Free Saris, free electricity, free color televisions and now free loans. India is trying to be truly a welfare state that even the Sultans of the Gulf will be put to shame and who knows even Adam Smith must be turning in his graves.
All these are key budgetary drills of a government that has thrown to winds all fiduciary responsibilities and accountability in the hope of winning votes so that they can continue to encourage squandering of public funds without being answerable to anyone.
This may seem like a belated reaction to the budget announcements of our Finance Minister (FM). I thought it is time to rekindle this fire when inflation is burning bright and threatening to spoil the party for everyone. Would the Finance Minister (FM) have presented a budget of a different flavor if today’s inflation levels of 7.41% were there in February?
Look at the stock markets. The budgetary announcements tinkering with the securities transactions tax, short-term capital gains and now controlling prices of steel and who knows next -cement – and perhaps a complete ban on exports – will further bolster uncertainties that can fuel more turbulence in the stock markets. Earnings of corporate India can be seriously hampered if controls are imposed on trade. When the going is good all that the politicians want is “credit” and when things go out of control, they want to resort to command and control impinging on the ability of entrepreneurs to perform.
A lot has been written about the gigantic loan waiver and its potential impact on the balance sheets of our Banks. It is now more than a month since the budget was presented by the FM. Till now there is no clarity on how this write-off is going to be funded. Does anyone honestly believe that this write off will be funded by disinvestment plans? What a bluff!!
One argument that I heard is that these loans are anyway bad and had to be written off. And most of these loans have been given by PSU Banks. The prudential norms for provisioning would have already hit the bank’s bottom lines. So the FM’s direction to write off could come as a big bonus for these banks if the government will reimburse them. That is not clear. Somebody will have to pay for this and mostly the banks would have already paid for it through provisions previously made in the books.
Or is it a trap that they have set up to get the headstrong Left so that they can pin them to the wall once and for all and go ahead with the Nuclear Deal ? Look at the timing – one is in June (loan write off) and the other soon thereafter (Nuclear deal). Can the Left object to disinvestment plans to fund the mother of all write offs? It may be termed as a political masterstroke that attempts to silence the Left, who are the self proclaimed guardians of the poor. But can such tricks be played with public funds to satiate the strategies of political parties? Now Karnataka is trying to woo votes by offering rice at Rs.2 a kilo and free color televisions following the footsteps of Tamil Nadu and Andhra. Now a political party in the capital is selling cooking oil below market price to catch votes!! And who is paying for this? Some “compassionate” local traders.
The poor should be taken care of. There is no quarrel about that. And we have millions of poor people in this country. But there are many other ways to achieve such laudable goals more effectively. This sudden awakening to the indebtedness of our farmers is dubious. And the lack of clarity on its accounting is again a big farce. (Read my article “What is our real fiscal deficit” for a better understanding of accounting in government or the lack of it)
There is a saying in Tamil and I am sure our FM , a tamilian, will recognize this – “Kadai Thengai Vazhi Pulla yarkke”. A quick translation is – A visitor to a road side Ganesh Temple picks up a coconut from a street vendor (of course without paying a penny for it) and offers it to Lord Ganesh( the elephant god) for favors. These write off of sixty thousand crores of rupees (yes 15 billion US Dollars) rings a similar bell. Invariably such offerings cannot fool Lord Ganesha and instead of favours HE will shower more trouble. Look at what the government has got into – uncontrollable INFLATION that is simply passed off as a global phenomenon!!
Our Agricultural Minister is reported in the newspapers as taking all the credit for this write off. And now many others have joined the fray. Many of the States have staked their claim on this booty. Now the latest on this is a demand to extend the loan write off to other deserving farmers too. Consider the impact of all these on the so called good portfolio of non delinquent borrowers of banks. Even those willing to repay their loans will take the banks for a ride. This kind of leadership that encourages disruptive behavior and promotes rebellion will do more harm to our fragile social fabric than ameliorate the conditions of poor farmers.
This new monster called INFLATION has caught the most sophisticated leaders totally unaware and perhaps the price they will have to pay inspite of all the gimmicks will be very dear. Is the opposition listening?
As we exmaine the role of our political leaders in providing some semblance of governance there are several questions that beg an answer. Let us examine a few of them .
* Can a Finance Director of a listed company make an announcement to his shareholders that he is proposing to write off substantial amounts of debts of certain class of customers without explaining as to how he is going to do this without affecting the bottom line?
* Can he get away by saying that he will explain when the time comes?
* Will the Chairman of that company keep quite and let the disruptive Finance Director get away with this?
* Or if the Chairman of that Company instructed the Finance Director to do so, will any professional Finance Director dare do such an impudent and imprudent act?
* Why do we have a set of legally mandated corporate governance rules for business and nothing similar for people who run the government?
* Why dont we have a published set of code of conduct and governance norms for leaders who run the country?
* Do elected representatives of a democratic government occupying executive roles enjoy unquestionable freedom from being accountable?
* If not, under which law of the land are these leaders who are “running” the country (desh challane ka kam) accountable to the public?
* Why do we accept or even expect our political leaders to be less efficient and less accountable?
* Why do we glorify ordinary performance of our political leaders and put them on a pedestal?
You can write to me with your valuable inputs and comments so that we can attempt to answer some of these questions and define their roles and responbilities.
You may also read my earlier articles on “Governance- What does this really mean?” on this website and search for the story “Accounting Fib” – (not on this website) Google on this. These will give you further insights as to how this machinery called government functions in our country. My aim is to share whatever information I have on how this country is governed and place it before the educated people for them to exercise their constitutional rights.