After lockdown, the loan mela, and planetary exploration, anyone?

Here’s the Thing

By now, almost everyone, including those who read out the Modi government’s ‘stimulus’ package in all its detail over five days, has realised that it is nothing more than the announcement of a loan mela. MSME, dying and want to survive? Take a loan; farmer in distress? Take a loan; big corporate going under? Take a loan, we have reduced the interest rate for you. Middle class and suffered a salary cut or job loss? Stay home, stay safe, bang the plates, light the diyas and wait for Modi to come on TV at 8 pm.

And typical of the Modi government’s solutions to problems, this is going to worsen the existing NPA problem of banks down the line. For instance, the Rs 3 lakh crore of loans for MSMEs without collateral and with the government standing guarantee for all of it is an open invitation to people to borrow and not bother to repay.

Be that as it may, in other countries, governments have announced actual cash and income support to large sections of their populations (US, $1,200 per person) and workforces (UK, 80% of wages of private sector employees) as a substantial part of their relief packages, realising that people need immediate cash/income support in the wake of job losses and salary cuts. And by some sheer coincidence, the relief packages announced in some of the advanced countries all seemed to amount to more or less 10% of their respective GDP numbers.

The Modi government caught on, albeit after several weeks of agonising over how to do it – 10% of GDP. Hmmm…somehow, we have to come up with a figure that’s 10% of GDP. And so, Modi came on TV at 8 pm and said he would give Indians a package of Rs 20 lakh crore, “more or less 10% of GDP.” But there really was devil in the detail.

Truth is, the Modi government has no money to give anyone, no matter the level of distress one is in. Those in the know will tell you that when the top grey suits of certain industry lobbies approached the government seeking sector-specific help, they were told in no uncertain terms, “Look, if we can find some money to help the poor, that will be a big achievement for us. As for you in the industry, we have arranged for cheap loans. Go and take loans, and survive as well as you can. There is nothing more we can do for you.”

Of course, the government did do more for industry in the dark of the lockdown and in the name of ‘reforms’ that were inserted into the ‘stimulus’ package, but more on that another day.

The question is, why does the government have no money despite it claiming all along until now that all was hunky-dory with the economy under Modi, that we were the fastest growing economy in the world, that he is now going to transform India into a $5 trillion economy by 2024, that post-demonetisation, more people are paying taxes?

It is time to recognise the truth: Narendra Modi has destroyed the Indian economy to such an extent with his whimsical handling of it that his government has no money to help even the poorest of India’s people at this hour of need. The destruction of the economy started with demonetisation, the reckless, but deliberate, sucking out of the lifeblood of the economy that led to the beginning of the end of demand, especially rural demand, in the economy. Then, too, it was with four hours’ notice to the nation. Then, too, millions of migrant workers had to suddenly flee the cities back to their villages, as key sectors such as the construction industry were paralysed.

But that’s not all: with the economy in doldrums since demonetisation, tax collection has fallen greatly year by year. To make up for the shortfall, the government has been sucking money from the RBI and nationalised banks as well as the public sector units at a much higher rate than the UPA government did. Under the UPA, the government took in on average about Rs 50,000 crore a year in such dividends, except during 2013-14 and 2014-15, when it rose to nearly Rs 90,000 crore. Since 2015-16, the Modi government has sucked in over Rs 1.1 lakh crore annually, rising to nearly Rs 2 lakh crore in 2019-20 and still at close to Rs 1.55 lakh crore in 2020-21. So, there’s no more to squeeze the banks and PSUs for, either (except maybe the RBI’s surplus, built up over the decades).

And last, but not the least, you and I have been paying for petrol and diesel at the same or higher rate during the six years of Modi (when oil prices have ranged from a low of $29 a barrel in 2016 to about $65 last year; currently, they are at about $30) than we did in 2013 when international oil prices were at $108 a barrel.

In short, the Modi government has sucked in money from every source it can for six years, and yet, it has no money to help any section of society today. But Modi does have Rs 20,000 crore to spend on putting his own stamp on Delhi’s Central Vista, and the gumption to sell you dreams of start-ups conducting planetary exploration. Well, I suppose, Modi is from Saturn, the rest of us are from Mars.

(S Raghotham lives the life of an owl, and can turn his head 270° @sraghotham)