Monday

01


February , 2021
Editorial
16:42 pm

Dr. H. P. Kanoria


Dear Readers,

Prime Minister Narendra Modi had said that the first phase of Covid-19 vaccination will incur no cost for state governments and that the central government will bear the entire cost. Priority for vaccination would be given to front-line workers – health workers, both in private and public facilities, security and armed forces staff, and sanitation workers. The next in line priority would be those aged 50 and above and those suffering from co-morbidities below 50.

The world’s largest vaccination programme began in around 3006 session sites across the country, which would be connected virtually. Around 100 beneficiaries would be vaccinated at each of the session sitesdaily. It plans to vaccinate around 300 million people with two doses in the next six to eight months. India’s drug regulating authority says Covishield is 72% effective while the results of Covaxin’s trials are expected in March.

India ventures to export vaccine to its neighbouring countries like Bhutan, Maldives, Bangladesh, Nepal, Myanmar and Seychelles under grant assistance.

Covid-19 pandemic has caused economic downturn across the world. However, some companies in India and other countries have managed to increase their market capitalization. Mukesh Ambani’s Reliance Industries attained a market capitalization of `13.48 lakh crore, Gautam Adani’s Adani Group attained a market capitalization of ` 4.17 lakh crore as on December 24, 2020.

Finance: The RBI Governor, Shaktikanta Das, said that pandemic threatens to result in balance sheet impairment and capital shortfall, especially as regulatory reliefs start getting rolled back. Loan recast scheme for companies ended on December 31, 2020. Bank’s gross non-performing assets may rise to 13.5% by September 2021 from 7.5% in September 2020. It may even escalate to 14.8% due to the uncertain macroeconomic environment. 

He said that the central bank is working towards preserving financial stability. It is open to look at any proposal for setting up a Bad Bank. It has provided regulatory guidelines for assets reconstruction companies.

The central bank will take any measures as may be required to support growth without compromising on financial stability. It has advised all banks, large non-deposit-taking and deposit-taking NBFCs to assess the impact of Covid-19 on their balance sheets, asset quality, liquidity and capital, and work out possible mitigation measures including capital planning, capital raising and contingency liquidity.

Tough reserve rules and more capital rules for NBFCs will aggravate their liquidity and working as their borrowers in various sectors, which are crippled by Covid-19 pandemic, are not making the payments. Fear of such tighter regulations had its impact on the stock market resulting in a fall in prices of their shares. Loans which are presently in the NPA category will, in all likelihood, be performing assets by 2022-23. NPAs of any sectors which would be short-lived should not cloud the vision of Financial Institutions.

Mining: The Coal Ministry has reiterated that the country should have maximum use of coal reserves and that thermal power plants should have enough stock of coal. Coal need not be imported. Clearances, which take 19 major approvals for starting a coal mine, will be done by a single window portal in a phase wise manner. Next tranche of commercial mines auction will be done by the end of 2021. Coal can be a major contributor to targeted GDP of USD 5 trillion economy of the country. So many small trading companies are now getting into coal mining as claimed by the Home Minister, Amit Shah.

Economy: The country’s economy may grow by 10.1% in FY22 as projected by ICRA due to the dual impact of a sharp expansion of economic activities. Estates finances are in dire straits due to decline in the tax and non-tax revenue. Estates are in dire need to cut down on various expenses. They need to increase the taxes on alcohol. Their deficit and borrowings are greatly increasing. Outstanding debts continue to grow in double digit.

To boost the economy, Bharatwasis should save more and invest in the creation of wealth for the generation of wealth and employment and not fritter away scarce fund. Covid-19 pandemic should be an eye-opener when it comes to shortage of beds and treatment centres for the Covid patients. Health sector has great potential for employment of highly-skilled, skilled, semi-skilled and un-skilled workers. There is also great opportunity for health education and skill development centres.

To become Atmanirbhar, we need to curtail import of finished and intermediate goods. Many countries are dumping their products and selling goods at low prices, affecting the local manufacturer. Liberalise regulations for enlisting the manufacturing units, the defence and the PSU sectors. Liberalisation of manifold regulations and the de-criminalisation of Companies Act and other economic acts need to be done.

Disinvestment can only have a very limited and temporary impact as to increase the liquidity of the government. Government should have effective and efficient management. Public sector units will give the views of private sector units, so as to formulate policy decision. Status of NPAs of PSU banks gives the views of the NPAs of NBFCs. It should not be viewed with clouded as heroic or demonstrative vision of fraud or diversion of funds, crippling the works of the NBFCs.

For adequacy of capital, PSU Banks should come for public equity issue, so as to meet critical financial need. It is imperative that the RBI does not rollback regulatory capital shortfall reliefs and companies loan recast scheme till the end of March 2022; by that time the economy is expected to improve.

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.