Chief Economic Advisor Arvind Subramanian, after releasing the comprehensive Economic Survey 2018, told reporters about the new public opinion on the private sector, which has changed from the popular ‘crony socialism’ to ‘stigmatised capitalism.’ He, jokingly, said that he is going to patent ‘stigmatised capitalism’ and anyone who uses this phrase will have to pay him a small royalty. He was talking in the context of the Twin Balance Sheet (TBS) problem of banks.
He said that the public attitude and perception towards the private sector has changed, and it is stigmatised capitalism that has made the TBS reform very difficult. He was referring to the problem of the banking crisis, high bad loans and NPAs. Bad loans in India as of September-end was about 9.46 lakh crore, according to Reuters, however, down from record high of Rs 9.5 lakh crore, while the bad loans of only public sector banks were 7.5 lakh crore.
The Economic Survey 2018 authored by Arvind Subramanian said that the public view of the TBS problem was that promoters in India had “little skin in the game” and the country had “capitalism without equity”. The survey said that the public formed a negative perception of the Indian capital which was little liability instead of limited liability.
The government, in October last year, announced massive bank recapitalisation plan of Rs 2.11 lakh crore for public sector banks to clean-up their balance sheet. Meanwhile, the Insolvency and Bankruptcy Code (IBC) is also taking its course, under which the Reserve Bank of India has identified over a dozen companies to be sent to National Company Law Tribunal (NCLT) for resolution.
The government also asked banks to follow a six-point reform process to ensure that after the capital is infused, the NPA problem does not escalate in future. With an aim of keeping wilful defaulters and defaulting promoters away from bidding, the government by the Ordinance route brought-in rule to bar them. The Ordinance was passed in the winter session of the Parliament.