Political rhetoric may be understandable but when it ignores fully the realities of life, it only sharpens the pangs of distress
Staying positive is not the same thing as the inability to read the writing on the wall. The first is as necessary as oxygen is for life. Experiencing the second, is, not recognising the fact that ignoring the obvious can only lead to a roadblock. The situation is compounded in an endemic environment of anxiety about health and receding frontiers of income and opportunity.
Pointing this out is necessary because if debt repayments are necessary for survival of intermediary financial institutions, approaches which are likely to push firms into bankruptcy can be equally dangerous. Under such circumstances, topping it all up with understandable but untenable social objectives is only going to make confusion worse. Consider the situation of ordering Small and Medium Enterprises (SMEs) with less than 100 workers to pay full wages. On the face of it, this appears to be a laudable approach, yet there is a flip side to it. From where will the SMEs find the money to pay when they are not earning anything themselves? If they go bankrupt, the employees will not even get what they could be getting in a reduced manner. This is not economics. It is common sense.
When the reality is grim, appealing to “resilience” or “dynamism” can only lead to an echo situation. One can hear oneself over and over again but nothing is going to change. What is required is overcoming the crisis with a genuine ability to develop alternatives and indeed lower the sights. Consider a situation where all this is ensconced in an administrative environment of further tightening processes to a still more rigorous tax regime.
Governance, anywhere, works on many wheels. One of them is committee work. The Covid era has no dearth of committees, with many of the members of such panels being busy bees in the corridors of power. Apparently there is also a ‘Covid-19 economic task-force.’ If it has not made any Earth-shaking recommendations till now; they must be among the best-kept administrative secrets.
What one finds in columns and discussions are phraseologies like “transformative economic opportunity” or exhortations for “meaningful and effective” action. What does all this add up to? Having a compass, which has a needle with no marking of the North, is not the normal process. This is not the normal way of finding a path.
Mergers of banks were announced with great flourish; however, for this to work, there had to be a preparation for a conscious redesign of their architecture. What was needed was a framework of reference. Perhaps an activity for which no one has time when everyone is in a hurry. There are many ways of writing off a good suggestion, which one is unable to understand and the best is to term it theoretical/intellectual/unrealistic. The Covid era may have changed many things but the area on which it has still to make an impact is clichéd responses.
To consider the severity of disruption of economic activity, banks find it difficult to meet singly, either a demand shock or a supply shock. When both come together, the people in authority, having a limited understanding of the triggers of the situation could mistake activity per se as the solution. It takes an astute administrator to realise that one can be very active, just jumping up and down at the same spot but you will not be going anywhere.
One of the reports terms the situation arising out of Covid-19 as “economic asphyxiation.” This is a particularly difficult phase to go through for finance-related institutions. Several international ratings have revised India’s outlook downwards. Fitch ratings of a month ago are particularly devastating. Add to it the high public debt India is burdened with. For one thing, even the weekly game to meet, partly, the situation by hiking fuel prices seems to have exhausted itself. By itself this could be ignored up to a point but this is the lowest investment grade India has had in well over two decades. Foreign currency issuer default rating can be an important indicator in getting funds.
A distinguished friend of influence in Government circles made the argument that such ratings are “red herrings”, because indicators of normal times cannot be used to measure abnormal times like the Covid era. This kind of a debate is interesting to toss around but unhelpful in working for an economic turnaround. In the meanwhile, the much-maligned and little-understood people factor continues to get weighed under the realities of commodity prices, spiralling expenditure through populist doles and receding fiscal revenues. The solutions could possibly lie in a package of approaches, which would include lowering public rhetoric, recognising that economic crests and troughs are unrelated to political gains and losses, recognising that in a universal pandemic situation most economic segments will have to redefine their life sourcing strategies. Political rhetoric may be understandable but when it ignores fully the realities of life, it only sharpens the pangs of distress.
(The writer is a well-known management consultant)
