A cohesive public policy, coupled with quick action, can bring a change in the financial market. For this, one needs a specialised mechanism and methodology
The financial markets are in a state of churning — in more senses than one. The present times are seminal. Simultaneously, multiple moves are being made. Even in the best of times it is only the rare and the gifted who see with clarity the implications of their action in cognate or distant areas. In normal times such line of vision is a rarity.
Consider the case of ports and the banks — these are two seemingly unrelated areas but they have a cusp. There is an attempt, and rightly so, to create Special Economic Zone (SEZ) around some ports. The writer of this article recalls his experience as a consultant at the Dubai Port Authority in a similar area. In case of India, the SEZ development is projected to begin with around Jawaharlal Nehru Port Trust. For this, 277 hectares are to be put aside.
This zone is about five kilometres away from the port. The target is to develop 100 acres by December. Various global manufacturing companies are interested. The chief executive officer of the JNPT, SEZ, S Sittarasu, has a reputation of competence. For competence to show results in such an environment the powers of the special planning authority need to be bestowed on the SEZ. Here, the Maharashtra Regional and Town Planning Act, 1966, would get into play. The steps appear obvious but can get complicated.
A parallel look at the shipping industry will also bring to fore postures which would need to be reconciled. If one keeps in mind that 95 per cent of India's trading, by volume, and 70 per cent by value is moved through maritime resources, then the importance of shipping is obvious. Yet, the type of vessels which are used by shipping firms are essentially second-hand acquisitions, acquired internationally. Gaps in the Indian capacity in shipping gets a further twist with Goods and Services Tax (GST).
GST has predictably raised various issues of tax burden on the Indian shipping companies. If things continue as they are, a major concern is going to be the levy of five per cent Integrated Goods and Service Tax (IGST). This would cover both inter-State supply of goods and services and imports. The implication for capital cost and working capital is obvious. It would have been challenging to foresee these contradictions before they started surfacing.
The domain expertise, sector for sector, simply cannot be handled without domain knowledge. There is, however, a practical limit to access the very extensive list of domain expertise that would be required for operationalising the concept of GST on the ground. It is a fit case for giving sufficient time for the industry bodies to react. Unfortunately, far too much time was lost on political squabbles. Sorting out the operational economic and financial knots too needs time. Unfortunately, the experience at squabbling doesn't seem to have ended. The brave words of disagreement from the Finance Minister of West Bengal, Amit Mitra, coming in May end, are too well known for repetition. Putting it in simple terms, there seems to be several grey points in the operationalisation of GST.
Reference had been made earlier on this text to the banking sector. Interestingly, the S&P Bombay Stock Exchange banking index has flagged the rise in its index by over 30 per cent. The key player seems to be Yes Bank, IndusInd Bank, Axis Bank, Kotak Mahindra bank, HDFC etc. One can go looking for the Public Sector Undertaking (PSU) banks and their growth patterns. The impaired loan of PSU bank stood at 13.4 per cent while it stood at 4.4 per cent for the private banks. Clearly, more rationalisations are in order.
To sum up, if the foregoing contradictions are placed on a bed of unrelated and at times ‘sudden appearance factors’, the complexity is compounded. Consider the infusion of cash in the market by payment of arrears of the Seventh Pay Commission. Consider the sudden welcome break of the monsoon beginning with the showers on the shores of Kerala.
The cash infusion will cause a boom at several places, including in the auto sector. The rains would lead to higher take of the agricultural produce. Scenes can and do the change. There is a need to put all this together for a cohesive public policy coupled with quick action. It needs a specialised mechanism, methodology and a group of exceptionally gifted people to work in harmony.
(The writer is a well-known management expert)