Steering the economy in a more confident way

Image for representational purpose only (Photo: PTI)

Despite serious challenges, Indian economy is on an upward swing. However, the growth should minimize economic inequalities by creating more jobs and opening better opportunities to increase income.

The Indian economy is poised to grow to over 7% in 2019 – a momentum it has established during the past few years despite slowdown in 2016-17. The growth at macro level is not the country’s problem. Its micro-economic managements are creating inequality, stymieing job growth and crisis in the banking sector. Even people with good qualification have not been able to manage properly paid jobs.

The private sector, from education to industry, is sustaining by offering low-paid jobs to teachers, engineers, management experts or any other. While the problem is there in the major metros, where salaries are paid at 30% of the government stipulated norms, a little away even jobs in higher education or any level of private employment hovers around less than Rs 5,000 to Rs 30,000 (if so). The managements of private sector admit the fact. They also say that their earnings are also low. The enterprises are struggling to stay afloat by slashing their charges, fees or cut on expenses. In such a scenario, they find that provisions and penalties of the GST impact their activities.

The central and state governments operations are becoming expensive. They go on increasing taxes despite GST. Since new levies could not be called tax, they name it as cess. The latest to add to the list is the “cow cess” in UP. It was already there in Punjab and Rajasthan. While technically indirect tax after GST is coming down, with the highest slab being 28% various levies are adding to the problem. Even income tax has about 3% cess. On the part of the states, various cesses, profession tax and increasing tolls remain as unseen and less discussed taxes. Even municipal levies are rising. So the inequality is growing. The poor loses more of their income to such levies further impoverishing them.

Oxfam in its 2018 reports says, “In the context of the acceleration of growth rate of Indian economy, the rise in inequality raises issues of the distribution of gains from the growth.” The Oxfam report concludes that since 2010 till now more and more of the country’s income is going “to the top 10% and top 1% of the population.” The Credit Suisse’s Global Wealth Report Gini coefficient for wealth points to overall inequality. It has risen to 0.854 in 2018 from 0.804 in 2011 and 0.83 in 2017. The closer the Gini value gets to 1.0, the more unequally distributed is an economy.

It is a public perception that inequality is a political choice. It acts through the hold of powerful lobbies over government policy. They do no miss an opportunity to increase levies in any name and the latest is the environment. In the name of environment car lobbies, acting through government organisations, are forcing people to abandon their working vehicles and increasing various charges on industry and for parking as in Delhi. The citizen loses on their income and lobbies maximise profits.

Even the 2016 demonetisation for mopping up black money turned into a nightmare for the poor and small businesses. India remains even now a cash-based economy. Digital transfers are not accepted even at government-run highway toll booths. Apart the rationale of toll, leading to more corrupt practices, is being questioned as every Indian is paying a fuel cess for road construction amounting to Rs 1.13 lakh crore a year.

In an election year, when the government traditionally, not constitutionally, is supposed to present an interim budget, no new proposals should normally be there. But the government has the opportunity to avail of the window to reduce many levies and abolish atrocious cess and tolls. It would be a great relief to the people, increase their income and also pave the way for growth. Lower levies also could be an incentive for the enterprises to employ more.

The 2008 to 2010 loan bonanza to the industry, flight of defaulters like Vijay Mallya, Nirav Modi and Mehul Choksi, led to the severe NPA crisis over Rs 12 lakh crore. A mere Rs 50,000 crore has been realized. The recent mergers of five SBI subsidiaries and now Vijaya Bank and Dena Bank into Bank of Baroda (BoB) are not being seen as a solution. The SBI merger led to depressed operating performance and its bad loans surged. It is found that the mergers increase costs. The latest mergers into BoB has shaken the stock market. It saddles BoB with Dena Bank’s Rs 16,140 crore stock pile of bad loan.

The merger of Air India and Indian Airlines has led to the virtual collapse of the public sector entity. Though bank mergers were done for good, finally it may cause many hiccups for the economy in 2019. More job losses in the banking sector are also predicted. Dena Bank alone has 13,440 strong work-force. The mergers are now being touted as unwise. Saddling one’s losses on another is not wise.

One reason for high banking cost is stated to be over 30 crore Jandhan Accounts. Though conceptually they are fine, compulsion has added to the cost for the banking system and problems for those who were forced to open accounts.

Around 7.5 million youth join India’s job market each year. As government encompasses all activities, not providing jobs or remunerative prices to the farmers is seen as problem of the government. It is leading to the waning of business confidence. The October 2018 Global Business Outlok survey of 12,000 manufacturers and services by HIS Markit spells concerns of political issues, cost pressures and currency stability. In fact, business sentiment in the country was weaker than the average in emerging markets as well as globally.

Despite this India is poised to grow. Its exports increase over 20% to $221 billion till August 2018, PMI at 51.7 shows expansion, I-T collection touches Rs 10.03 lakh crore, companies raise Rs 21,000 crore IPOs, FDI equity inflows reach $389.6 billion, IIP output rises by 7.1%, primary goods production rise by 3.7% and capital goods by 16.4%.

But the country has to rethink on bringing all activities under government. This is against the concept of “less government”. It is adding to administrative, financial, economic and functional problems. If this is solved many inequities could be addressed.

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