If news reports are to be believed, the Finance Ministry seems to be caving in to the RBI strategy to sell Public Sector Banks and is raising the limits of FDI in banks to 49% — thus virtually paving the way for handing the PSBs, which are at the heart of the national economy, to global financial interests. If the RBI Governor succeeds, it will be a disaster for India.
PSBs, the core
In the second of a three-part series on the Indian economy ahead of the presentation of the Union Budget, well-known commentator on political and economic affairs, S Gurumurthy argues that the Indian family’s instinct to save in banks rather than spend at stores, which is similar to that of Japanese families, has insulated the economy from global crises. However, this cultural aspect has not been given due consideration when it comes to policy and budget-making efforts in the country. This, he explains, is due to the Western bias of Indian economists.
It’s that time of the year when ‘experts’ throw around intimidating economic jargon to ‘advise’ the government and ostensibly enlighten us all on what’s wrong with our economy. Starting today, we bring to you well-known commentator on political and economic affairs S Gurumurthy’s three-part series, Indian Economy for Dummies, to make the subject intelligible and less intimidating. In the first part, he lays bare hidden truths behind some obvious facts that are the most difficult to detect and missed in the Indian economic discourse, policy and budget-making.
At times individual events irreversibly change the dynamics of regional geopolitics and texture of bilateral relations. Xi Jinping’s well publicised two day (April 20-21, 2015) visit to Pakistan, barely three weeks prior to Indian Prime Minister Narendra Modi arriving in China, is one such.
The way economists have made simple theories into complex mathematical equations has made monetary economics seem difficult to comprehend. Well-known economists, including Nobel laureate Robert Shiller and Prof Bradford DeLong, have already protested at this distortion of economics. Monetary economics is the story and dynamics of money. Money is to the economy what blood and medicine are to human body. If the economy is short financed, its growth will slacken. If it is starved of money it may even collapse. If it is excessively financed, it will lead to inflation.
All budgets are in a sense compromises with different stakeholders. Whether it is a housewife making budget for home or a Chief Finance officer for a company or Finance minister for the Government. The core issue is that expenditure is always larger than revenues. Government can rely on Nasik press and Corporates on Banks. But housewives have no such recourse.
India’s economic growth for the financial year 2016 has been estimated at 7.6 per cent as compared with the revised estimate of 7.2 per cent in the previous year, aided mostly by growth in the manufacturing sector.
However, the GDP growth for the third quarter of this financial year slowed to a four-quarter low at 7.3 per cent. In the second quarter, it had grown by 7.7 per cent.
1.The Round-table recognised that energy access is critical for energy security. It took note of the fact that 80 million households are still to be provided with electricity and energy. This denies them a fair share of economic growth, access to livelihood, education, healthcare, transportation, entertainment etc.
It was strongly felt that we would, as a nation be energy secure only when we are able to meet the basic energy needs of the entire population on a sustainable basis and at affordable prices.