Maharashtra Industrial Policy 2019
Recently, UP government declared loan waiver of Rs. 36,000 Crore which was followed by Madras High Court asking TN government to do the same and such decisions creating further pressure on government of Maharashtra and Punjab. It is estimated that farmers of Punjab is indebted by around Rs. 80,000 Crores and currently 20% of state government’s revenue is going towards repayments of loan and this wavier will only pressurize the government treasury so is the case with Maharashtra government which has a current debt level of Rs. 3.50 Lakh Crores. But can this loan waiver be the ultimate solution? Elections and Oppositions always want loan waivers for farmers. How many farmers really need loan waiver is different thing. There is a very famous dialogue in movie Sarkar where Mr. Amitabh Bacchan say’s “Nazdiki Fayda Dekhne Se Pehle Door Ka Nuksaan Sochna Chahiye”. It can’t apply to any situation better than this. Let’s look that what happened in previous loan waivers. The Parliamentary Public Accounts Committee has found out that in the case of Rs. 52,000 crore debt waiver schemes announced in 2008, there were serious concerns over its implementation. In a sample of 90,576 beneficiaries spread across 25 states out of the intended 3.69 crore beneficiaries, discrepancies were found in 22% of the cases, acts of omission and commission were observed in paying money to those who were ineligible (persons who had taken personal loan, vehicle loan or gold loan were also reimbursed), depriving those who were eligible, overpaying some beneficiaries and paying less than what was due to others. Also, loan waiver scheme of 1990 has reportedly crippled rural credit structure to such an extent that it took decades to recover from its impact. Now, we also need to understand both short term and long term implications of such schemes. The implications of such schemes are delay in payment of salaries of its employees, reduction in planned revenue expenses, halting of long term Infrastructure and Development projects with government unable to make capital expenditure. This ultimately hits fund flow in system and growth in the economy. It also hurts the credit discipline in the society by penalising sincere and law abiding farmer and which can be the start of vicious circle. It not just penalizes them but the small and marginal farmers who are more dependent on non-institutional sources of loan such as the local moneylender. The interest on these loans is higher but these are excluded from any loan waiver scheme. Also, the agricultural loans in India are really cheap and the rates can be as low as 4%. Almost every individual who owns an agricultural land takes a KCC loan before the season begins. The loans are given based on ownership of land whether they really need it or not is all together a different question. The individuals who take loans many a time are not farmers but the ones who are in employment or in business and have rented out there agricultural land. The end use of such loan is definitely not agriculture. Also, both print media and electronic media cover farmer suicides a lot but how many times they report that a particular farmer was an alcoholic. They never do. I sincerely believe structure of Agriculture Advancing needs to be altered. Loan waiver can only be a short term solution which will defer the problem at hand as it has its own ill effects. Somebody has to bear the burns of loan waiver, who is none-other than honest citizen who faces it either as increased borrowing cost, or higher taxes or through inflation. Now, it’s high time pro-poor politics are shed and government comes out with real solutions be it through better irrigation facilities, protected farming practices, literacy or technology up gradation in farm practices, better procurement policies and post-harvest management. It should invest heavily on in agriculture and support sectors with long term vision and should also learn from errors made earlier while implementing wavier program to achieve best out of this.
Housing for All by 2022
The Central Government has now taken several initiatives to attain the objective of “Housing for All by 2022” which includes passing of The Real Estate (Regulation and Development) Act 2016, demonetization of currency and running subsidy schemes like Credit Linked Subsidy Scheme for Lower and Middle Income Groups. The impact of the same is loosening up of the Real Estate market which has always been a bubble. Now, the million dollar question; Is this the right time to purchase house property or should we wait further? My answer to it is “Yes, it’s the time to take a Buy Call”. The property rates in both Tier I & Tier II cities have gone back to levels of 2013, the interest rates on home loans have almost bottomed, and inventory of both ready for possession and under construction is in abundance and lastly builders and developers have been facing serious liquidity issues. Let’s look at various factors which led to this call. Financial Position of Builders The builder and developers have been bleeding for some time now and the asset class has remained in real stress. Either they have made huge investments in lands or have entered into time bound joint venture agreements with the land owners; the same has indirectly created a compulsion on them to get the construction work going even when there was no movement in inventory. As the customer advances have been really low, most of the investments in these projects have been through high cost debt. Now with enquiries, walk-ins and ultimately sales drying up, the result is no or very low movement in inventory and the builders are now under serious pressure to dispose of the inventory to generate cash and to repay their debts. The unhealthy position of builders has for a change created a situation where the customer can enjoy bargaining power during price negotiation if he can make that tempting payment offers. However at the same time he should make proper due diligence while purchasing Under Construction Property as delayed possession can also back fire. Low Rate of Interest The rate of interest on home loan has almost bottomed. With most of banks are offering loans at rate of around 8.70% to 9.30% where rates are variable and at fixed rate of 9.10% to 9.45%. I believe opting for a fixed ROI home loan may not be a bad idea considering the market volatility in long run. Subsidy Schemes like Pradhan Mantri Awas Yojana (CLSS-MIG) On eve of New Year, PM came up with front end interest subsidy scheme, probably for the first time something has been done for the middle class population. A buyer taking a home loan under this scheme will be able to reduce its EMI by atleast Rs. 2,000 for the tenor of loan. This sum may not sound big but for a middle class person, his EMI can go down by 7.5% and if he can invest that sum in a medium risk profiled SIP; he will be able to create a tax free fund which will be equivalent to the home loan raised. Passing of RERDA Act 2016 Lastly, The Real Estate (Regulation and Development) Act 2016, though this is still a work in progress as many states have still not adopted it but this is something which has been enacted with sole objective of customer protection and cleaning the sector which is really dirty. It will definitely bring transparency and will protect customers from the builders and developers who were selling their property without adequate legal title or who had this habit of delaying possessions to enjoy credits. Thus considering above factors, I believe the sector has bottomed enough and incentives for purchasing are sufficient to take this Buy Call. And also the way government is pushing its Infrastructure and Development projects with objective of creating Smart Cities in turn a Smart India, we may see the Real Estate pricing going up sooner than later.