Growing Economy- Groping Economy

On a budget day, the finance minister stepped out from the North Block office carrying a red bag doing away with the briefcase that her male predecessors used to carry at the annual event. The Stock market seems to have taken a clue from Finance Minister’s red bag and its red zone all the way in the market. Market is literally bleeding with every day new companies trying to reach yearly bottom.

Fifty days is good enough time to get over the euphoria of winning the elections. The uncertainty of investments is over and it is a certainty that everyone wants to sit on cash. With the auto industry running in first gear getting economic growth back on track is a challenge. Sales of passenger cars witnessed their biggest slump in two years. There is huge drop in sales number every month. To add to that government announced increase in registration fees. Same is the script with two-wheeler sale which fell for the fifth month consecutively. If you examine the credit off take the story is non- committal .There is no growth in credit after the year 2015. With drop in the demand Industrialists are not looking for credit as expansion may result in blocking their funds. The way this government is changing gears it seems that it would have made erstwhile Moscow rulers happy. The revenue starved government ,in a bid to tax the rich earning above rupees two crores , it inadvertently picked up sundries like FPI and in bid to show its spine in decision making it has turned out to be a major goof. By one hand it started advising investors to change their status to corporate entities and on the contrary it announced making KYC norms easier for FPIs.

What is certain that the industrial sector is in the grips of a crisis and economy is undeniably losing its speed. With the ambitious plan of turning India into a $5 trillion economy by 2024 the government is groping. Job creation and eradication of poverty are key issues to achieve ease of living for the people. International Monetary Fund, Asian Development Bank and Reserve Bank of  India are all in tandem and have pared down India’s growth forecast in view of downward trend in global growth and dwindling domestic investment. With collection marginally higher it’s difficult for government to enhance its investment. Big dilemma is that government looks to borrow overseas through sovereign bonds in the bargain trying to maintain the fiscal deficit under control. Under the circumstances little overshooting in the expenditure and marginal increase in fiscal deficit should be allowed. But government is so sacrosanct with these numbers that in the bargain focus on development is done away.

Heartening feature in the current scenario is gone are the days of sick companies and rich industrialists. With the problem of NPAs mounting beyond 10akd crore rupees this government has shown its intention. Government is targeting Rating agencies, Auditors and Regulators for all the wrong doings. So the industrialists who enjoyed loans and write off and ever greening are bought to the knees. Government is trying to reach to the root cause. This action of MODI 2.0 is laudable.

Through its spending government looks forward to increase in production it has to ensure state of art infrastructure. Inadequate infrastructure, delay and cost are impacting the exports. Reduction of logistics cost by will help to boost the exports substantially. Automation, ease in clearance and simplifying processes will help improve the logistics in seamless manner. Refund of taxes on GST in timely manner will resolve liquidity problem faced by exporters. For economic revival stimulus is required in real estate sector. Real estate sector can trigger many other sectors which are dependent on it .Rationalisation of GST and improvement in the liquidity are key factors to boost this sector.

As I write this column Stock markets are bleeding. The Hon’ble Finance Minister has categorically stated that she does track stock markets but she doesn’t get influenced by stock market. All are waiting for her to have a relook.

• UDAY TARDALKAR
  CORPORATE CONSULTANT AND TRAINER 
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