- The economic scenario in the Indian context is slowly on the mend, aftermath of the pandemic-induced damages, cannot be disputed as various stimulus packages and reforms aimed at buffering the freefall are showing some tangible results. However, the moot point to ponder over here is whether those measures initiated by the Central Government will be succeeding in providing relief on expected lines to the common citizens as well as overcome the still unresolved challenges staring at us. Delving deep into the subject would throw us where exactly the country is positioned on the matter. Unfolding events of the past few days show how the Union Government is committed in its planning to revive the economy based on welcome reforms by announcing three policies expected to go a long way in addressing the same.
PC: Cory Phare
- People following closely on the economic scenario would understand how two extremely critical sectors are under duress over the last few years. Yes, I am referring to the banking and more specifically, the telecom sectors. If the banking sector was burdened with mounting non-performing assets (NPAs), the telecom sector was bogged down with the ill-thought-out retrospective tax liabilities owing to adjusted gross revenue (AGR) claims. The government has to be commended for initiating efforts to offset these festering problems. The third announcement on extending fiscal incentives through Production Linked Incentives (PLIs) to the automobile and drone sectors aims to address the industry’s challenge of inadequate competitiveness concerning relevant peers.
- Mind you, the bad bank structure, for long the albatross hanging around the sector, announced recently is potentially the most far-reaching of the three policies. Understandably, the overarching aim is to clear bad loans from banks’ books and unclog credit flow by envisaging two complementary entities. The bad bank or NARCL (National Asset Reconstruction Company Limited) will be the repository of bad loans from banks with the majority stake held by public sector banks. Further, these loans will be managed by another firm, IDRCL (India Debt Resolution Company Limited) with a majority private sector stake. Of course, the success of the bad bank, duly backed by government guarantees, will depend on the incentive structure envisaged.
PC: Investallign
- Another move that deserves appreciation is the announcement about the telecom package reducing the burden of levies. Just imagine how illogical it is to first auction spectrum and then levy charges on its use. What needs to be ensured though is to prevent the emergence of a duopoly in the Indian telecom sector when major markets have three to four competitors. Looking at the thrust placed on the PLI to boost competitiveness, its efficacy will largely depend on how the incentives are designed to provide fiscal support. Earlier experiences have been discouraging owing to design flaws. Ultimately, the Government should ensure the GDP growth sustains by keeping the option of additional financial support on the table. The RBI has done enough till now to support economic growth and the ruling dispensation should front these credible policy tools from now.
