Does their adamant foolishness in understanding basic of economics ever worry you?
- Lower repo rates by RBI for lending to banks;
- Lower cash reserve requirement to maintain with RBI, so more lending can be done;
- Guarantee free loan to MSMEs by Banks and NBFCs;
- Partial guarantee (first 20%) to loss suffered by NBFCs.
Of course it is not a case where they are unaware about the issues on the demand side. People don’t have money or jobs and thus they lack purchase power.
Still why do you think this is being done? This phenomenon of providing supply side solutions for combating demand side issues?
I will tell you why.
Because these supply side solutions will cause 2 primary things:
- Benefit the industrialists utilizing the schemes, which will be indebted to government for their support and future lobbies.
- Break the backbone of the labour class, which will eradicate their bargaining power for labour rights (including minimum wages, work timing, social security, union etc.). This will again help the industrialists by creating a huge mass of unemployed and gullible work force, which would be ready for being exploited, in order to survive.
While the first one garners the support of Industrialist, the government aims to attract the support of labourers, by providing them employment, after strategically engineering the cause of unemployment or job loss in the first place.
However, the instant measures are not all that has been done by the Government in the name of helping the supply side / industries. Lowering of Corporate taxes, decriminalizing offences by under Companies Act, Income Tax Act and Anti-Money Laundering Laws, are the previous steps.
While few of you are aware and are spreading awareness also, however the mass still lacks the sincerity that this issue necessitates.
What the future holds?
I will not go in detail, but leave this be, as all these economic decisions have a specific and, sort-off, pre-determined ending: NPAs and Bad Debts.
When loans cannot be paid back, creditors declare them as NPAs and Bad Debts. In the instance creditors will be banks and NBFCs. If the number of such NPAs and Bad debts are beyond threshold of bank to operate rest of the business, then the bank collapses.
Do you really need me to say what happens if the bank collapses?
Worry about it.