NaMo Knows His Numbers

NaMo Knows His Numbers

What kind of financial health can we expect from an expected Narendra Modi led Government at the Centre in a few months? Of course, the overburdening of expenditure over income the projected NDA Government will inherit, is both profligate and colossal. Still, looking for clues in the highlights of the Gujarat interim budget just presented, can be rewarding. It is only a vote-on-account for the first four months of the next fiscal 2014-15, but it says a lot, and will be filled out more once the new Government forms and sets its economic direction.

But let us note that here is Gujarat, with a rare Clinton administration style surplus of Rs. 7,697 crores, contrasted with a sea of red ink in many places elsewhere. West Bengal, for instance, has an interest load on borrowings alone of Rs. 28,000 crores annually, which the Congress led UPA refused to help out with, occasioning Trinamool Congress to withdraw its support for it. But BJP President Rajnath Singh has reportedly told Mamata Banerjee that it ‘could be’ deferred when the NDA comes to power, and that there may be other largesse for West Bengal too. Mamata Banerjee is apparently counting on it, because she has promptly gone public with this, announcing it would unleash a ‘golden’ period in her State.

Meanwhile, the Kolkata based public-sector United Bank of India (UBI) has just posted losses in excess of Rs. 1500 crores from non-performing assets (NPAs), not provisioned for earlier. This on an equity base of Rs. 700 crores, calls for serious recharging of capital. And apparently Rs. 1,000 crores has just been pumped in, enabling the bank to reopen its loan desk. Its lady Chairperson has become the willing scapegoat, having resigned and taken early retirement alongside the loss announcement which comes to add to an NPA load of over Rs. 8000 crores for UBI.

But reading between the lines, a lot of this NPA probably has a lot to do with a West Bengal Government that is practically bankrupt.  But not all of the UBI bad debt is old, from Left Front times. Some of it is recent, over the last two quarters. West Bengal is not, and has not been solvent for many years. Like the massive Saradha Chit Fund debacle of a few months ago, it takes its money from wherever it can. It will therefore do itself a favour to ally itself with the NDA, as before, instead of dreaming Third Front dreams, with new found friend Anna Hazare chiming in alongside. But apart from waivers and hand-outs, West Bengal, like many other States in India, must become productive, efficient and profitable again.  

Actually, reflecting the current malaise, the PSU Banking Sector across the country has seen unprecedented growth in NPAs over the last couple of years, hinting at massive Government influence and hidden collusion. This will need sharp correctives to restore a semblance of the prudence and probity expected, along with massive recapitalisation from the new Government.

Meanwhile, discussing the Gujarat interim budget, let us note it has upped the allocation for development to Rs. 80,974 crores, thereby keeping its emphasis on productive growth. It is growth that provides both balance in the economy between income and expenditure and in some cases, even surpluses. The fiscal deficit reported is just 1.93% at Rs. 17,611 crores. Compare this with the Centre’s ‘on target’  fiscal deficit, manipulated with blatant financial jugglery by Mr. Chidambaram, of over 4.5%, that too, on much larger national numbers!

Gujarat’s Gross State Domestic Product (GSDP) is pegged at  Rs.6,70,016 crores for 2012-13, making it one of our most prosperous in our union. The State’s Public Debt, at an expected 1.53 lakh crores, up from the current 1.38 lakh crores, is still about 25% of GSDP for the 2012-13 fiscal.

If a Narendra Modi led NDA Government can turn out national figures that resemble Gujarat’s, and help states such as West Bengal, blustering and floundering in financial mismanagement, we are in for a very good time. It is no wonder therefore then that another report from the National Housing Bank exhorts property investment in Vadodara amongst other tier-two and three cities across the country, for its connectivity and proximity to Ahmedabad, where the prices have already run up considerably.

The BJP’s  economic agenda for the general elections and beyond, not yet unveiled except in previews and glimpses, is however clear on its atmospherics. It expects to offer clear and transparent guidelines and hold the line on a stable and consistent basis. It also will stress new job generation by truly unleashing the ‘animal spirits’ of business and industry without the all-pervasive corruption and policy paralysis that has characterised the UPA years.

On the foreign investment front, In addition to China, Japan, already operating in the infrastructure and industrial space in India, is expected to considerably ramp up its FDI. New Prime Minister Abe and Narendra Modi enjoy a good rapport, and Japan has also been a partner  in the organisation of the Vibrant Gujarat Summit. Japan needs a good industrial base abroad in a country it can trust. B y process of elimination it has zeroed in on India and seems ready to overlook its earlier reservations on Indian ponderousness and lack of  many civilised facilities.

Curiously, our relationship with America, hyped from time to time, has gone into something of a decline for no good reason. This will not however particularly hurt India, on its growth path, because there are many countries eager to forge closer ties with us. Including, as it turns out, several in the dollar and petroleum rich Middle East including Iran. But the US cold-shoulder is occasioned by petulance at India’s less than forthcoming biddability; and more so under an anticipatedly assertive NaMo-led Government. Perhaps they are too used to pushing nations around.

This is sad in a way, because the Americans need to change their attitude, towards not only India, but the demands of a multipolar dispensation, of which India willy-nilly has become an integral part in its own bumbling and stumbling way. 

(1,011 words)

February 22^nd, 2014

Gautam Mukherjee