You knew it was looming, you knew it was unavoidable and when it came, you blamed it on the government. Rightly or wrongly, in a regulated economy one is bound to blame the government and at the same time look towards it to provide solutions.
With the first Budget around the corner after a thumping victory by the ruling disposition, the clamor and expectation for the government to step in and clear the gloom cast over is naturally more.
But even for the government, the knock-on effect on critical sectors such as real estate, infrastructure and retail that the current crisis could spill over to, is reason enough to consider providing some impetus. However, in focusing its attention on growth and employment, the government must remain cognizant of the fact that its measures are not a knee jerk quick fix reaction which only re-boots the existing problem.
Fixing potholes with a fierce energy using mere sand may provide respite and a photo-op but there is no doubt that it will be brief and short-lived.
The Budget therefore should certainly ensure that there is liquidity generated through allocation for critical sectors, but it must provide that such liquidity is not wantonly utilized.
Establishing certain thresholds and criteria towards ensuring more responsible lending and providing clear penalties to bring to book breach of such criteria can perhaps be considered. Access to such liquidity can also be based on fulfillment of certain parameters and independent audit checks.
In parallel, incentivising fiscal discipline by offering sops to banks if they actively arrest non-performance or fast-track insolvency resolution processes can be considered.
The government will need to work closer and in tandem with the Reserve Bank of India to consider alternate policy measures if necessary. Despite global anti-trade sentiments, geo-political tensions and the uncertainty of Brexit, foreign currency lending into India remains of interest. Tapping this source by further policy easing should certainly be looked into.
On the infrastructure projects side, a priority list must be created with an effort to monitor and curb leakage. Locking the stables after the horses have bolted is too often the case and this must change.
The current government has surely been proactive and has certainly acted swiftly to avoid complete catastrophe.
With the Budget the government has the chance to continue the momentum it has gathered and provide further effective measures for sustainable growth.
It could very well be equated to the discussions across the country on the pre-monsoon water shortage crisis – eventually the rain Gods have come calling. There are certainly hopes in some quarters that the Finance Minister brings deliverance through the Budget in the form of a goddess.
Anish Mashruwala is a Partner with J. Sagar and Associates, a law firm.
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