How to manage cash for nation-building

ONE OF THE features of globalisation was the emergence of global supply chains and just-in-time (JIT) inventory.

- SHYAM S DUBEY Former Controller General of Accounts

Improvements in technology and physical and digital connectivity enabled companies to manufacture even complex products with hundreds of components, and to arrange their assembly and production efficiently. They did not have to invest working capital in inventory. Parts were delivered even with a day's lead time. However, things are changing. JIT is giving way to just-in-case supply models. Amidst rising geopolitical and trade tensions, companies are no longer sure of receiving critical supplies at the right time. They need to stock up and even localise production of the components they need. So, the cost of production will rise.

In a different world, in the public finances of the government of India, JIT is coming into fashion and leading to efficiency gains, even as multinationals are forced to abandon the model. There is a quiet but significant enhancement of cash management in the government, saving crores in interest payments and even earning some.

It is well known that governments run fiscal deficits and supplement their tax and non-tax revenues with market borrowings. Interest costs start accruing from the moment the loan is subscribed to.