Unrealistic expectations

Finance Minister Nirmala Sitharaman unveiled a third set of measures on Saturday to lift the economic sentiment and support the real estate and export sectors with a Rs 70,000 crore package. The intended support is meaningless and misplaced in terms of a strategic response to issues confronting these two vital sectors. Sitharaman seems to be losing sight of the objective with which these sectors need to be evolved. If creating jobs, enhancing exports and pepping up real estate sales are the objectives, these may not be achieved even in parts.

The stress in real estate stems from over 400 projects involving millions of units getting stalled, with proceedings under the National Company Law Tribunal (NCLT) in progress due to non-payment of banks’ dues. The government’s plan does not touch these projects at all. What then is the idea behind setting up a dedicated Rs 20,000 crore fund, with Rs 10,000 crore of it coming from tax proceeds? While the fund is aimed at tackling the ‘last mile’ crunch, the special purpose vehicle will only cater to projects in the low and middle-class category that have progressed beyond 60% and do not have any NPAs or NCLT cases. Projects with positive assets do not need government support. They can be financed by banks and financial institutions. Secondly, providing housing loans to government employees at 6.54%, equivalent to a 10-year yield of government debt paper, is not advisable. Why should the already pampered lot with questionable productivity yields be provided 4% interest subvention? The government clearly has its priorities wrong if it thinks that the 50-lakh odd personnel from its ranks would boost spending on new housing units.

Providing priority sector lending tag to exports is an old preposition whose time finally seems to have come. Here again, it means exporters and importers would be able to access the debt market more easily and at subsidised interest rates than other domestic manufacturers. Already, exporters have enjoyed interest subvention schemes for close to two decades. The government should instead have thought of measures to take Indian exports from low technology items and primary goods up the global value chain. It has not done so. Yet, Commerce Minister Piyush Goyal has declared an unrealistic target of upping exports by 20% — at a time when exports have declined by 6.05%. Again, there’s no innovation in remission of duties and taxes as no country is expected to export levies. At best, this decision is more in line with meeting WTO compliance issues. The government will have to come up with better ideas.