Friday, December 8, 2023

Vaccinate the economy

By SK Nag

Corona pandemic has paused our life and livelihood entirely and requires rebooting. We are made to unlearn many things which we have imbibed historically. Charles Darwin’s evolution theory justifies our existence on this planet. But today, we are forced to re-think the effectiveness of the ‘Power of Civilization’ achieved so far. Are we indeed scientifically strong enough to take care of us: is a big question. This planet on which we live for so many millions of years puts us in a challenging situation, doubting our future. Stand together and collaborate to rebuild our economy once again brick by brick. 

# CapEx Spending:

Across the organization, the conservation of cash has led to a shrink in the market demand. Big-spending decisions have to start from somewhere. Few companies are incurring CapEx. The economy is contracted to the level of the no-demand market, signaling no immediate possibility of return. This may not or indeed not the way we can bring our economy back on track. Fortune 500 companies should come forward and lead to rebuild the ecosystem expediting their upcoming CapEx outlay plan without waiting for this pandemic to disappear. We can fight this recessionary effect by overpowering the pandemic with our ‘Power of Consumption.’ All business CapEx plans need an immediate start by the leading Industries to declare the end of the ‘CapEx holiday.’ Reserve and Surplus in a business balance sheet might bring strong ratings, but the actual return on investment opportunity is doubtful. Instead, systematic investment in CapEx may leverage better mileage as the Power of Purchase of every Rupee spent has been increased significantly. Mr. Dhirubhai initiated the Jamnagar refinery project implementation during those days when the economy was in poor shape. So this is the right time to start exploring the window of opportunity remaining unattended due to fear of operations. A bold spending road map is required to rebuild the organization to become a new normal friendly company in the coming days. 

# Banking to be perceived, not pursued:

Banking reform in India has seen many salutary initiatives starting from the 70s nationalization. However, having said that, the current brick and mortar banking system could not reach India’s masses after so many nationalization years. Unless the broader population is not brought under the ambit of the mainstream banking system, our economy will not meet our country’s aspirations. The banking system expansion is a key to economic development and well being. Otherwise, it will remain as a mere tool of the few privileged. PM’s Jandhan initiative extended the banking facility enormously within a short period. But these accounts barely participate in serious transactions and are mostly dormant participators in our economic transaction without giving rise to the desired yield. Jandhan account contribution to boosting the economy is currently doubted because of their day to day operational challenge. Digital wallet banking, on the other hand, has some advantages that users might potentially accept. Therefore, a red carpet welcome strategy to reach every corner of the country, like carpet bombing in the current context, is required. Digital wallet banking is superior to conventional banking and net banking because some in-built features made it a convenient banking system. Microfinance companies, Post office payment banks, and mobile digital wallet banks benefit from potential widespread network coverage in countries like India. They should be inspired to invest in these segments in a big way to penetrate the country with the modern banking system more profoundly into the social habit because banking should be a habit, not a mandate. The advantage of banking should be perceived, not pursued. Therefore, Conventional banking and wallet banking should coexist being doppelgangers. Like the Post office and Courier have been coexisting for a long time.

# Technology Banking:

Digital India needs a robust telecom infrastructure without connectivity challenges pan India. When metro cities are busy getting 5G installation, our far-flung locations are still struggling to get 2G connectivity. India’s banking lending system should promote the telecom sector with its out-of-box lending mechanism for India’s banking penetration. Over the years, the banking system is understood to have developed many pragmatic and prudent lending mechanisms for industry funding. Be it long term or short term; their lending formats are supposed to be user friendly, setting aside a conventional conservative approach. Currently, lending processes are hitting the roadblock due to the current format of delivery. Fear of sanctioning authority’s post-retirement complications do not allow many sectors to have achieved the fullest. Sanctioning authority should not be identified as an individual responsible for making lending decisions; it is role and responsibility specific with a clear vision of accountable delivery. We have seen due to improper lending mechanisms, the aviation sectors are already in terrible shape and struggling to remain airborne.

Telecom sectors have the opportunity to grow, and it can also make our economy grow by multiple folds. The Telecom sector landscape is impoverished because of low ARPU compared to any global average. Lending banks can not isolate themself from this telecom sector’s business ecosystem, which would piggyback digital wallet banking. Digital wallet banking will save many big mint street establishments shortly with deeper market penetration in microfinance sectors easily. Without a dependable telecom network, this wallet banking is meaningless. Therefore, Lending in telecom sectors shall be a mixed infusion of funds through debt and equity both. Without any doubt, brick & mortar banking should consider them complementing business partners in telecom sectors by giving catalytic support to grow and let grow. 

Vaccinating the economy across the globe is an imperative for the key stakeholders responsible for making strategic decisions to boost. Therefore, an expansionary economic approach is required, which will bring liquidity to the system. With more liquidity, the demand will grow and start pushing the curve to U-shape recovery because V-shape recovery, which the whole world is postulating, is not seen as of now.

(SK�Nag is�Chartered Engineer,�Energy Expert and industry mentor. The views expressed are personal opinion of the author. He can be reached at�[email protected])

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