From hope to despair, it has been a quick descent. As the year draws to a close, a sense of uncertainty and a feeling of resignation has slowly taken over our minds. One can argue rightly that this is a transitory phase. All the same, the doubts are refusing to die away.
The reason for doubt is quite apparent. All the critical economic numbers – from GDP (gross domestic product) to inflation figure and trade data – don’t give any reason for comfort. The quick slide in GDP number to below 4.5% from 8% in just four quarters is causing too much of an anxiety across policy planners and common man alike.
Poor IIP (Index of Industrial Production) numbers and weak consumption demand combine to sketch a distressing picture. Not surprisingly, the numbers on capital formation and investment have not shown any healthy growth. A former governor of the Reserve Bank of India has summed up the state of the economy quite nicely with a new term – “growth recession”.
What is equally concerning is that the portents appear to be not good, with the World Bank warning of a substantial risk in global trade and growth in advanced economies slowing down. With little headroom on the fiscal front, the Centre appears to have been caught in a pincer-like situation. With the political atmosphere heating up by the day in the wake of Citizenship Amendment Bill and following the victories by the opposition in two states, the Modi government has its plate full.
If the macroeconomic picture is turning out to be increasingly worrisome, events at the micro level are hurting significantly investor perception, causing further damage to the overall economy. The Reserve Bank of India was forced to refer Dewan Housing to the NCLT (National Company Law Tribunal). The Punjab and Maharashtra Co-operative Bank imbroglio, which erupted just on the eve of Maharashtra State Assembly elections, has cut short the life of nearly half-a-dozen depositors even as unmindful political parties slugged it out to claim the right, nay power, to rule the state.
Prior to all this was the IL&FS debacle, setting off a chain of adverse reaction triggering a negative multiplier impact on the overall health of the economy. All these suggest to a dipping confidence level all around. There was also this Karvy fiasco, which saw promoters misusing the power of attorney given by clients for illegal fund-rising activity. It did so by pledging the shares of its clients!
How did all these scandals happen? Do we blame it on the inherent rot in the system? Should promoters be held accountable? What were India’s regulators doing? Where were the responsible characters in the entire chain while all this was happening? In all these instances, the real losers were common Indians, either as depositors or investors of one kind or the other.
The effect of 2019’s scams on the micro-level was palpable and felt instantly. On top of this though was the continuing agrarian crisis, a cause for farmer suicides. Somewhere along, the Modi government appears to have either allowed the situation to drift or not really gotten a hang of these fast-engulfing issues. When confidence in the economy is short and the threat of job loss high, a consumer has very little option but to exercise prudent and live only an existential life. This is having a chain reaction not just down the line but up the stream as well. Production, investment and everything else is reeling under the impact of this.
When senior industrialist Rahul Bajaj bluntly voiced the fear psychosis among its peers to home minister Amit Shaw in an open forum, probably he was articulating the exasperation experienced by the business community in the prevailing economic conditions. The fear reference made by Bajaj was somewhat sweeping, yet he managed to hit the nail on the head.
Is time running out for the Modi government to drive its men, machinery and ministers towards providing ‘roti, kapda and makaan‘ rather than dissipating its energy on other diversionary issues?
As we slip into 2020, this will be a key question. The NDA government’s job is cut out and its first priority must be to to steady the rocking economic ship. No doubt, this government has not diluted its reform agenda. The fine-tuning of the Insolvency and Bankruptcy Code – its evolution, the recent amendment and the Supreme Court verdict in the Essar Steel case – all give a sense of optimism in addressing the stressed asset problem of banks. The government’s disinvestment agenda, move for labour reforms and the like are equally important. These will take a while though to see results on the ground.
The near-term misery, however, requires a quick fix. The writing on the wall is all too clear. Action is what matters and not speeches from political podiums. The onus is definitely on the government. If the government can’t, nobody else can.
K.T. Jagannathan is a senior business journalist.