Finance minister Niramala Sitharaman’s claim at an event in the US that India’s present woes in its financial sector have largely to do with mismanagement of the economic affairs during the Manmohan Singh—Raghuram Rajan period should be taken with a pinch of salt. The reply from Dr Singh noted the inappropriateness of the Modi government to put all blame on the UPA, rather than shouldering blame on themselves. The blame game apart, a tragedy befell India in the form of a sharp downturn in economic growth, as is reflected in GDP and other figures.
Ups and downs in economic growth are a natural phenomenon; China is also facing a similar situation. Its economy has overheated, and a phase of cooling down is currently on. The global economy too is now facing serious reverses, as had happened 10 years ago. At the same time, what is specific to India now is a scary scenario in relation to the huge rise in non-performing assets (NPAs) of public sector and other banks; the bad debts rising to the order of Rs 10 lakh crore and now slowly coming down due to governmental intervention. But, worry was compounded weeks ago when RBI intervened to handle a huge debt crisis that deeply hurt some 1.5million of Punjab and Maharashtra Cooperative (PMC) Bank customers. More such banking sector collapses are likely, thereby hurting the national economy.
Two aspects must be noted. One, the present NPA crisis has largely to do with the freewheeling manner in which banks were forced to disburse loans to big sharks; meaning, men who used political influence to get huge funds without sufficient safeguards or guarantees for repayment, during the UPA periods. Several of the big business tycoons that scooted from the scene without repaying their outstanding are willful defaulters – those who can afford to repay, would not. They would rather prefer prolonged court battles to avoid payment. Finance minister Sitharaman has made a pointed reference to this situation.
At the same time, the past five years was a good enough time for the Modi government to set things right in a more effective manner. It should have acted in a more forceful and effective manner. There were times when then finance minister Jaitley was made to also handle other principal portfolios like defence. Even now, whether Sitharaman has the strength in her to handle the finance portfolio is a matter of debate. The economy, the RBI and the banking sector require more serious attention from the Modi Government.