A King's Ransom From The Iron Bank

The Centre rolls back stringent laws, cadges money from RBI. But to fix the economy, structural flaws must be addressed.

- Lola Nayar and Jyotika Sood

Rs 1,76,000 crore! It is, and was, a curious, controversial, and deb­atable figure. When the former comptroller and auditor general Vinod Rai estimated that this was the notional loss to the exc­hequer due to the 2G spectrum scam during the previous UPA regime, it jolt­ed the nation, and proved to be one of the reasons for the downfall of the Con­gress and its allies since 2014. This week, when the government arm­twist­ ed the Reserve Bank of India to trans­fer a similar amount from its reserves to bail it out, it rang a bell.

The RBI transfer proves that the gover­nment finances are in tatters. Last week, when Union finance minister Nirmala Sitharaman announced a slew of new measures and budget­related roll­backs, she silently acknowledged that the econ­omy was teetering on the verge of a crisis. Growth has slowed down, investments have lost pace, unemployment is high and consumers have postponed purchases. Several key sectors such as automobiles, consumer goods, retail, and textiles are in the doldrums.

Banks are cagey to lend to industry or retail consumers because of their bad loans. Although they have come down, they are still high. The alternative, non­ banking financial companies are in disar­ ray. More important are the sentiments of Indian and foreign investors, who are shattered by the seemingly strong­arm official tactics to extract more taxes out of them. As Outlook’s last cover story (Death by Debt, Sep 2) revealed, India Inc is gripped by fear and despair.