Anna Sebastian Perayil’s Death Shows How Capitalist Labour Takes the Life of the Worker

Capitalist labour creates the illusion of giving life, but it actually takes the life of the worker.

The death of Anna Sebastian Perayil has brought into focus the question of the relationship between labour, capital and human beings. It was not the death itself but the refusal of Anita Sebastian, mother of Anna to accept it as a normal death and her decision to write a strong letter to the head of the CA firm Ernst & Young holding the work culture of the firm which made it a public issue and forced the government and the political class to take cognisance of it.

Anita Sebastian held Ernst & Young responsible for the death of her young daughter Anna. It burdened Anna with an impossible workload which ultimately crushed her.

She said “Anna would never have blamed her managers. She was too kind for that. But I cannot remain silent. Burdening newcomers with such backbreaking work, making them work day and night, even on Sundays, has no justification whatsoever… You should show some consideration to new employees. Instead, the management took full advantage of the fact that she was new and overwhelmed her with both assigned and unassigned work,”

What Anna’s mother wrote next was written by Karl Marx some 175 years ago. Anita writes, “Anna’s experience sheds light on a work culture that seems to glorify overwork while neglecting the very human beings behind the roles.”

Her daughter is gone but Anita knows that it is not about her alone: “This is not just about my daughter, it’s about every young professional who joins EY filled with hopes and dreams, only to be crushed under the weight of unrealistic expectations… Anna’s death should serve as a wake-up call for EY. It is time to reflect on the work culture within your organisation and take meaningful steps to prioritise the health and wellness of your employees,”

Anita speaks like a labour rights activist when she demands that an environment should be created where employees feel safe to speak up, get support to manage their workload and “where their mental and physical well-being is not sacrificed for the sake of productivity”.

Anita is questioning the sacred principle of productivity which is a beautiful substitute for the familiar PROFIT at the alter of which everything and anything can be sacrificed.

Anita talks about her daughter: that her daughter was full of life and dreams. She, the mother cries: “I don’t know if anyone can truly understand a mother’s emotions when she lays to rest her child – the child she held in her arms, watched grow, play, cry, and shared dreams with – unless they have experienced the same pain.”

But she is writing the letter precisely because she does not want others to experience the same pain: “I hope my child’s experience leads to real change so that no other family has to endure the grief and trauma we are going through. My Anna is no longer with us, but her story can still make a difference.”

Anita also resented the fact that her daughter’s company did not express any condolences after Anna’s death and no-one attended her burial.

It was slightly surprising to see the letter creating a ripple in the political circles which is more or less united by the consensus that it is productivity which matters most and the interests of the capital are supreme. Anita Sebastian’s letter has moved governments and politicians. It would be seen as natural for the Kerala government to have taken note of the letter.

What is pleasantly unexpected is the fact that the union government’s Labour Department, National Commission for Women and National Human Rights Commission have also questioned the company. The company has predictably denied that its work culture was responsible for Anna’s death.

According to the chief of the firm, the company is very humane and takes care of the mental and physical health of the employees.

Union Finance Minister Nirmala Sitharaman’s statement in keeping with her temperament and the politics of her party the BJP failed to be moved by the tragedy. She did not even have the civility to mourn the death of the young worker.

The death of Anna gave her an opportunity to ask the educational institutions and families to teach the young to manage stress. She feels that spirituality can help. Not once, unlike leaders like Shashi Tharoor and Rahul Gandhi and the left leaders, did she feel the need to talk about the overwork that the mother of Anna held responsible for killing her daughter.

Sitharaman was criticised by others who saw her indirectly blaming Anna for her own death as she could not manage the stress caused by the workload. Why didn’t she prepare herself to endure it? Why did she allow herself to be broken by this stress?

Even if you leave this ruthless indifference of Sitharaman, we know that if Anna’s mother had not written this letter, then Anna’s death and her life would have remained anonymous just like the lives of crores of workers. They are like pebbles which just sink in the well of capitalism without any noise.

