Restoration of this trust is a must if we wish to revive and rejuvenate the economy and we hope that 2020 commences this restoration

Mumbai: Ups and downs in the GDP growth, or economic cycles as they are called, are an integral part of every economy, whether developing or developed. They could be due to domestic factors or those from abroad, and it is the government’s responsibility to tackle both since an excess of neither ie. upturn or downturn is good for the economy. The Indian economy has been in a prolonged worrisome decline and the gravity and extent of the slowdown in the GDP growth rate have surprised even the most seasoned players, including the IMF. To us, this prolonged slowdown is a situation, whose seeds were sown in the UPA government by way of corruption induced reckless bank lending, resulting in giant banking and corporate frauds, amidst build-up of unwanted excess capacity in many industries. It was an era of sheer waste of our national resources, with no worthwhile industry coming up. This problem created by the UPA was aggravated into a full-blown national crisis, due to the sheer incompetence and political unwillingness of the Modi government, to recognize this crisis and remedy it. Almost six years of uninterrupted and absolute power should have been good enough for the BJP government to have realized this legacy of an economic crisis that it got from the UPA and formulate the remedial measures to rectify it.

The reality is that for the first five years of the Modi rule, the government simply refused to accept the crisis that was bequeathed to it, despite numerous visible signs and it is only after the crisis snowballed beyond a point, which coincided with the BJP’s victory in 2019, that the government was now willing to accept that the economy had deteriorated considerably and was in a crisis mode. In its first five years of rule, so determined was the Modi government to not recognize the economic crisis and claim that all is well, that it simply junked any reports/statistic that pointed to this reality, it gave doctored data to prove otherwise and then to gloss it all over, it announced grand schemes and programs, such as ‘Make in India’, etc. which understandably failed.

What we have witnessed in the past few years, is that doctoring and manipulation of data were done by one and all in order to hide a disturbing reality, Corporates doctored data, so did banks and NBFCs and sadly so did the government. So rampant and blatant was this manipulation of data and hiding of reality that the balance sheets of all ie. banks, corporates, NBFCs, and the government are all stressed today, revealing the financial crisis that they all face. This doctoring of figures by one and all has created a situation, where trust is missing from the system, such that even if audited and AAA-rated financials are presented, they are not readily accepted and are seen as suspect. We are in a situation where transparency and truth are missing in the overall economy, which has resulted in an erosion of confidence of the investor and the consumer, which has hugely contributed to our economic slowdown and the crisis that we face today. How did we reach such a situation, where even the figures and data given by the government are suspect and is not trusted. It has been due to the following reasons:-

• Bogus financial statements of top-rated corporates like ILFS and many others, which were audited by well-known firms like Deloitte and were highly rated by many raters, eroded confidence incorporates.
• Bankers too manipulated their financial statements to hide their rotten reality, which auditors readily certified.
• At this stage corporates, bankers, auditors, raters, independent directors, all lost trust of the public and stakeholders.
• The government blatantly doctored key economic data of GDP growth, fiscal deficit, unemployment, tax collections, and credit growth and junked any contrary figures that came from independent agencies.
• Taxmen conducted raids that were politically driven and devoid of any transparency.
• The government indulged in policy flipflops, due to which trust in the integrity of policymaking was eroded.

Thus we are in a situation where neither of auditors, corporates, raters, independent directors, bankers, and the government is trusted or even trust each other. Restoration of this trust is a must if we wish to revive and rejuvenate the economy and we hope that 2020 commences this restoration. And for that, it is the government that will first need to come clean with its statistics of GDP, fiscal deficit, etc., however inconvenient they are. The government needs to make a start here before others are expected to follow.