The Shaky Indian Economy

Recently RBI replied to an RTI application regarding amount of bad loans which has been written off between 2013- 2015 financial year from books of public sector banks. RBI needs to be applauded for such an act of courage for divulging such sensitive information which shows the actual economic condition of our country, India. GOI talks about reducing subsidies towards weaker section of society which is actually a commendable step, empowering common masses should be a focus of any government in today’s globalised world rather than giving freebies. Governments in current world order should work as a facilitator and not as a regulator.

India is growing at slightly over 7% per annum, and we owed this to our strong macroeconomic standings, much too be credited to RBI for not loosening up its monetary policy despite pressure from various fronts. But point which I want to make is, the amount information given by RBI regarding written off bad loans is Rs 1.14 lakh crore, though RBI couldn’t name the big defaulters as banks submit their bad loans’ details in a consolidated way. But majority of loans were of big industrialists, which is evident from various economy reports, big loans go to big parties and retail loans still don’t constitute major part of banks’ balance sheet. Though experiences suggest that retail banking is more profitable than big ticket loans, it hedges risk like mutual fund does with stock market risks.

So here we are, our tax payers money are being spent for non performance of private industries, for casual, corrupt, unprofessional behaviour of banks’ staffs, & for political benefits and this indirect subsidies are abetted by taking off subsidies from weaker section of society. Despite RBI loosening up its monetary policy in last quarter, banks haven’t passed this to common masses in name of managing their non performing assets’ losses. So what the taxpayers got? They paid their taxes on time and this tax money was being spent to bail out industries who didn’t work and then banks didn’t pass interest rate cut to genuine taxpayers to clean up their own mess and this vicious cycle will keep on repeating. It’s like an open loot of public money, an act of rewarding culprits and punishing innocent law abiders.Late Sri Bal Gangadhar Tilak had once said to British Empire that their railway department was being subsidized by poor Indians, he equated that situation with decorating someone else’s wife and still after 69 years of independence, situation remains the same only faces have been changed. White Sahibs have been replaced by Brown babus.

Brazil messed up their economy by giving highly leveraged loans, subsidies and in India we are doing the same but instead of direct loans/ subsidies we are giving it indirectly and money is flowing futilely and that is the main issue. Government needs to be alert or else as Sri R. Rajan has said, once our credit rating degraded then government will really find it hard to raise some Rs 11 lakh crore for development works from bond market. In fact we are sitting on a time bomb and no one knows when it will explode, maybe we still have time to defuse it.

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