Capitalist labour creates the illusion of giving life, but it actually takes the life of the worker. It was Karl Marx who wrote more than 175 years ago that the labour of the worker stands as an enemy against the worker.

It feeds on her, grows larger than her and then smothers her. It dehumanises when it does not kill. After Anita’s letter, many people on social media have written openly about the inhumane labour culture of their respective companies. A woman wrote how the company treated her cruelly even when she was pregnant.

She was fired, his computer was immediately taken and all her stuff on it was quickly deleted. It was the company’s treatment of the employee who had given years of her life to make the company profit from it and increase his capital. Many other people have also shared their similar experiences.

Every company can say that the employee’s work is properly compensated. But as Marx has written and the capitalists have not yet been able to deny it, capital grabs a large part of the real value of the worker’s labour and thus becomes fat. But it cripples the labour.

To say that capital is human is a joke in itself. She wants to absorb every drop of your time and makes every effort. Initially it seems tempting that if you come to the office in the morning, you’ll get breakfast and coffee, but the price is nothing compared to the time that the office is taking from you. You happily surrender that time to it and thus yourself.

Anna had just entered the world of capital and labour. She threw herself into it. It is clear from Anna’s mother Anita’s letter that it was not a pleasant labour. Can labour be enjoyable? This question has been considered for a long time.

It is not just that Marx believed that unless the worker has a role in determining the goal of labour, it remains alien to him. The result of labour becomes the enemy of the worker and stands confronting her.

Ghisu and Madhav, the two famous characters of KAFAN , created by Premchand are not the only ones who ask this question, what becomes of me with my hard work? If it does not get rewarded properly it becomes the property of others , why do it? They are derided as shirkers .Those who are lazy.

The narrator of the story refuses to participate in the glorification of labour: “In a society where the condition of those who toil day and night was not much better than their condition, and in contrast to the peasants, those who knew how to take advantage of the weaknesses of the peasants were far more prosperous, it was no wonder that such an attitude arose there. We will say, Ghisu was much more intelligent than the peasants and instead of joining the thoughtless group of peasants, he joined the infamous circle of idlers.”

After Anna’s death, the issue of working hours is being discussed again. 12 to 14 hours of work a day is now becoming a norm. In the era of labour modernisation, mobile phones and email keep you under the watchful eye of your boss 24 hours a day. There is a price to pay for not picking up the phone, not looking at your WhatsApp.

Some 200 years ago, workers, by agitating or rebelling against the rule of capitalism, forced it to limit the work to 8 hours a day. But after 200 years these hours have increased somewhere from 12 to 20 due to trickery and fraud. Capitalists are demanding ‘reforms’ in labour laws to allow them to take as much work as they want from workers. We are not talking about those who work multiple shifts to make ends meet.

Some time ago, the ideal man of India, NR Narayanamurthy, had complained about the increasing laziness among the youth of India. He demanded that the working hours be increased. To enhance the productivity of the nation, he demanded 70 hours of work per week from the youth.

An example of how the corporate world increases the limit of working hours without any formal announcement was found in the death of Anna Sebastian.

Anna’s mother Anita’s appeal is to the capitalists or the corporate world that they should also take care of the person behind that work. But does capital have human ears? Would Anna’s mother Anita’s letter remain just a newspaper story and evaporate as days pass ?

India Will Not Slip Into Recession or Stagflation, Nirmala Sitharaman Tells Parliament

India’s inflation has remained above its central bank’s upper tolerance limit of 6% since January, fuelled by rising commodity prices and the war in Ukraine.

New Delhi: India will not slip into recession or stagflation, finance minister Nirmala Sitharaman told parliament on Monday, after opposition parties raised concerns about rising inflation and its impact on the economy.

India’s inflation has remained above its central bank’s upper tolerance limit of 6% since January, fuelled by rising commodity prices and the war in Ukraine.

(Reuters)

Won’t Impose GST on Items Sold by Small Stores, Says Kerala Finance Minister

K.N. Balagopal told the Kerala assembly that the decision might lead to issues with the Union government but the state was not ready to compromise.

