Trains journeys are quirky, just like India. I happened to meet a bank official of a nationalized bank in the last journey. He talked about a lot of things from UPSC exams to anger management, credits to my other co-passenger. If one wants to understand the status of economy, among the many people to meet should be a bank official. The following accounts from him tell a general tale of how India is today.
Account 1: The bank is planning to construct housing for its employees so that it can do away with the monthly Housing Allowance (HA) it pays. The management team has done the math and has estimated an amount under which it is economical for the bank to build housing, above which the bank is better off paying the HA. Tenders were issued and it attracted only 3 bidders. To be a reasonable they need to attract at least 6-7 bidders. But it simply doesn’t happens. Moreover, the three who have bid have a nexus. The bid amounts are so high that, if any bid is accepted, it becomes uneconomical for the bank. So the team talked with the bidders to get the quotation down, for which the bidders impose terms so all three can benefit. If the terms are accepted, it becomes illegal. This has been repeating year after year. The only things the team has to offer is – indecision. Simply the team cannot decide.
The official tells that it is not a unique case in banking. The problem persists at all levels of decision making in the economy right from the ministerial level. The example he gives is the famous 2G Spectrum case. While the CAG quotes a presumptive loss of so much crores due to illegitimate issuing of licenses, what has the redone legitimate 2G licensing done last year achieved? Certainly it hasn’t brought the exchequer the intended amount. If audited, it may even turn out the present income from the licenses, may even be less than the “tainted” money. In the bank’s case they have opted for indecision rather than either loss or a tainted profit.
Account 2: In theory, the education loan is the most ideal form of borrowing. One doesn’t pledge anything or provide any 3rd party surety. The bank simply keeps entire trust on the borrower and his commitment to repay. In reality, rarely there exists a ideal system. He says the percentage of loan repayment is somewhere between 15-20%, in student numbers not in the amount repaid. The catch here is the lower the loan amount, the more likely the student is likely to pay. So technically the unpaid 80-85% are the heavy borrowers. Why doesn’t the student pay? The reasons vary from inability to pure greed. Some interesting reasons:
- a girl student has been married to a person, who demands the entire salary to be given over to him. So the girl is willing to give in writing stating something like, “Arrest me if you want to for defaulting. I am better of in a jail than with my husband”
- another girl’s husband simply considers it a matter concerning her father and warns of legal consequences if troubled by the bank again
- a medical student in Australia simply wasn’t interested to pay even after settling down there, the case was pursued throw embassy and notice served before the parent coughed up
- an engineering student earns 18,000 per month in Chennai, what is left of personal expenditure and family commitment is too little even for the interests
- one doesn’t simply wants to repay the loan as the government is busy waiving them
So what does the bank do? How do they recover the money? The solution again is indecision. The new manager comes pushes the repayment period for a six months further and leaves the office without showing bad loans and the next manager repeats it. Because in most cases, the student simply has nothing in his pocket to give.
Enterprising
While I am not a economist to even the smallest of measures, this is what I observe. Of all the posh talk regarding FDI, market liquidity, global cues, blah blah persists in economic strengthening of the country, hardly any thought is given to the strengthening of local enterprises. It is hard to tell when our Finance Minister last talked about anything other than foreign investment and global market cues. While the situation, in terms of laws and regulations, for IT services and tech startups seem conducive, with introduction of things like within-24-hour registration, there is hardly any push in other sectors. Hardly anything fresh comes out from India. Even in crown jewel of Indian enterprises the IT, the industry is largely based on services and the lookout for an Indian Google or Facebook (I am not talking about a equivalent service) hasn’t ceased yet.
This sluggishness in enterprise is the one of the big reasons, that fuels the indecision in India. Had the entrepreneurial scene been better, the dilemma of the housing construction for the bank wouldn’t have existed, not all students would have been made to pre-sell their labor in the name of loans, or even better, they wouldn’t have a hand to mouth existence like a daily-wage laborer. While I wouldn’t argue lack of enterprising is the only reason for indecision at various levels in the economy, it does have a undeniable connection when dealing with the development. While there are a multitude of reasons for this slack, it is important to recognize the impact it has on the economy and accept the fact, no matter how much the FDI is, whatever the global cues are, we have approached a point where economic growth is being held back by our indecision and the lack of home grown enterprises solving local problems.