*DISMAL ECONOMIC FAILURE IN FAVOURABLE* *CIRCUMSTANCES UNDER NARENDRA MODI*
*Elvidio Miranda, Panjim* The Modi government does not have any alibis to adduce for the abject state of the economy in India. It is very significant that in particular, the price of crude oil in the international markets all through his now 4-year term in office was in the range of $ 60-65 a barrel against an all time high of $149 per barrel earlier and since India imports about 70 percent of oil from especially the Middle Eastern countries, such as Saudi Arabia, Iran, Kuwait, Bahrain and Oman and Russia, the BJP government has nothing to complain about since, this low price of oil has led to the saving of several lakhs of crores of rupees every year. The other factor is that for a long time now the bank interest rates have been very low, in the region of 6.5 to 6.8 percent on fixed deposits due to the lowering of interest rates by the Reserve Bank of India in their policy reviews. It may be argued here that these low interest rates affects the depositor the most who are now getting lower returns in interest accrued while it greatly benefits the corporate sector who for doing business get loans at very cheap rates, thus meaning that they should have performed much better than in the past. Even recently the manufacturing sector has suffered under the BJP government, despite these low interest rate regimes to a 5-month low. Modi’s much touted `Make in India’ programme has also been high on rhetoric but extremely low on performance. Also, it is inexplicable why the Public Sector Banks (PSBs) have performed so dismally, when low interest rates should have boosted their profitability. To give a very stark example of the massive underperformance of the PSBs, it should be noted here that the market capitalization of just one private bank, HDFC Bank was Rs. 59,000 crore more than the market capitalization of 21 PSBs put together. This includes the State Bank of India (SBI) and its associate banks which were recently merged into one entity and which was valued as one of the 100 most valuable banks in the world after the merger. Market capitalization is the product of the total number of shares of a Bank multiplied by its value on the Stock exchanges such as the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Quoted below are the actual Earnings per Share (EPS) of the various banks in India, both private and public sector banks. EPS is the main indicator of the financial strength of any bank or other companies. MRF which is a tyre making company has the highest EPS in India at 2438 and its share price is Rs. 77,000. *EPS OF PRIVATE BANKS*: Axis Bank: 14.38, DCB: 7.6, Federal Bank: 5.03, HDFC Bank: 64.30, ICICI Bank: 17.11, IDFC Bank: 3.0, IndusInd Bank: 56.72, Kotak Mahindra Bank: 30.52, RBL Bank: 10.63, Yes Bank: 17.19, City Union Bank: 8.5 and Standard Chartered Bank: -ve. *EPS OF PUBLIC SECTOR BANKS*: Bank of Baroda: 3.58, Bank of India: -26.34, Canara Bank: 14.26, IDBI Bank: -21.85, Indian Bank: 30.12, Karnataka Bank: 16.03, Oriental Bank of Commerce: -153.13, Punjab National Bank: 5.76, State Bank of India: 0.01, South India Bank: 1.64, Syndicate Bank: -8-87, Union Bank: -29.87, Allahabad Bank: -ve, Andhra Bank: -ve, Bank of Maharashtra: -ve, Central Bank of India: -ve, Corporation Bank: -ve, Dena Bank: -ve, Indian Overseas Bank: -ve. Jammu & Kashmir Bank: -ve, Punjab and Sind Bank: -ve, United Commercial Bank: -ve, United Bank: -ve, Vijaya Bank: 6.52. -ve indicates loss making banks. *(Source: Business Standard dated 20thMarch, 2018)* Without any doubt, the EPS of the PSBs have decreased to such an extent that indicates that the PSBs have been badly managed. There has been a massive fall in EPS of PSBs, which is a reflection of the mismanagement of these financial institutions run by the government. Besides, recently infusion of capital to the tune of tens of thousands of crores of rupees have been made to prop up the capitalization of these banks. Also, most of the PSBs due to losses in the last one year have not been paying dividends to the shareholder, when in the past hefty dividends were being paid by these very same PSBs. Who will take the responsibility for this huge underperformance of the public sector banks? Is it the Prime Minister Narendra Modi, who normally takes credit for everything when the going is good or is it the Finance Minister Arun Jaitley? Could it also be that the Reserve Bank of India (RBI) is responsible for the financial fiasco that is ailing the public sector banks? It has been brought to light that the total Non Performing Assets (NPAs) or bad loans of