Thiruvananthapuram: Amid growing protest over the imposition of Goods and Services Tax (GST) on essential commodities, Kerala government on Tuesday, July 19 said it does not intend to tax items sold by entities like Kudumbashree, or small stores in 1 or 2kg packets.

State Finance Minister K.N. Balagopal told the Kerala assembly that the decision might lead to issues with the central government but the state was not ready to compromise.

“At any rate, in Kerala we don’t intend to tax items which are sold by organisations like Kudumbashree or in small stores in 1 or 2 kg packets or in loose quantities. Even if this will lead to issues with the Centre,” Balagopal told the Assembly. “We are not ready to compromise on this. We had already said this there.”

He said the state government has already written to the Centre regarding its stand.

“Yesterday too, the CM wrote to them regarding these things. We don’t intend to levy it on small-scale traders and small stores. There can be no argument on this,” Balagopal added.

Kerala government’s Kudumbashree, a women self-help group, is considered one of the largest women empowerment projects in the country. It’s engaged in ventures such as running of small-scale food processing units, and various others.

Balagopal said the branded companies have to pay a tax of 5 per cent on packaged products, but if they mention in the packaging that they are not “claiming the brand” then it is not taxed.

“So they (the Union government) have brought in the rule to catch such companies… but there is still some confusion prevailing over this,” he added.

According to The Hindu, Finance Minister Nirmala Sitharaman on July 19 clarified the GST Council has exempted from Goods and Service Tax (GST), all food items including wheat, pulses, rice, maize, when sold loose, and not pre-packed or pre-labelled.

The Finance Minister also reiterated that the decision to hike the GST rates was taken unanimously by the GST council and all states were present and agreed to the move in the meeting held on June 28.

Kerala Chief Minister Pinarayi Vijayan has sought an urgent intervention of Prime Minister Narendra Modi on the issue of the imposition of GST on essential commodities, arguing the move will severely affect the common people.

Vijayan pointed out that many small shopkeepers and millers pre-pack and keep the items ready for sale so that the customers can readily purchase them off the shelf rather than spend time getting the items weighed and packed.

In the letter, Vijayan said such pre-packing is a common practice in most of the retail shops in Kerala and the present change will have an adverse impact on the large number of ordinary customers who frequent these shops for their essential purchases.

(With PTI inputs)

‘Don’t Damn GST’: Nirmala Sitharaman Admits it ‘Might Give Difficulties’

GST was implemented in July 2017.

New Delhi: Conceding that GST may have some flaws in its present form, finance minister Nirmala Sitharaman on Friday asked tax professionals not to curse it and sought their help to make it better.

The minister was replying to the concerns raised by taxation industry professionals here, who said that the industry was “cursing” the government over how the GST was implemented.

Billed as the biggest reform in indirect taxation, the Goods and Services Tax, which does away with a host of levies from the federal to the local government levels, was implemented on July 2017.

On several stakeholders “cursing” GST, Sitharaman even objected to a person who raised the question and asked him not to damn the law which was passed by parliament and all the state assemblies.

“After a long time, many parties in parliament and in state assemblies worked together and came up with the Act. I know you are saying this based on your experiences but suddenly we cannot call ‘what a goddamn structure it is’,” the minister said.

She interacted with people from industries, chartered accountants, company secretaries and many other stakeholders in the financial sector. Stating that it has been only two years since GST was implemented, she said that she would have wished the new structure was satisfactory from day one.

Also read: Centre Asks PSUs to Clear Vendor, Contractor Dues by October 15

She also said that she wants all stakeholders to give some solutions for better compliance. “We cannot damn it. It might have flaws, it might probably give you difficulties but I am sorry, it is the law of the land,” she added.

B.M. Sharma, a member of the Cost Accountants Association, later explained why he said what he said. “I said that the objective of GST was to ease of doing business, reduce tax complexities, rationalise 13 taxes, and reduce litigation and corruption. But the same is not being achieved due to several problems and industries and professionals are complaining now,” he said.

As Sharma suggested some solutions, the minister asked him to meet her in Delhi.

