Here is what I expect from NaMo's Big Bang announcement today. Follow the thread
Of the Rs.20,000 crore package, about Rs 6 lakh crores has already been announced earlier. what effect it had is another matter...
True to form, NaMo regime will likely focus on the banking system to deliver. So , expect some recapitalisation of banks/NBFCs, relaxation of norms on capital adequacy norms, etc. This may be up to Rs. 4 lakh crores.
In the name of addressing the needs of small industries reeling in the crisis NaMo regime will announce that it will fasttrack clearance of dues to businesses. This may be anywhere up to another Rs. 5 lakh crores.But there is a catch here. Read on...
A significant portion of these dues would in fact be to medium and large companies. Moreover, this not address the dues of large units to small ones, which is a perennial problem for decades. So small ind may smile tomorrow, but will grieve later.
There is likely to be another dose of liquidity infusion, this time targeting smaller banks and NBFCs. This may amount to another Rs.2 lakh crores. this will meet the same fate a the earlier ones
Again, using market instruments - never mind that markets have collapsed - NaMo Govt may increase limits on PFs and insurance companies' exposure to corporate bonds. Basically, he will hit workers' incomes/savings to prop the economy. And still manage to call it "relief"!
There may be about 4 lakh crores package to support various schemes - some support to households, direct support via the blessed Jan Dhan, which has been documented not to reach most people, and some more for farmers. The package would thinly spread and clogged in pipelines.
Again, using market instruments - never mind that markets have collapsed - NaMo Govt may increase limits on PFs and insurance companies' exposure to corporate bonds. Basically, he will hit workers' incomes/savings to prop the economy. And still manage to call it "relief"!
There will be something for improving health care facilities, the infamously opaque Natl Infra Pipeline, some measures to boost demand for housing thru GSTand other concessions. Impact likely to be negligible.
Of course, there will be a repo cut, favourite instrument of the FM, by possibly 100 basis points, which like earlier will have ZERO effect. There will be enhanced credit guarantees for exporters,amounting to perhaps Rs.1 lakh crores as Govt's contingent liabilities.
For the MSMEs the FM is likely to continue with asking banks to provide enhanced liquidity. Results will be similar to what has already happened - nothing. Its likely that even these limits will be limited to a multiple of the salary bill of these companies - grossly inadequate.
I am not a soothsayer but the rough total of the above measures would take the figure close to the Rs. 20 crore mark. But that the numbers are not the main issue, the point is where NaMo is driving the economy.
Basically, the MSMEs are being wrung out to dry. Meanwhile, even some larger units would go bankrupt. But their loans would be converted to equity, which means their eventual sale at rock bottom prices. In effect, NaMo is driving concentration of economic power with a vengeance.
That may not be obvious tomorrow as a sunny media will shine in the light of the wondrous package. But reality will dawn, sooner than later.
(End of thread)
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@threadreaderapp pl unroll
@threadreaderapp Pl Unroll
