August , 2020
11:53 am

Dr. H. P. Kanoria

Dear Readers,

Bharatwasis celebrated the birthday of Lord Ganesha/Ganapati/Siddhi Vinayak on the day called Chaturthi all over India and overseas.  Lord Ganesha is worshipped first even by his father Lord Shiva and mother Ma Parvati. His blessings are essential to start any work, especially an enterprise. He grants wisdom, success, and innate power. He is the remover of all obstacles. His big ears indicate he is a good listener. May India’s policymakers be empathetic listeners like Lord Ganesha and pay attention to the plight of various stakeholders in the economy and may they have the wisdom like Siddhi Vinayak to frame policies and regulations that can remove all hindrances for economic activities.

Nation: The Modi government has announced the new National Education Policy 2020. It is more oriented towards Swami Vivekananda’s message, “Educate people intellectually, technically and morally.” It aims for a holistic, inclusive education from pre-school to secondary level with 100% Gross Enrolment Ratio (GER) in schools by 2030. Implementation is a herculean task. It proposes opening of higher education in India to foreign universities, dismantling of the UGC and the All India Council for Technical Education (AICTE). It proposes to introduce a four-year multi-disciplinary under-graduate programme with multiple exit options and discontinuation of the M. Phil programme. All universities and colleges will have to become multi-disciplinary by 2040.

The National Research Foundation will be set up as an apex body for fostering a strong research culture and building research capacity across higher education.

The Higher Education Commission of India (HECI) will be set up as a single body for higher education excluding medical and legal education. The HECI will have four Independent Verticals – National Higher Education Council (NHEC) for regulation, General Education Council (GEC) for standard setting, Higher Education Grants Council (HEGC) for funding, and National Accreditation Council (NAC) for accreditation. Public and private higher education institutions will be governed by the same set of norms for regulation, accreditation and academic standards. An academic bank of credit will be set up for storing academic credits earned by different HEIS.

Each college would become either fully integrated into a university or converted into an autonomous and independent degree giving institution. An independent board would govern each higher education institution.

Pre-graduation education is structured: curricular education at the age of three and grouping education till class 12 in four categories. The new model proposes a foundational stage up to class 2, age group 3 to 8 years; a preparatory stage up to class 5, 8 to 11 years; a middle stage class 6 to 8, 11 to 14 years; and a secondary stage from class 9 till class 12, 14 to 18 years. It prefers local languages at lower-levels till class 5. Presently, classes 11 and 12 prepare students for higher education.

Implementation is likely to be challenging at school level. Public schools are usually not of high standard. Parents do want to admit their children in private schools even at higher costs. Significant investments will be required in infrastructure, technology, and teachers training. It may lead to centralisation of education resulting in more inefficiency, clearances, and approval. Large fund will be required for implementation the sources of which are not yet clear. Depending on how the guidance provided by NEP is taken on board by the States, it may or may not lead to centralisation of education. In case of the former, there will be a risk of increased inefficiency, clearances, and approvals.

Higher education will be promoted with multi-disciplinary education system and coming of foreign universities in India, which will give opportunities to the students belonging to the lower middle-class.

Financial sector: The financial system needs to be rejuvenated for the sake of growth. It is one of the worst major performing sectors. PSU banks need to be recapitalised. The government is considering a reduction in its holding by selling in the market. Stock prices of these banks are at rock bottom, declining by 70-80%. The government should

reduce its holding by offering new equity at a discounted price by 25% on the present price. There is liquidity in the market. It is expected to be over-credited.

The RBI decision to allow one-time restructuring of loans without classifying assets as non-performing will remain ineffective as so many conditions are incorporated. It does not cover NBFCs though they have been asked to do moratorium on the loan extended to their customers. Most of the organisations will fail to comply with the condition of not having defaulted with any lending institutions as on March 2020 and accounts have to be standard to the date of invocation. K.V. Kamath, Chairman of the RBI-constituted Expert Committee, has to come up with pragmatic recommendations to boost the economy and employment. The RBI Governor, Shaktikanta Das, has advised the banks not to wait for the Kamath’s report to restructure the loan. Kamath Committee will recommend parameters for recasting the loan.

The government should restructure all loans especially in sectors like hospitality, aviation, healthcare, and real estate – which will be otherwise slip into NPAs eventually. Banks are flushed with liquidity, which is lying idle, costing money to banks and resulting in losses. It will be a great national loss leading to a large-scale unemployment.

China’s Central Bank has given liquidity support of USD 101 billion (700 billion Yuan) to commercial lenders. The rate of interest remains unchanged at 2.95%.

Hospitality: Several representations have been made to the government for reduction and roll-back of some taxes like GST, financial support, restructuring of loans with moratorium, and moderate interest rates. Larger gathering above 50 persons depending on the size of the banquet halls should be allowed. Hospitality will fail to comply with the norms of RBI for financial assistance and one-time restructuring.

Power sector: The pandemic has reduced demand. Power sector is unable to service debts. Lack of coal supply arrangements has also been affecting the efficiency and resulting in losses. Twelve projects (17000 MW) are under resolution. Almost all power projects will fail to comply with the RBI’s norm for restructuring.

Non-banking Financial Companies (NBFCs): Companies in this sector have been witnessing reduced inflows due to moratorium to their clients, and even they have to pay to banks/financial institutions/agencies they borrow from and which are not under moratorium. They are not manufacturers. They borrow from banks/financial institutions and serve large number of customers belonging to MSMEs, self-employed, middle and small contractors, whom the banks/financial institutions cannot cater to due to manifold reasons. Loans to NBFCs should be restructured irrespective of portfolio size. Restrictions, deadlines, and other conditions should be realistic and pragmatic. Banks are flush with funds. If banks do not use funds, they will incur losses as they have to meet payments of interest to depositors and overheads, which are very high compared to foreign banks.

Conclusion: Bharat needs realistic, pragmatic policies and actions for steady and rapid growth. Stressed units in manufacturing, hospitality, non-banking financial sector and healthcare need urgent restructuring of loans. Presently, banks and financial institutions are extending the loans to those who are healthy and strong.

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