Earlier during a presser, when asked about the low GST collections, the minister attributed it to the difficulties due to weather-related disasters and also poor compliance.

“Yes, GST collection in some areas has not been strong enough. Various districts in Maharashtra, Karnataka, Himachal, and Uttarakhand were flooded and we had to postpone filing returns from these areas,” she said.

She also said that the Revenue Secretary has already formed a committee to identify where the collection has not been adequate as per our expectations. “We have some reports on how in some cases evasion has happened. The committee will look into how this can be plugged and if there has been any under-invoicing,” she said.

Maruti Trims Prices of 10 Models After Corporate Tax Rate Cut

This makes Maruti one of the first companies to respond to the rate cut, intended to boost economic growth.

Bengaluru: Top Indian automaker Maruti Suzuki said on Wednesday that it lowered prices of some cars, making it one of the first major companies to respond to the government‘s move to cut corporate taxes in a bid to revive economic growth.

The company cut prices on 10 different models by Rs 5,000 ($70) each, representing discounts of just about 1% or less on average car prices. The price cuts start on Wednesday.

This comes as the domestic automobile industry faces a crippling slowdown in demand that has led to production cuts and thousands of job losses.

Also read: ‘Panic Reaction’: Modi Government’s Corporate Tax Cut Invites Opposition Ire

Maruti said that the move was aimed at reviving demand by sharing “the benefits of corporate tax reduction with its customers”. The price cuts will kick in just ahead of the festive season, and it said that it hoped the move would help entice entry-level customers.

On Friday, Union finance minister Nirmala Sitharaman announced a cut in the headline corporate tax rate to 22% from 30% in a move widely cheered by local stock markets. The cuts were the latest in a line of government measures aimed at reviving growth in Asia’s third-largest economy, which slumped to a six-year low in the April-June quarter.

Maruti‘s shares were down 2.7% at 6,811.30 rupees by 0514 GMT on Wednesday amid a broader decline in Indian stocks.

No Plans To Revise Fiscal Deficit Target or Cut Spending Now, Says Nirmala Sitharaman

The government will decide on additional market borrowings for the second half of 2019/20, said the finance minister.

New Delhi: India will not revise its fiscal deficit target immediately and is not planning any spending cuts at this stage, the finance minister said on Sunday, after slashing corporate tax rates to boost a flagging economy.

India cut corporate tax rates, on Friday, in a surprise move designed to woo manufacturers, revive private investment and lift growth from a six-year low that has led to major job losses and fuelled discontent in the countryside. Though equity markets welcomed the move, bond yields spiked to a near three-month high on speculation the government may have to borrow more to meet its spending needs.

The measures will cut revenue by 1.45 trillion rupees ($20.4 billion) in the current fiscal year, according to government estimates. But finance minister Nirmala Sitharaman said that the government would only review the fiscal deficit target closer to the 2020/21 budget.

Also read: ‘Panic Reaction’: Modi Government’s Corporate Tax Cut Invites Opposition Ire

“At this point of time we are not revising any target. The decision will be taken later,” she told reporters at her residence in New Delhi on Sunday, adding that there was no plan to cut spending currently. Sitharaman also said the government would decide on additional market borrowings for the second half of 2019/20 later.

Ratings firm S&P Global said on Friday India‘s move to cut corporate tax rates was a “credit negative development” despite potentially boosting the economy as it will widen its fiscal deficit.

Government sources told Reuters this month that India is likely to miss its fiscal deficit target for the current financial year and, toward the end of 2019, be forced to raise it to 3.5% of GDP from 3.3% after economic growth fell to a six-year low of 5% in the April-June quarter.

(Reuters)

With New Round of Bank Mergers, Is the Govt Ignoring Lessons From the Past?

The earlier big bank mergers are yet to display the claimed gains, and the 2008 financial crisis shows that size hasn’t been an advantage internationally as well.

