India @75: Decoding freebies amid widening socio-economic disparities

Poor people need to be nurtured in more ways than one. They require more and more affirmative measures. Banks should organize loans melas for poor students in every university and college with a special focus on OBC, SC, ST students, and must encourage and guide them to get best of education in India and abroad with the help of bank loans

All of a sudden, there is a raging debate over freebies in our country. A recent report penned by Soumya Kanti Ghosh, Group Chief Economic Adviser to the State Bank of India (SBI), has suggested, as reported widely in the media, that the Supreme Court-led panel should cap the financial implication of welfare schemes at one per cent of the state's gross domestic product (GDP). The report cites the examples of three states – Chhattisgarh, Jharkhand and Rajasthan – where annual pension liabilities have been estimated at Rs3 lakh crore. Findings of the SBI report should not be dismissed as a futile exercise. For many years now, there has been a discernible angst among a section of our own people about affirmative measures, welfare schemes and concessions being given to the needy as well. Though the rich and powerful among us are well aware of glaring disparities in the distribution of national income, resources, opportunities and facilities among 135 crore people of the country, they are rarely heard talking about poor people's multidimensional plight even after 75 years of Independence. The erudite economists of SBI should also suggest ways and means to eliminate income disparities where 10 per cent of the people control over 90 per cent quality resources, opportunities, responsibilities and facilities of the country. Since charity begins at home, the SBI should also come out with a report on how over the years the country's most prestigious bank has ensured fair distribution of jobs, education and entrepreneurial loans among those coming from non-elite social sections. It should, in fact, be done by all the banks whether in the public or private sector, but I doubt if they will ever do so.

Pensioners have multiple categories in our country. A powerful section among them is those who retired from government jobs including armed forces personnel. The share of marginalized sections of society in this category of pensioners is minimal given their poor representation in government jobs. Then we have the beneficiaries of old age and widow pensions. They are the needy people. We cannot discontinue their pensions under any circumstances unless we devise a better and more robust social security scheme for them. The Centre has extended the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) for another three months - October-December - this year under which free good grains at 5 kg per person per month will be given to all beneficiaries – nearly 80 crore people. PMGKAY has so far had an estimated subsidy of Rs 3.45 lakh crore in six phases. The Phase VII of PMGKAY from October to December entails an estimated subsidy of Rs 44,762 crore. The government's decision is in sync with the fact that Covid-19 pandemic has miserably upset the lives of vulnerable sections of society. Similarly, we have nearly 50 crore beneficiaries under Ayushman Bharat Yojana under which Rs 5 lakh per family per year - for secondary and tertiary care hospitalization – is being provided. The insurance cost – which runs into thousands of crores – is also being borne by the government.

The government would never like to withdraw itself from helping the vulnerable and marginalized sections of society. Only recently on October 15, Finance Minister Nirmala Sitharaman urged the World Bank to avoid an "unidimensional" view of the subsidies provided by the Indian government and asserted that it is important to differentiate between "distortive subsidies" and "targeted support" to the vulnerable households. She was speaking at an intervention of the World Bank Development Committee's meeting in Washington. She also said that subsidies have made a definitive contribution in improving India's performance on several key parameters of Sustainable Development Goals (SDG). "We urge the Bank to avoid a unidimensional view of subsidies. It is important to differentiate between distortive subsidies and targeted support to the vulnerable households," Sitharaman said. As an illustration, she said that by providing free LPG connections under the Pradhan Mantri Ujjwala Yojana over the last six years, the Indian Government has ensured that access to clean cooking methods has achieved near saturation for women in India. This has made a definitive contribution in improving India's performance on several key parameters of SDG, she said. Empowerment of the poor through inclusion and multiple interventions is an important mandate of the Indian Constitution and our democracy.