all the banks in India put together is to the tune of Rs. 9.50 trillion, a huge amount, which in simple terms means that every Indian amongst the 1.25 billion population has lost just over Rs. 7000 due to under recoveries of bad loans. Also, the bad loans or the NPAs are primarily due to the large corporate companies not having paid back their loans to the extent of a little over 90 percent of the total NPAs. A case in question of a private company is that of Anil Ambani’s Reliance Communication with a massive loss of Rs. 42,000 crore. The recent revelation that the Nirav Modi group of companies owes about Rs. 13,000 crore to Punjab National Bank is fresh in our minds. Also, an alleged amount of Rs. 40,000 crore by a consortium of banks to the Videocon group has surfaced which is another scam in the making. Vijay Mallya’s Kingfisher Airlines owes the government Rs. 9,500 crore. These are just a few examples of bad loans that big corporate companies owe to the banks, major of which are PSBs. In addition to the banks, the demonetization policy, which was primarily done in a secret sudden haste in November, 2016 was not only a failure, but a disaster as at least 100 people lost their lives either due to exhaustion or in the melee ensuing due to the huge queues of people to exchange their old Rs. 1000 and Rs 500 notes. There is no official confirmation of the quantum of black money detected. It has been reported that a total of Rs. 15.28 trillion accounted for 99 percent of the old notes already counted and the RBI despite more than a year having passed has not yet counted all the surrendered notes till today. This speaks volumes of the inefficiency of the Reserve Bank of India. The fear is that, the PSBs having lost credibility and the ability to generate profits, have dented the confidence reposed by the people. Can the PSBs in particular do a turnaround or will it be better for the government to begin the process of privatization of banks, so as to nurse them back to healthy balance sheets? As per expectations, due to relatively low crude oil prices, only the oil refining and marketing companies like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), Chennai Petrochemicals Limited as well as Maruti Suzuki are the only big profit making ventures that have substantial profitability. Another financial disaster is the case of the Air India, which has accumulated losses of Rs. 40,000 crore. The government having been unable to reduce its losses has now decided to privatize the airline. Will the ailing Maharaja find any takers? What stares people in the face is if the government is unable to manage businesses due to corruption, fraud, collusion, mismanagement and thus the only escape route now is to privatize, then precious public tax payer’s money is at stake. Private banks have performed very creditably with healthy balance sheets, compared to the PSBs. The RBI was contemplating to merge small banks into just 6 major banks in India. If small banks cannot be managed well, will it be prudent to merge banks into larger entities? The example of the merger of associate State Bank of India units suggests that the government is not able to manage big banks. So it seems that it will be a futile exercise to merge smaller banks into larger entities. All said and done, the Modi government in the Centre has failed miserably in the economic front. Linking of Aadhaar cards and PAN Cards under duress by the RBI and TRAI seems to not have had a positive effect on the economy. Has this measure boomeranged? Recently the Supreme Court has ruled that Aadhaar linking has not been able to prevent the prevalence of Non Performing Assets (NPAs) which have now reached an astounding 11 percent mark primarily due to default by the large cap corporate sector. In the current global atmosphere of sanctions, imposition of trade tariffs and counter-trade tariffs and protectionism, current tendency of hardening oil prices, in addition to restrictions of visas for Indians especially in the technology sector, money repatriated by Non Resident Indians (NRIs) is bound to decrease thus aggravating the already grim economic downturn. Goan Non Resident Indians (NRIs) and Portuguese passport holders who repatriate their money to Banks in Goa, especially PSBs should be cautioned about the risks to their hard earned money, unless the government gives assurances that their money is safe. At present, the Reserve Bank of India guarantees only Rs. One lakh in each bank branch immaterial of what amount you have invested. So be on your guard. Tough times seem to be lurking ahead. Sent from my Samsung device
