Are we on course to $ 5 Trillion Economy — Not yet, it seems
Are we on course to $ 5 Trillion Economy — Not yet, it seems
Tejinder Singh Bedi
One of the foremost objectives of the big bang banking announcements proposing the merger of 10 State Run Lenders into four large entities is apparently that these might become capable of meeting the higher funding requirements of the economy besides positioning these banks in their new avtaars to acquire a higher global space.
While the State Bank of India, one of our largest banking arms in the country with a business share of 52.1 % and market share of 22.5 % still figures around the 50th place in the global rankings in terms of assets, the latter realignments may still not serve this vision with even the second largest merger of PNB, OBC & United banks still staying at combined 7.7 % market share — at 1/3rd of SBI’s just as for the next close 3rd runner up HDFC — (though the only private banker amidst the three top financial institutions). Following this proposed consolidation in the making the nation will now have 12 PSU (Public Sector Undertaking) banks instead of 18 as before.
Fora reality check, going by the latest updated statistics of the government owned NSO, it is a matter of grave concern that the GDP in the manufacturing sector (which accounts for most regular and/or continuous jobs has dropped considerably low from 12.1 % in 2018–19 to just 0.6 % in the last fiscal. The situation is just as grave in the farming, fishing forestry and agri sectors; the next largest employment sectors in the un organized employments — where the slump is from 5.1 to 2 % during the same time lines. Construction sector at 5.7 % in the fiscal gone below 9.6 for the previous year continues with the slide even today with no signs of recovery as also the financial, real estate and professional services that have received a hit to 5.9 % below 6.5 % for the previous year. The GDP figure at 5 % for the quarter ended is also reported to be lowest since the March quarter of 2012–13, over 6 years hence for April — June at 5.8 % of the previous quarter and at 8 % in the same quarter of the previous year
Although the bank mergers will continue to make big news for quite some time, how much this step will contribute to boost our sagging economy with most employment generation sectors having got the maximum hit year on year remains a big question mark. The BJP Rajya Sabha MP Subramanian Swamy seems quite right in cautioning that the country’s target of becoming a 5 trillion dollar economy may remain elusive in the absence of a new economic policy but will his voice be heard at all within the party and the government circles? May be so as one of my alumni members and a keen commentator on issues of national interest writes, “ He (Subramanian Swamy) is a court jester whose main contribution is to keep the Nehru Gandhi clan and other troublemakers in the opposition gainfully occupied in court litigations and off the back of the BJP. with no one in in the RSS/BJP caring about what he says”. Ernst & Young, one of the major global accounting firms had also already said earlier this month that India will need to grow by 9 percent every year for five years continuously and raise aggregate investment rate to 38 per cent of GDP to achieve PM’s vision of turning India into a $ 5 Trillion economy.
Besides this news of the merger of some banks, a few other concurrent decisions of the government also need to be carefully studied as these may affect some other sections of the society too from new home buyers to senior citizens.
Firstly, the newly proposed inclusion of payments made for amenities like club membership and car parking to arrive at the cost of the property for deducting the tax by new home buyers needs to be reviewed. It is a known fact that 99 % of the builders overshoot the deadlines promised for delivery of the ready to move in property to the home buyers at the time of bookings by more than 2–3 times of the time lines promised and as far as commissioning of club services or parking facilities are concerned here too they take even much longer beyond the already overshot handover timelines of raw structures/societies though all such assured integrated services have already been charged in full in the beginning itself at the times of bookings, in most cases.
The 5 % TDS proposed on proceeds falling due on maturity of life insurance policies is detrimental to the interests of senior citizens, who have paid premiums for their policy covers over a life time after complying all provisions of tax remittances as applicable from time to time and even much more harder on all those who are not in receipt of any pension or medicare supports or any other social security covers from the state or their previous employers they have served for their growth and profitability all along.
Government’s concern for speedy refund of GST claims for traders and business community is a welcome step. However, this also needs to ensure refund of any excess payments made by some businessmen against the earlier service tax subsumed later in the GST during the transitory or initial phase of the same over riding any time-limitations for seeking the same, especially where deposits towards service tax had also been made erroneously or through an error of transfer of payments made through online transactions then just introduced or even otherwise, as the subsequently updated GST Portals have not lent any supports in the system to locate and seek refunds against such excessive deposits.
Asking banks to report even small transactions below the hitherto applicable threshold of 50,000 from September 1st for verification of Tax Returns is also unlikely to have any positive impact on revival of economy or spends for shopping though it might only end up as an additional activity for the taxation officials, which otherwise through simplification of the processes should have been reduced instead.
While both FPI & FDI turnarounds are not only time consuming the gains expected to accrue through these will also show results over a long period of time after investments in new projects start building up. Calls for increasing privatization to help economy prosper have been given by most successive governments in the past too but the pace at which an environment could be built for MSMES, SMEs and other small business entrepreneurs compared to the same for the big business houses has remained lackluster all so far and the stimuli required to inspire the same has remained missing. The famous MUDRA scheme does not seem to have contributed towards job creation and contribution to GDP from the grass roots at the scales expected. Whatever one might profess on the after effects of the mergers in the banking institutions, mass scale disruption in their activities can not be just looked away. The poor performing banks should have been taken to tough task and curtail all of their overheads to recover their losses as happens in most competitive corporate houses going through ups and downs.Let’s hope some more positive measures are announced by the government to give a real boost the economy needs to track a path of 9 % GDP for the next five years to stay course to $ 5 Trillion economy finally!
(Author is a people management cum CSR adviser, freelance journalist and a passionate singer)