Hyderabad: India’s economic crisis has been in the making for decades now, caused by a lethal combination of lopsided policies, gross mismanagement of resources, dysfunctional and malfunctioning official machinery, omnipresent corruption and unscrupulous political establishments.
Bereft of financial capacity, the NDA government’s disoriented strategies to bail out the beleaguered banks and industry can prove to be counterproductive, resulting in only aggravating the problem.
The so-called economic experts had conducted biopsies and come out with "conclusive evidence" that declining consumption had debilitated the economy. According to them, monetary transfusion is the only curative that could provide both oxygen and glucose for re-energising an ailing economy.
Such assorted but irrational suggestions do not have any answers to inevitable questions. Do we have the revenue potential to compensate such indulgences? Does India have a sturdy foundation to afford such largesse? While the diagnosis and recommended prescription are debatable and open to pertinent questions, a glaring fact that emerges is the failure of the "experts" to comprehend the deeper symptoms which actually indicates a progressive economic disorder.
All efforts by the NDA government during its previous tenure and till date – the plans to adjust bank customer’s savings for bailing out NPA impacted banks, the recent unprecedented Rs 1,76,000 lakh RBI payout and a part of the same i.e., Rs. 70,000 crore being infused to enable lending by the banks – have exposed the fiscal fragility of India’s economy.
The outcome of ongoing endeavours to extricate the country from the slowdown and the stagnating consumption will prove to be ephemeral, since the solution for such problems is in being equipped with a robust and healthy economy to afford economic reforms apart from doles of this nature.
India does have the capability to create a sustainable economic structure, but due to systemic misuse, abuse and disuse, its inherent potential has been systematically undermined and dismantled.
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The slowdown is not just reflective of consumption – as we are often made to believe – but more debilitating problems afflicting the country like industrial sickness, high unemployment rate and non-performance across various sectors. What India is presently experiencing is the cumulative consequences of a shoddy management of the economy.
The imbroglio had not happened overnight, but is the end result of mismanagement, manipulation and loot of the economy by successive governments since independence. Most importantly, an economy starved or deprived of resources and infrastructure will become brittle and unsustainable.
Project cost and time overruns have proved to be the main impediments to development and growth in the country. For instance, agriculture output would have increased manifold if irrigation projects had been completed according to schedule. Likewise, the Indian economy has incurred huge losses due to delay in completion of projects. According to reports, on an average, project delays have been in the range of 5 to 20 years.
Cost escalation due to delay in completion of the projects, rampant corruption and related overvaluation of projects are among the major contributory factors – if not the root cause – for the pervasive economic distress across all sectors in the country.
Data on delayed projects and its financial implications contained in the report of the Infrastructure and Project Monitoring Division (IPMD) of the Ministry of Statistics and programme implementation reflects a narrative of gross irresponsibility of implementing agencies.
According to data, cost overruns of 1453 projects - worth Rs 150 crore and above - amounted to Rs 3,28,734 crore. While the original cost of these projects was Rs 18,32,579 crore, the cost on completion is estimated to be Rs 21,61,313 crore. The escalation worked out to around 18% of the estimated cost. Among these, 388 projects overshot the completion schedule and 345 projects accounting for cost overruns.
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According to the report, the expenditure on these projects as on April 2019 was 8,84,906 crore which accounted for around 41% of the anticipated cost. The narrative continues with financial burdens accumulating to insurmountable proportions.
According to 2018 CAG report on Accelerated Irrigation Benefits Programme (AIBP), sixteen National Projects were identified by the Government in view of their national importance with the fundamental objective of expediting their completion and delivery of the envisaged benefits.
This fundamental objective remained unachieved even after almost a decade of existence of the scheme with only five projects being actually under implementation. A total expenditure of Rs 13,299.12 crore had been incurred on these five projects as of March 2017. Despite the huge expenditure incurred, none of the five projects were near completion and the anticipated benefits in terms of creation of irrigation potential and augmentation of water and power generation were yet to accrue.
The shortfall in terms of physical progress in different components of the projects ranged from eight to 99 per cent in the five projects under implementation along with an overall cost escalation of 2,341 per cent that threatened the economic viability of the projects. Only 15 per cent and 37 per cent of the intended irrigation potential envisaged for all the 16 projects and the five projects under implementation respectively has been utilised so far.
Shockingly, there have never been any attempts on the part of the various governments to rectify the faults within and prevent cost overruns and time overruns. Establishments, over the years have been quick to come out with excuses and reasons for delays, but demonstrated an innate incompetence in preventing the resultant fiscal anarchy.
India is also paying a heavy price due to omnipresent corruption in the corridors of power. Projects are overvalued to a level many times higher than the original cost to accommodate bribes for those – both politicians and bureaucrats - who are vested with the powers to endorse them.
In addition to this, there is another form of corruption which is eating into the vitals of the economy – undervaluation and exploitation of assets. For instance, the spectrum scam and the coal scam. According to the Comptroller and Auditor General of India, the spectrum scam has caused a notional loss of Rs 1.76 lakh crore and to the Indian national exchequer.
The coal scam accounted for a loss of 1.86 crore loss to the public coffer, according to the CAG. Add whopping losses incurred from a spate of scams from shady Defence deals to illegal iron mining by BJP leader and former Minister Gali Janardhan Reddy, and the root cause of the economic ailment becomes conspicuous. Add also the politically motivated unproductive sops and subsidies amounting to thousands of crores doled out in the form of populist schemes, then the farce and fallacies responsible for economic degradation become evident.
Proponents of the stimulus package should understand that the present crisis is not a superficial or temporary problem that could be solved by doling out doses of monetary benefits. The prevailing fiscal distress is the consequence of fiscal indiscipline, impropriety, lack of accountability and retrogressive work culture. The government is acting in tune with the dictum ‘desperate times require desperate measures’ and reeling out unviable and infeasible policies which have ‘disaster’ written on them. This is like attempting to cure the manifesting sickness while perpetuating the virus that causes it.
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