The consumer is king in the twenty-first century. A click of the mouse is enough to bring the best in the menu of the best of restaurants to your table. Sitting on your sofa you can order anything you fancy ~ diamond jewellery, a vacation in the Caribbean or whatever, that too on easy instalments. ‘Enjoy now, pay later’ is the leit motif of Generation Y. But, after five weeks of lockdown, the firms offering paradise-atyour- doorstep are faltering and their customers are wondering how to pay their accumulated credit card and other bills.

Banks and credit card companies are willing to grant time, with the rider that interest @36%, will continue to run. People born before 1960 had to earn to enjoy but after the L-PG (liberalisation, privatisation and globalisation) of 1991, funds became available for the asking. A number of small entrepreneurs, with dreams of earning their first billion in the next few years, borrowed money for fanciful schemes. But, before using the money for business, many ‘entrepreneurs’ used the greater part of borrowed funds for financing an extravagant lifestyle.

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Banks had targets for lending; loan proposals were examined only cursorily. Loans were almost never called back; sometimes with dishonest motives and at others, only to protect the skins of the lending bankers. Loan defaulters like Mallya and Choksi lived life king-sized on borrowed funds, inspiring many others to follow suit. A move to identify bad debts or Non-Performing Assets (NPAs) of banks was initiated by Raghuram Rajan, when he became the RBI Governor in 2013.

Startling results followed; loans that had been regularly rolled over were found to have gone bad. The enormity of events that Rajan set in motion can be imagined from the fact that bad loans of more than Rs.6.60 lakh crore had to be written off between 2014 and now, whereas in the period between 2008 and 2014, loans of Rs 1.60 lakh crore had been written off. Till now, the RBI had steadfastly refused to reveal the identity of debtors whose loans had been written off.

So, a political storm broke out when it emerged that debts of people like Vijay Mallya and Nirav Choksi, amounting to Rs 68,607 crore had been written off. The Finance Minister was at pains to highlight that it was only a ‘technical write off’ that left the option of recovery open, while the Opposition accused the Government of shielding loan defaulters. Neither suggested any improvement in the loan disbursement or recovery process.

Unbridled consumerism, of the type practised by the likes of Mallya and Choksi, is the cause of the downfall of many individuals and businesses. Probably, low interest rates and inflation prompt people to spend in the present rather than save for the future. Consequently, our saving rate is declining consistently, coming down from 37.4 per cent in 2008 to 30.1 per cent in 2019, which reduces availability of funds for investment in productive ventures.

Last year, when the economy was slowing down, credit cards and personal loans recorded growth rates of 40.7 per cent and 28 per cent respectively with credit card dues pegged at Rs 1.09 lakh crore. To curb intemperate consumerism, there is a need to restrict easy credit for non-business purposes and prevent financial entities from floating unrealistic money appreciation schemes. For this purpose, the regulatory structure has to be strengthened and worthwhile avenues for investment have to be provided to the public.

Probably, a Government fund offering a reasonable interest rate with income-tax exemption can readily attract investment sufficient to fund the ‘war’ against the Coronavirus pandemic. In the recent past, in addition to a number of cooperative banks, Yes Bank, a large private bank has failed. Then, we had NBFCs like IL & FS and DHFL going belly-up. Mutual fund schemes like that of Franklin Templeton promising alluring returns have folded up. Lack of effective regulation had enabled such suspect entities to collect huge amounts from the public.

It may be worthwhile to mention that the Financial Sector Legislative Reforms Commission had submitted its report in 2013, detailing ways to strengthen the legal-institutional architecture of regulators in the Indian financial sector. The Commission had found that the fragmented regulatory architecture had led to regulatory gaps, overlaps, inconsistencies and regulatory arbitrage that had resulted in a loss of scale and scope.

The Commission proposed legislation to ensure that every entity operating in the financial space would be covered by a financial regulator. The Commission also proposed measures to strengthen both aspects of consumer protection; prevention and cure. While financial regulators were to be tasked with preventing frauds, the proposed financial redressal agency (FRA), spanning across the financial sector, was to address financial consumer grievances. Additionally, a resolution mechanism was proposed to address failure of financial firms and to protect consumers in the aftermath.

Sadly, a negligible part of the Commission’s recommendations has been operationalised. We are currently chasing the goal of becoming a $5 trillion economy by 2024. Looking to the fact that we aim to achieve the 17 Sustainable Development Goals (SDGs) ~ mainly to end hunger and poverty, fight inequality and injustice, and tackle climate change ~ only by 2030, we can be sure that most of the benefits of our rapid progress would accrue to the already rich.

The direction in which our economy has grown would reinforce this conclusion; the Annual Global Wealth Databook published by Credit Suisse highlights the fact that the richest 1 per cent cornered 61 per cent of the extra wealth generated between 2000 and 2015, which were the years of almost uninterrupted progress. Again, the richest 1 per cent of Indians own 53 per cent of the country’s wealth ~ up from 36.8 per cent in the year 2000.

On the other hand, the poorest 50 per cent of our countrymen own only 4.1 per cent of our nation’s wealth. The difference between the rich and poor can be gauged from the fact that India has more than 25 crore persons living below the poverty line, but 2.5 lakh of our countrymen figure in the top 1 per cent of the world’s richest people. Mr Mukesh Ambani, the richest Indian, earns almost Rs 300 crore per day!

Till now most of the Government’s largesse has been reserved for commerce and industry. After Budget 2019, the FM announced a reduction in corporate tax rates, providing a relief of Rs 1.40 lakh crore to corporates. Tax rates for Foreign Portfolio Investors were also cut. Amongst other reliefs, she also released Rs 70,000 crore for Public Sector Banks’ recapitalisation and Rs 30,000 crore to Home Finance Companies, a Rs 20,000 crore fund was created for finishing stalled housing projects and export incentives of Rs 50,000 crore were announced.

But within six months the corporate sector is again at her door, with a begging bowl. A similar investment in the agricultural sector would have provided millions of jobs and prosperity to countless farmers. Agriculture, which employs 45 per cent of our population definitely needs a push. The Government can set up agriculture-based industries and improve infrastructure in villages at a fraction of what has been provided to other sectors.

Imparting knowledge about modern farming practices, helping farmers in marketing their produce, helping farmers in choosing the correct crops to grow, providing adequate capital to farmers, can end the problem of rural distress permanently. The Coronavirus pandemic has ruthlessly exposed the vulnerability of our fast-growing economy. Our economic situation may worsen; according to UN estimates the Coronavirus pandemic may force about 400 million people working in the informal economy in India into deep poverty.

Clearly, this may not be the time to chase ambitious economic goals but to consolidate our economy at the current level. Even if we have muted growth for the next few years, we should aim at increasing employment and ensuring social justice. Our recent Budgets had focussed relentlessly on economic growth to the exclusion of things like happiness of our people or climate change. But things can be changed.

The last New Zealand budget focussed on “well-being” of citizens, rather than on productivity and economic growth. Given the resource constraint we can choose between our earlier trajectory of fast economic growth with inequalities or to eschew fast growth but make the economy focussed on distributive justice and the citizens’ wellbeing. Hopefully, the Government would choose the latter course.

(The writer is a retired Principal Chief Commissioner of Income-Tax)