The recent announcement of mega public sector banks (PSBs) merger – as expected – has received mixed reactions, depending on the political loyalties of experts and commentators. A lot of din will be kicked up and logically so. The earlier round of bank mergers (Dena Bank and Vijaya Bank with Bank of Baroda) is yet to yield the projected gains as the process is still a work in progress – so much so that even the boards of the merged banks continue to stare at the passers-by, reflecting on the uninformed strategy of the government.

The economy, in any case, doesn’t appear to be the priority. What has happened to the huge non-performing assets of the merged Dena Bank is anybody’s guess. The issue of fixing accountability on the top people who facilitated the questionable loan decisions is not being talked about either.

Stale arguments

The finance minister put forward the now-familiar arguments for the fresh round of mergers: size will help the country compete internationally, it will enhance efficiency, it will help raise capital and it will give a push to the goal of a $5 trillion economy by 2025.

Meanwhile, the earlier merger of five associate banks and the Bhartiya Mahila Bank with the State Bank of India is yet to display the claimed gains. The existing mega-banks like SBI, BoB and Punjab National Bank (PNB) in the state sector and ICICI Bank in the private sector, have themselves been under frequent public scrutiny. As the now over-a-decade-old global financial crisis confirmed, international experience is also not very charitable towards the supposed advantages of size.

After the crisis too, banks like Wells Fargo and Deutsche Bank have exposed how vulnerable the big banks can become. Sadly, our policy formulators have not internalised such lessons.

Also read | Will a Big Bank Merger Help India’s Crisis of Liquidity and Confidence? 

Even four years after the package of reforms kickstarted under the incomprehensible acronym ‘Indradhanush‘ by the first Modi government, no tangible improvements or change has been evidenced in the working of PSBs. On the contrary, the following years witnessed a deeper existential crisis. The signals of recovery of the PSBs in the current year are weak when the economy itself is under great meltdown.

Under the circumstances, the major thrust should have been reforming the Augean stables rather than merging the entities.

The uniqueness of banks on the axe

Some of the PSBs now facing the axe on their distinct identities have unique historical backgrounds. Take the two banks hailing from the coastal districts of Karnataka: Syndicate Bank and Corporation Bank. They are part of the four banking gems started in the erstwhile South Canara district of former Madras Presidency. Each one was started by local citizens who had a public concern – Haji Abdullah of Corporation Bank, T.M.A. Pai of Syndicate Bank, A.B. Shetty of Vijaya Bank and Ammembal Subba Rao Pai of Canara Bank.

None of them were industrialists. Their motto was to promote savings habit among the local populace and provide financial help to the needy. That motto struck a deep emotional chord with the people and helped the banks grow steadily, although at a different pace. That explains why Canara Bank and Syndicate Bank were nationalised in 1969 whereas Corporation Bank and Vijaya Bank took 11 more years.

That these banks were born in a remote place in the country, survived several crises in the banking industry – both before and after the Banking Regulation Act, 1949 came into force – and rose to become national players is a tribute to their inherent resilience.

These banks provided the foundation to the all-round development of the coastal districts – the large number of educational institutions, hotels and small enterprises that dot even the interiors of the coast are a testimony to such contribution.

These banks had another uniqueness in the Indian banking map: the coastal South Kanara district had the highest banking density in the country (leaving aside the metropolitan Mumbai, Kolkata and Chennai). They continued to serve the common man despite the temptations of big-ticket business in banking in the large metros or emerging industrial corridors. The four PSBs became a part of the socio-cultural milieu of the west coast.

All these will now be part of history in the new India being built by a dispensation which swears by everything Indian.

Jumping into the unknown?

The latest decision of mergers will no doubt be welcomed by the admirers of a government which does not believe in consultation or learn from experience. This feeling gains currency from the inability of the government to act on the substantive recommendations of one of its own appointees – the learned and knowledgeable Vinod Rai who as head of the Bank Boards Bureau had given a slew of recommendations when he demitted office 18 months ago.

Also read | Will a New Round of Forced Public Sector Bank Mergers Work?

