Boastful claims of FM and Fallout
C P Krishnan
THE finance minister, in her article captioned “Bold decisions pronounced under PM Modi” in Times of India, dated July 14, 2020, has praised the former prime minister, Narsimha Rao for his immense political will for dismantling the four decade old command and control model. Nirmala Sitharaman, in this article, has glorified several policy decisions of the governments headed by A B Vajpayee and Narendra Modi. Truly these policy decisions were responsible to take the country's economy towards pro-corporate and were against the interest of the common man. She has made many claims and listed achievements of the BJP led governments in this article; but the reality is that these decisions have resulted in worsening the economic situation of the country as well as increasing the misery of the people.
Claim: “However, it was PM Vajpayee who enacted the Fiscal Responsibility and Budget Management Act.”
Fallout: In fact this FRBM Act is the one that serves totally against the interests of the common people. In order to maintain the fiscal deficit within the prescribed level of the GDP, the central government cuts many of the welfare measures benefitting the common people, sells the shares of the Public Sector Undertakings etc. Today many state governments are unable to borrow funds to tide over the pandemic crisis only due to this Act.
Claim: “Within a year after forming the government in 2014, PM Modi held a two-day Gyan Sangam with PSBs.”
Fallout: It was very much shocking that the meeting of chiefs of the public sector banks named as Gyan Sangam held on January 2-3, 2015 at Pune laid a road map for privatisation of public sector banks. The BJP led government at the centre took the lead for this summit. All the presentation papers were readied by the ministry of finance with McKinsey, a multinational company (MNC) as knowledge partner.
The participants were divided into six panels headed by chairpersons of Allahabad Bank, NABARD, Indian Bank, Andhra Bank, State Bank of India and Bank of India. The quintessence of this presentation was to privatise PSBs. It was a matter of shame that being heads of the PSBs, they were party to the presentation of papers, which essentially was a drive towards privatisation of PSBs. It was strange that former chairman of Axis Bank, P J Nayak who headed a panel advocating privatisation of PSBs was also invited to this summit.
Another argument advanced by them in the Gyan Sangam was that a level-playing field was not there between private sector banks and PSBs. Some of the fields suggested by them were:
1 PSBs had to fulfill priority sector lending (PSL) obligations while private sector peers were allowed to purchase PSL securities from NBFCs.
2 PSBs had spent the last three months focusing on the PMJDY and opened 10 crore accounts while private sector peers opened only 30 lakh accounts.
3 PSBs had 33 per cent rural branches while private sector banks had only 15 rural branches.
4 PSBs invested heavily in infra-financing and four other sectors keeping nation building interests in mind whereas private sector had not made any such investment.
These were really genuine concerns. Instead of advancing an argument that private sector banks should be compelled to fulfill RBI directives strictly or private sector banks should be nationalised, the argument to privatise PSBs was highly dangerous and harmful to the interest of the people of this country.
This Gyan Sangam is the root cause for all the maladies faced by the banking industry today.
Claim: “A set of mergers took place in 2017. And a leap forward happened in August 2019. Twenty one PSBs after consolidation today are truncated to 12. In addition we have a payments bank in the India Post Payments Bank.”
Fallout: It has been witnessed that bank mergers led to closure of a large number of branches denying bank service to the common man, increased service charges, pro-corporate lending policies and increased non-performing assets. State Bank of India has closed nearly 2,500 branches and offices. Bank of Baroda is closing more than 1,000 branches and offices.
Claim: “The PM Jan Dhan Yojana launched in 2014 has provided over 39 crore poor people access to banks and their services.”
Fallout: It is true that 39.71 crore jan dhan accounts have been opened as on July 1, 2020. But the hard fact remains that out of these accounts, the PSBs opened 31.51 crores, the regional rural banks opened 6.94 crores and the private sector banks opened hardly 1.26 crores accounts (3.17 per cent). Strangely the FM has openly announced in May 2020 that all public sector undertakings, including banks would be privatised. If the banking industry is declared as a strategic industry, maximum four PSBs would be allowed to exist. The very PSBs which were instrumental in opening nearly 80 per cent of the jan dhan accounts for the poor people are to be privatised, according to the FM. Then whose interest is the present BJP government serving?
Claim: “The Insolvency and Bankruptcy Code and setting up of the National Company Law Tribunal in 2016 provide a major relief for companies looking for an exit policy. Long pending resolutions are happening now.”
Fallout: In May 2020, the finance minister herself admitted, "in 221 resolved cases 44 per cent recovery has been achieved since the inception of IBC 2016. The admitted claims amount to Rs 4.13 lakh crores and the realisable amount is Rs 1.84 lakh crores." This clearly reveals that an amount of Rs 2.29 lakh crores has been written off to the corporates in these 221 cases. Further, it was revealed by the government of India that “13,566 cases involving a total amount of Rs 5.01 lakh crores (approximately) have been withdrawn before admission under provisions of IBC till February 29, 2020.” The government did not explain how and why such a large number of cases were withdrawn, the role of the lenders and the RBI in this regard and the alternate mechanism to recover this huge NPA of more than Rs 5 lakh crores. This is a hard reality about the IBC law and its implementation.
Claim: “Within one year of being re-elected in 2019, NDA brought in major reforms in taxation. Corporate tax was reduced to 15 per cent for new manufacturing companies and for the old to 22 per cent.”
Fallout: In fact this move has resulted in Rs1,45,000 crore loss to the government exchequer. While the government has reduced the allotment to MNREGA in the budget, while there is no sufficient allotment as recommended by various committees to the health and education, while common man is ruthlessly exploited through increased excise duty on petrol, diesel when the crude oil price is touching rock bottom, this huge concession was extended to the corporates. But FM claims this as an achievement of the government.
Claim: “The recent steps to energise agriculture have resulted in amending the Essential Commodities Act.”
Fallout: Amendment to Essential Commodities Act and other ordinances to allow barrier-free inter-state trade of agriculture produce are an attack on the federal character of the country, eroding the powers of the state governments. They are nothing but pro agri-business reforms which would push the peasants to further distress. The Essential Commodities Act was the single most important act to prevent hoarding of the essential commodities and its futures trade. This amendment enables the processors, aggregators and big traders to procure any quantity of crops stockpile and sell at the rates as dictated by the neo-liberal market. This is nothing but opening up agriculture for hoarding, black marketing and endless private profiteering. This move will threaten food security and lead to hike in prices for consumers.
The working class of this country has to understand the reality behind the claims of the finance minister, forge an all-in-unity and resist the pro-corporate policies of this government.