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Indian Economy on Ventilator ~ Nationalise all Indian Private Banks & NBFCs NOW !!

Indian Economy on Ventilator ~ Nationalise all Indian Private Banks & NBFCs NOW !!

Let's first understand, in the gargantuan mess created by series of self goals, most of the solutions are not workable. Hence the govt has no room or very little room on the fiscal front.

Given the above context, let's analyse and then see if any conventional solution is even possible.

1. Economy is in a downward spiral, the consumption has nose dived, companies earnings have nosedived, electricity consumption is down by more than 40%.
3. Fiscal deficit is shot, no room to pile on more debt. Any further borrowings will lead to further downgrades on sovereign ratings.
4. S&P has already announced it will downgrade india if the consumption does not recover in the upcoming qtr.
5. Govt Spending - cannot stop its programs, as it will lead to further GDP growth fall. Only the govt spending is providing some growth to the economy in an otherwise broad recessionary trend.
6. Banks are neck deep in NPA, so they cannot lend more and provide growth fill up, and hence the credit squeeze will continue indefinitely till the deleveraging happens.
7. No tax cuts are possible, any cuts in personal income tax or GST will lead to fiscal deficit and potential sovereign rating downgrade. This is the stupidity many said, when the govt foolishly gave the RBI cash to corporate bonanza instead of paying down the debt.
8. Increased Spending - Not possible due to tight deficit now, so cannot fund demand side programs like the UBI - universal basic income, Nyay scheme, Kisan scheme, etc..which could have provided more cash in consumer hands.
9. PSU sale - is a cumbersome process, and could take years despite all the bravado by the govt.
10. Consumption - is not coming back anytime soon - Semi formal sector has gone completely informal. Most crooks have closed their official businesses and opened fully illegal businesses and avoiding paying any taxes. Most people are out of jobs, or earning less.
11. Investment - is dead - No FDI, no domestic company have any plans for investment and creating jobs. Not going to come back anytime soon.
12. Banking or nbfc collapse - high risk of further collapse leading to another round of shock to the economy.
13. Reduced Tax Collections - Not going to revive any big tax collections anytime soon with economy spiralling downwards.
14. Tax increase - Not possible, it will further drag the economy down,
15. Debt refinancing - Possible but will only reduce existing fiscal deficit but not help in stimulus spending or revival of the economy.
16. Rate cuts - already done, more can be done, but will not help lift the economy from such a downward spiral.
17. Instead of praying or counting on a turnaround, we need to plan for indefinite or longer recessionary trend.

So we are totally stuck in a quagmire, and with no possible conventional solution or way out. So what next ?

1. Nationalise all the Major Indian owned private banks - yep do what Indira Gandhi did way back in 70s. Merge them and consolidate the books.
2. Nationalise all the NBfCs and merge them together. Ensure no more NBfCs collapse.
3. This will immediately create confidence in the market, that there will be NO more bank or NBFCs collapse. This will create more fiscal space to move funds and support the weaker banks, NBFCs and debt refinancing.
4. Nationalise all Indian airlines. Ensure the airline business is self sufficient so that air india does not spend further tax rupees.
5. Banks and Airlines are critical infrastructure, the country cannot afford to have them collapse, particularly in this critical situation.
6. Raise Tax and spend on stimulus - Impose Banking Transaction Tax - Transfer cash to consumers for demand revival. Any other tax increase like GST, petrol tax etc.. will drag the economy down.
7. Raise Tax via another round of Black money amnesty scheme.

For god-sake, do something, don't just sit there and hope things will turn around. The turnaround has not happened even after so many quarters, that itself should be warning sign. Any more collapse of the NBFCs or a bank will trigger a bigger contagion that you will not be able to control. Take all actions now before it is too late, instead of hoping and praying....

Ps: Let's not discuss endlessly whether the economy is in doldrums or not, this is not your whatsapp group, so instead focus on solutions.

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