Economy in distress

    Recent comments by RBI governor over threat of world economy slipping into a phase reminiscent of great depression of 1930's a scary preposition even though he was upbeat about Indian economy. No matter how much we were preached about the resilience of Indian economy, its nothing more then a lip service meant for newspapers headlines. It's bound to falter even though we are less dependent on exports but not completely immune. Till few months ago, our economy was reeling under the double whammy of high inflation and high crude prices though situation is contained now with moderation in commodity prices but food inflation hasn't abated yet. With rural economy under tremendous stress due to earlier non seasonal rains and now the threat of below average monsoon predictions. But central bank has taken some pro active steps to spur growth through reduction in rates unfortunately these rate cuts haven't been of any help to masses due to reluctance of banks to pass on benefits, thus, so far these steps turned out to be nothing more then  merely cosmetic steps devoid of any materialistic impact on economy. What's astounding is the concerted steps executed by the previous govt to tame inflation were illogical and beyond comprehension. Certainly raising interest rates and choking infrastructure projects on ambiguous reasons besides corruption were partially responsible but truth is world economy never rebounded to pre lehman era, even depreciation of currency over a period of time hasn't cushioned steep decline in exports. Only comforting factor is the softening crude prices and bullion import decline that aided monetary deficit . Curious case is the burgeoning non recovery of public money from corporate houses, what's bizarre is as per the combined NPA list of PSU banks released in 2013 by the All India Bank Employees Association (AIBEA), the combined default by the 50 companies totaled to Rs 40,528 crore of bank loans of total 1,64,641 crores. As much as 25 per cent of the total non-performing assets (NPAs) in public sector banks (excluding SBI) is accounted for by 50 corporate innuendo's corruption at higher levels or plain inexperienced management . By emphasizing on the poor state of banks, i am trying to draw attention to recapitalization of psu banks either through govt infusion of capital or raising money through markets is inevitable , but raising money by these banks is doubtful as there books are messy.We need robust banks to support economy and so emphasis should be to take drastic measures to improve there lethargic inefficiency.

   Sucess of Modi govt's initiative of "Make In India " will depend on many factors, available capital from banks will be one such factor, although corruption has been sternly dealt with (auction of mines and spectrum in full transparency)  under incumbent govt and faster clearance of stalled projects is welcome step,yet failure of govt to implement GST , land ,labor reforms are major impediments to negotiate. Emphasis should also be given on increasing farm productivity through innovation to consolidate and augment rural income which lately is in shambles. There are many challenges but silver lining is resolve of govt to tide the crisis ushers hope.