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Dear Readers,

ECONOMY: Globally almost all the countries have large debts. If they are required to pay the entire amount at a time, they may default. Corporate world also have debts far larger than the liquidity available with them. If their cash inflow is affected due to either external factors or internal factors, they may default or delay in payment to the lenders. Time is required to breathe and normalize the situation. To stimulate growth of industries and for enabling investments in them, government of India had set up a number of organisations. However, many of them subsequently wound up. Regulators, financial institutions and bankers have to work in tandem for the continuation of the business operations of a company which is under stress, especially when that is on account of a delay or non-payment by its customers. Lack of a practical approach by stakeholders – namely government, regulator and financiers – to resolve the problems of the enterprise may lead to the closure of the business operations, Juvenile spirit if any will not help. In no way trust of the executives should be shaken by the unwanted action of the regulator and bankers. If executives’ salaries and compensation get capped, while their market worth remains higher, this may trigger an exodus which will further hamper the stressed company’s operations.

COVER STORY: Universal Basic Income (UBI) is a model for providing all citizens of a Nation a given sum of money regardless of their income, resource or employment status. It is a government sponsored annual income. The motive is to reduce the inequalities in the society and to guarantee the meeting of basic needs of every citizen.

Canada and Finland with limited population have already introduced the UBI. Those who oppose this idea argue that it will lead to great pressure on the central exchequer and create a class of idle people. It will not reduce the societal inequality, People who have the intelligence, working hard and the appetite to take risks would have more income. Government will also impose higher taxes to fund the requirement of fund for UBI.

India spends approximately `9 lakh crore a year in welfare through thousands of schemes. MGNREGS, PM Kisan, etc. have mammoth budgets and sweeping scales. These schemes provide them funds against their work. To give ` 1000 per month to 135 crore Indians will cost the government ` 16.2 lakh crore a year accounting for about 8% of GDP. One-nation-one-ration card, one GST (indirect taxation) are good, but UBI is not good for Bharat having a population of 135 crore which is rising and rising.

BHARAT ECONOMY: According to Moody’s Analytics, India’s economy is likely to grow by 12% in 2021. They expect private consumption and non-residential investment will increase. However, the second wave of Covid-19 remains the key risk to recovery in 2021.

According to the recent Economic Survey, India has attracted a total FDI inflow of USD 67.54 billion

during April to December 2020. It is the highest ever for the first 9 months of a financial year and 22% higher as compared to the first 9 months of 2019-20 (USD 55.14 billion). The proposed capital expenditure of ` 5.54 lakh crore in the Union budget of FY22, if wisely done, will speed up economic recovery as private corporate investment is practically negligible. It is expected that with creation of trust, ease of doing and continuing business and dispersing with number of approvals as announced by Prime Minister pace of investment will improve. It is better to mobilise domestic saving and investment in Insurance sector and stock market instead of allowing FDI. Foreign investors can withdraw any time intelligently leading to collapse of market. Chief Economic Advisor K. V. Subramanian is confident of a V-shaped recovery. He is a strong supporter of assets monetisation and believes that selling the assets to the private sector will result in better utilisation of those assets. This will also improve the fiscal condition. To achieve these goals, privatization program has to be implemented more effectively than has been the case in recent past.

India’s forex reserve is now the 4th largest in the world. It is USD 582.04 billion as on March 12, 2021. China has the largest reserve followed by Japan and Switzerland. Strong reserves provide comfort to the foreign investors and credit rating agencies and are seen as government’s ability to meet the debt obligation. Reserve is enough to cover about 18 months of import. Rising inflows into stock market and FDI have contributed to reserve accumulation. Foreign Exchange Reserve accumulation is welcome but it should be kept in mind that every extra dollar reserve has loss elements.

Government is embarking on substantial borrowing to boost the economy. The total debt of the government can go up to 85% of GDP.

Vehicle scrappage policy will provide a fillip to the automobile industry. But it will affect the lower middle class and semi-urban society and rural people who cannot afford to buy a new vehicle and pay the EMI. For the family comforts and to avoid public transport for safety they used to buy old vehicles. Government should have selective policy for scrapping the vehicles.

NBFCs: Prudential regulations are essential to maintain the growth of NBFCs in the economy. Impractical approach by regulator will significantly affect the business operations and process of recovery from their borrowers and payment to their lenders. Like banking, NBFC’s business model is also based on trust. If large numbers of depositors try to withdraw their deposits at the same time, there would be a run on the bank and it will not be in a position to repay them immediately. The bank will fail. RBI has to come to the rescue. The borrowers have taken finance against assets; their operations have been affected due to Covid-19 resulting in defaults or delays in payment. Regulator has intervened and provided moratorium on repayments by borrowers of NBFCs for 6 months and have also instructed NBFCs to provide one-time restructuring for stressed borrowers. However, the NBFCs, who borrow from the banks, have neither been provided any moratorium or nor restructuring window. NBFCs have been adversely affected by the pandemic too and several of them are finding it difficult to make payments in time to their lenders. Regulator also did not provide clarity on whether banks were to provide the moratorium to the NBFCs. More regulations will make the matter complicated, without solving the problems. History tells that global financial crisis deteriorated due to more regulations. Many NBFCs have various high courts cases against the RBI’s norms on opening of current account etc.

Many NBFCs have various High Courts against the RBI’s norms (Reserve Bank of India) on opening of current account etc.

Bharat needs the investment and for that the wealth creators need to be trusted and protected. Defaults due to difficult economic conditions should not be equated to criminal motives. Globally it has been established that more regulations are not fool-proof. Entrepreneurs need to be encouraged to that they can create more jobs and that will enable and empower Bharatwasis to earn and live with dignity. And for entrepreneurs to flourish, we need a strong and vibrant NBFC sector which happens to be the principal source of finance for entrepreneurs. At this delicate moment, India cannot afford to have a situation of growing unemployment and a broken financial ecosystem.

Swami Vivekananda said “Arise, awake, work hard and stop not till the goal is reached. All the wealth of the world cannot help one little Indian village if the people are not taught to help themselves by hard work, have discipline and unity. Educate people intellectually, technically and morally.”