The compendium of recommendations given by him in March 2018 has obviously gone into the archives of the finance ministry. His proposals to improve the corporate governance system in PSBs and manpower reorientation do not appear to have been given serious thought by the government. No doubt the finance minister claims that governance reforms will be achieved through independent recruitment of chief executive officers (CEO) of PSBs. A few PSBs have recruited CEOs from the market in recent years, what is their record of performance in turning the banks around?

As per current practice, now that the finance minister has announced the government’s decision, the boards of the respective banks will meet shortly to pass resolutions seeking ‘voluntary mergers’ and thereafter claim that the mergers are ‘board-driven’. It will leave everyone in the lurch – the millions of small depositors and borrowers, who will be strangers to the new leaders of the mega banks, and the hapless staff.

That was the unfortunate experience when the associate banks were merged with the mega SBI. Before internalising the lessons therefrom and the merger of two banks with BoB during 2018-19, rushing to replicate such exercise shows our unwillingness to see the realities of the financial sector.

How exactly the new effort to create some more mega banks will drive the animal spirit of the economy already struggling under multi-dimensional crisis has not been spelt out. When the basic flaws in the financial sector remain unaddressed, the new mega banks to pump prime a staggering economy is like chasing a mirage. 

T.R. Bhat was joint general secretary of All India Bank Officers’ Confederation from 1995 to 2009. His book, Reforming the Indian Public Sector Banks-the Lessons and the Challenges, was released in April 2018.

Will a Big Bank Merger Help India’s Crisis of Liquidity and Confidence? 

The mega merger announcement can’t achieve desired results without accompanying reform on a number of fronts.

The new government has barely settled down and it suddenly appears that every day brings with it a new package of ‘reforms’ or policy announcements to address the economic slowdown that India is grappling with. 

After the finance minister announced a set of new measures last week to address some existing supply-side bottlenecks and credit concerns affecting core sector growth, there were new changes made to the foreign direct investment (FDI) cap limits across various sectors (to crowd in foreign investment). And now, we have another mega announcement – the merging of ten public sector banks into four big banks. 

In some ways, the pace at which such announcements are coming is both an acknowledgement and a statement on the severity of India’s current economic situation. It is also a telling remark on how the economy has been handled over the last few years; even if some of the current concerns, especially those relating to lower productivity and export demand, are connected with the general global economic atmosphere. 

Business and investment cycles are functions of confidence-cycles. Confidence, or the lack of it, has a multiplier effect in an economy, which is connected with the further generation of more opportunities for private investors and firms.  

Ever since the collapse of infra-finance operator, the IL&FS group, last September, the Indian economy has been battling with a serious crisis of confidence and a severe liquidity crunch – a squeeze of the type where even public sector banks are simply unwilling to dole out credit without reclaiming or dealing with existing bad debts (or NPAs). The situation is worse for NBFCs (Non-Bank Financial Corporations) that provide more credit to small and medium scale enterprises than banks.

The big bank merger announcement needs to be viewed in this light. 

Also read | Centre Announces Sweeping Plan to Merge 10 Public Sector Banks Into 4 Entities

The announcement calls for four new mergers now. The first will see Punjab National Bank, Oriental Bank of Commerce and United Bank of India combining to form the second-largest bank now after the State Bank of India (SBI). The second will see Canara and Syndicate Bank amalgamate into one. The third will have Union Bank of India merge with Andhra Bank and Corporation Bank. And finally, Allahabad Bank will merge with Indian Bank. After this, the total number of state-run lenders in India will come down to 12, from the earlier 27 that existed back in 2017.

A welcome announcement here is in relation to how six existing PSU banks (Bank of Maharashtra, Punjab and Sind Bank, UCO Bank, Indian Overseas Bank, Bank of India and Central Bank of India) will be independent or operate as separate entities. 

What this should ideally do is enable these banks, that otherwise worsen their lending patterns or accrue bad debts, to be allowed to turn insolvent or bankrupt. Having said that, most of these banks are those with a strong regional focus and would require a fundamental restructuring (in their lending approach) to improve their balance sheets. The introduction of IBC has definitely improved the corporate borrowing scenario and will yield positive steps – if the implementation of the Code continues to be swift.