Banking sector is considered to be an extremely responsible business. Let us see how our banks have been fairing over the years in our country. As per the Reserve Bank of India (RBI) data on global operations, the gross non-performing assets (GNPAs) of scheduled commercial banks (SCBs) were pegged at Rs 8,00,463 crore as on 30.9.2021. Banks reported fraud cases worth Rs 41,000 crore in 2021-22 as compared to Rs 1.05 lakh crore in the previous year. According to official data, there were 118 fraud cases in private as well as public sector banks in FY22. Earlier this year, the SBI reported one of the biggest bank frauds in the country totalling Rs 22,842 crore, perpetrated by ABG Shipyard and their promoters, much higher than the case involving Nirav Modi and his uncle Mehul Choksi, who allegedly cheated the Punjab National Bank (PNB) of around Rs 14,000 crore through issuance of fraudulent Letters of Undertaking (LoUs). Some time back, the Central Bureau of Investigation (CBI) booked Dewan Housing Finance Ltd (DHFL), its former CMD Kapil Wadhawan, director Dheeraj Wadhawan and others in a fresh case involving Rs 34,615 crore, making it the biggest bank fraud probed by the agency. A consortium of lenders led by Union Bank of India has alleged that the company had availed credit facility to the tune of Rs 42,871 crore between 2010 and 2018 from the consortium under various arrangements but started defaulting on repayments from May 2019 onwards.

Students, small borrowers, buyers of LIG, MIG and HIG flats have to bear the brunt of the bank's recovery agents if they are not able to repay the loans. It is strange that banks, while selling financial products, credit cards, ATM cards or any such facilities do not guide customers well. In fact, inclusivity and due diligence are still missing in our banking system. It is still haphazard, irresponsible and devoid of empathy notwithstanding the progress made by our financial system in the last 30 or 35 years. Last month a 27-year-old pregnant woman in Hazaribagh district in Jharkhand was crushed to death under a tractor allegedly by a recovery agent of Mahindra Finance Company. It was not an isolated case and hence shameful for us that we have not been able to streamline our banking system even after 75 years of Independence. In a statement, Mahindra Group MD and CEO Anish Shah regretted the incident. The 27-year-old pregnant woman belonged to the class of 90 per cent Indians who have to struggle every day and night to keep going against all odds.

However, the share of poor people in bank fraud is next to nil. Toiling farmers commit suicide when they are not able to pay back their bank loans. They cannot flee the nation. The amount owed by willful defaulters to Indian banks has risen more than ten-fold over the past decade, from Rs 23,000 crore as on March 31, 2012, to Rs 2.4 lakh crore on May 31, 2022. The RBI defines willful defaulters as the people who have the capacity to repay their loans but choose not to. Companies that use funds for purposes other than what the loans were originally granted for are willful defaulters as well. Data from credit bureau TransUnion Cibil shows that the defaults had surged to nearly Rs 2.6 lakh crore in March 2021, but have come down a bit since then. The data pertains only to those accounts in which suits have been filed against willful defaulters with outstanding amounts of Rs 25 lakh or more. As of May 31, 2022, there were more than 12,000 such defaults in India. Beneficiaries of subsidies and 'freebies' are not among these willful defaulters. They sell off their lands or jewelry or borrow money from relatives to pay back loans. Unfortunately, some of them even take extreme steps.

Similarly, the poor people's share in the money stashed in Swiss banks is next to zero. India has recently received the fourth set of Swiss bank account details of its nationals and organizations as part of an annual automatic information exchange under which Switzerland has shared particulars of nearly 34 lakh financial accounts with 101 countries. According to reports, the new details shared with India pertain to "hundreds of financial accounts" including many cases of multiple accounts associated with some individuals, corporates and trusts. Specifics are not in the public domain due to the confidentiality clause of the information exchange and the adverse impact it may have on further investigations but it is being said that that the data would be used extensively in probes of suspected tax evasion and other wrong doings including of money laundering and terror funding. Again, one does not know if the poor people have any account in any Swiss banks. Poor people need to be nurtured in more ways than one. They require more and more affirmative measures. Banks should organize loans melas for poor students in every university and college with a special focus on OBC, SC, ST students, and must encourage and guide them to get best of education in India and abroad with the help of bank loans. Our collective resolve should be to ensure that no one is left behind. Our public and private sector banks must play a seminal role in making India a self-reliant and inclusive nation!

(The writer is a senior journalist, columnist and author. The views expressed are strictly his personal)