The issue is whether the positive and good things discussed in Nirmala Sitharaman’s meeting which are tonic like to her, are tonic to the economy too.
The Finance Minister recently met the honchos/CEOs of the top 20 private sector banks, housing finance companies and microfinance institutions and said that with lots of positive and good things, it was a tonic like a meeting. She said that demand is back and that with increased lending, it will perk up the economy in the second half of the financial year. She said that the message that she got is that consumption is happening and that there are no liquidity issues. She said that the slowdown has bottomed out and that the festival season spending will help boost the economy. She said that things are looking forward and upward and that after the pitrpaksha is over, spending will pick up further and that there is enough demand for loans from the consumers.
The government has been belatedly battling a chronic and worrisome slowdown in the economy and has announced several relief measures in the recent past. The fact also is that it is the responsibility of the FM to talk up the economy and reassure its various stakeholders, but that needs to be credible and we think that it is too early for anyone to conclude with authority that the economic slowdown has bottomed out. There are no visible or reported indicators of the bottoming out of the economic slowdown. Even if the government’s package of recent measures are appropriate to cure the slowdown, it will take at least a couple of quarters for their effect to kick in and even the most diehard optimists will not rush in to say that the economic slowdown has bottomed out.
The issue is whether the positive and good things discussed in her meeting which are tonic like to her, are tonic to the economy too. All that she concluded from the meeting was that there is enough liquidity in the system, that the demand is picking up and that increased lending will perk up growth in the second half of the year. But is that enough to constitute a tonic for a slowing economy? A feeling of a pick up in the consumption demand is too narrow a perspective to pass such an early judgement on the state of the entire economy, particularly at a time when the economy has been slowing down quarter after quarter and the government has set up an ambitious target for a $5 trillion economy by 2025. To us, an improvement in the following factors will constitute the tonic that we want and not just an estimated feeling that consumer demand has picked up.
The government, eager to get good news, has often made hasty conclusions. It was over a year ago that Piyush Goyal hailed the IBC as the solution to India’s NPA crisis and had said that it will be history soon. Nothing like that happened. The NPA crisis remains unresolved. So is the case of the FM’s perception of bottoming out of the economic slowdown and the tonic like meeting with private bankers and lenders.
As an independent media platform, we do not take advertisements from governments and corporate houses. It is you, our readers, who have supported us on our journey to do honest and unbiased journalism. Please contribute, so that we can continue to do the same in future.