But what does this particular big-bank merger announcement signify?

For its signaling effect, the merger, as the finance minister mentioned, may allow an enhanced risk appetite for these institutions, and may make it slightly easier for the government to coordinate and push for re-capitalisation of these banks, as it targets to assign funds out of the surplus funds (Rs 1.76 lacs crores) received from the Reserve Bank of India (RBI) a few days ago. 

At the same time, it also makes merged banks to fall under the ‘too big to fail’ category – something that is also seen with other large credit-fueled economies, including the state-owned financial banks of China and private banks of the US. 

The ‘too big to fail’ concept centres around an idea that certain institutions remain so vital to the economy that they cannot be allowed to fail under any circumstances, owing to the damage they would cause to citizens and the national economy. The government usually bails these institutions during times of crises and this has been observed more frequently in cases of sovereign bank defaults seen in countries like the US (last seen during the 2007-08 crisis). 

Also read | In Boost to Modi Govt, RBI Agrees to Make Record Rs 1.76 Lakh Crore Transfer

In the Indian context, not only would the NPA ratios of merging banks add up to a larger number for the anchor bank institution now, but it would now also require the government and the RBI to be more vigilant in times ahead to monitor ‘risk of default’ for these big banks. This must be done to avoid a situation where the government is called to bail out any of the big banks from its already restricted fiscal space. Increased space and ease for credit mustn’t lead to an exacerbation of financial debt, as seen in China. 

One also doesn’t know how marginal cost of funds-based lending rates (MCLR) would be synchronised post the merger, especially at a time when transmission process in rate cuts (between RBI and PSBs) has remained a constant problem in ensuring policy benefits to actual customers. Last week, the finance minister emphasised the need to have a more improved coordination transmission rate mechanism to ensure a direct harmonisation between monetary policy cuts announced by the RBI and its linking to actual borrowing rate cuts of public sector banks. 

As of now, eight state-run lenders have already announced repo-rate linked loans. If handled well, a bigger bank network (with fewer anchors) can ensure a better transmission process. 

More importantly, politically-speaking, the move seems to also be positioned in tandem with the prime minister’s vision statement of a $5 trillion economy.

But would a merger help in addressing the larger crisis of confidence? 

Also read | Latest GDP Growth Figures Raise Questions About State of Indian Economy

The answer to this lies in how well the government treats the public sector banks going forward, including the big merged banks. So far, the history of Indian governments dealing with public sector banks and their lending mechanisms has been dreadful. The current state of most debt-ridden PSU banks – especially those with a regional or state focus, can be largely owed to the interventionist approach undertaken by the governments through greater bureaucratic influence and from the persistent election cycle of announced loan waiver grants.

Going forward, the Modi government, despite its over-centralised approach to the economy’s management, may perhaps learn from its own errs and those of its predecessors by gradually turning existing PSU banks and the big merged banks into different forms of independently managed special purpose vehicles. This, for one, can help the respective bank-management boards to exercise greater operational and functional autonomy and also make them target specific directional areas for credit transfers. Especially in areas of agri-business, housing, infrastructure, textiles, renewables and so on where there is dearth of cheap and swift credit.

Deepanshu Mohan is an associate professor and director, Centre for New Economics Studies at O.P. Jindal University. He is a visiting professor to the Department of Economics, Carleton University, Canada.

Union Budget 2019: Fiscal Deficit Target for FY’20 Pegged at 3.3%

Nirmala Sitharaman’s maiden budget speech will set the policy roadmap for the Centre’s next five years. Follow The Wire for live updates on the Union budget speech.

With the 17th Lok Sabha Budget session underway, the new Narendra Modi government is presenting its maiden Union budget. The expectations facing this budget are formidable: it will be required to tackle slowing economic growth while not straying too far from the fiscal consolidation path.

It will also keenly be watched for signals on the Centre’s policy roadmap for the next five years.

Nirmala Sitharaman is presenting her first budget on Friday, becoming the first full-time woman finance minister to announce India’s annual accounts. This is India’s 89th Union budget, including interim ones.

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