Can The Elite Sleep Peacefully With This?
Opinion-leaders must collectively voice their concerns against this journey into fiscal disaster that Rahul Gandhi wants the country to embark on.
Silence on the part of elites will make them partners in crime.
Rahul Gandhi is pushing the country off the fiscal cliff with unprecedented populism in an equally unprecedented desperation to come to office or stay relevant at all. For him, it is a personal existential question. So, country does not really matter here.
He is stirring competitive populism everywhere. Gujarat has written off power dues now. There will be more to follow. He is pushing both Congress-ruled states and the Union government to engage in fiscal recklessness.
Just as the National Democratic Alliance (NDA) government’s measures have long-run positives (goods and services tax, Insolvency and Bankruptcy Code and even, arguably, demonetisation) and short-run costs, his populism will hardly have any short-term redeeming features but substantial long-run costs. It is the flip side of NDA’s structural reform efforts.
More importantly, even the fiscal populism is only of second order importance. The first order issue is their effectiveness in addressing the underlying issues and durability of such effectiveness. The absence of both has been established repeatedly. But, the Congress party is not one to bother itself with such evidence.
On Friday, a brief research report from the Chief Economist of the State Bank of India came to me. He offers a simple proposal that might make a big difference both for banks and for farmers:
As per the existing norms of asset classification for agriculture advances, in case of an agriculture cash credit account a farmer has to repay the entire outstanding (principal along with interest) to seek fresh loans from the banks unlike other segments of cash credit business where if the borrower has cleared interest payments and ensured submission periodic stock statements, he/she would be eligible for enhancement/ renewal eventually continuing as a performing cash credit account.It would be in the benefit of all, if the farmer is given renewal/enhancement based on deposit of applicable interest to the bank and the submission of periodic stock statements (which may be linked to the yearly crop cycles) especially if the bank is satisfied with the farmer in terms of his/her land holding/paying capacity etc.If we align the NPA classification norms for KCC and crop loans for agri at par with other segments, we can also save as much as Rs 37,000 crore on being classified as NPAs. It would not only help the farmers but would also help the banks in saving capital on account of provisions made towards these otherwise avoidable NPAs!Source: SBI Ecowrap: ‘NOT LOAN WAIVER, BUT SIMPLE LOWHANGING FRUITS CAN SOLVE RURAL WOES’, 21 December 2018
My friend Dilip Subramanian forwarded me an article written by Shamika Ravi in July 2015 which is worth re-reading now. She wrote about farmers’ suicides and said that analysis of data showed that debt was not a factor but health issues and expenditures were.
In India, fiscal profligacy has always occurred under Congress watch and it has been left to the two NDA governments to repair them. Yet, the rallying cry of elites is that the NDA government is about to slip into the fiscal abyss.
Surely, demonetisation cannot be the worst policy decision since Independence in the face of such repeated criminal fiscal irresponsibility.
Opinion-leaders – collectively – must issue a strong, unequivocal, joint public statement against this journey into fiscal disaster and economic oblivion that the president of the Congress party wants the country to embark on, collectively. Silence on the part of elites will make them partners in crime.
This article first appeared in The Gold Standard and has been published here with permission.