The Big Story: Deflecting the issue

Former liquor baron Vijay Mallya was arrested on Tuesday in London and then – within hours – granted bail. That short period, however, saw Indian television channels churn out a remarkable amount of commentary. Many rushed to congratulate the Indian government on the arrest and speculate on the fate of Mallya – news that was made mostly irrelevant only a bit later with the businessman quick bail. The 61-year-old former Rajya Sabha MP owes 17 banks in India an estimated Rs 9,000 crore and stands accused of fraud and money laundering. New Delhi has been attempting to get the UK authorities to send him back to India ever since he left the country in March 2016. But as experts have pointed out, extraditing Mallya is going to be a long, hard process and it’s far too early to celebrate.

The incident did, however, made it apparent that the intense focus on Mallya is deflecting attention the real problem: India’s mountain of corporate debt, much of it owed to public sector banks.

India’s non-performing asset burden is nothing to sneeze at. As this Mint article points out, India comes in seventh globally when considering the ratio of non-performing loans to total gross loans. Nearly a fifth of India’s corporate debt is held by companies that are not generating enough profits to even pay off their annual interest – forget about the principal amount.

Under the leadership of the previous Reserve Bank of India governor, Raghuram Rajan, banks and companies were challenged on the problem for the first time. Banks were forced to air out their stressed assets, embarrassing the lenders as well as the companies to which they had loaned money.

Apart from Rajan’s moves, the RBI has done little to tackle the debt issue. Instead, various banks and the government have opted to manage the optics of the issue. In November, 2016, the public sector State Bank of India decided to remove assets worth Rs 7,016 crore from its books. A proposal for a “bad bank”, an institution that would house non-performing assets, is now back on the table after Rajan’s exit (he did not like the idea). Of course, a bad bank would, in all probability, simply transfer the issue from one part of the government to another – a sleight of hand that would do nothing to fix the problem and would instead let corporate lenders off the hook.

While Mallya dominates the news, it is instructive to point out that his borrowings are small compared to, say, a host of other companies, as this Newslaundry report points out. Neither the Union government nor the banks have launched criminal cases against them for their misuse of public money. And neither has unchecked lending to corporations stopped.

India needs to find a permanent cure for its debt issue by making corporate bigwigs pay up. The over-the-top media circus around Mallya isn’t a solution: it’s a distraction.

The Big Scroll

  1. Paranjoy Guha Thakurta tells the story of Mukesh Ambani’s loss-making private firm that just got public banks to restructure its loans.
  2. The bad loans of state banks equal India’s spending on defence, education, roads and health, writes Amit Bhandari.
  3. Mayank Jain draws up four charts that show how the bad loan problem of Indian banks is much bigger than Vijay Mallya.
  4. “Why have bad loans been made?”: Full text of Raghuram Rajan’s 2016 speech to Assocham

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Political Picks

  1. Tassaduq Hussain Mufti, younger brother of Jammu and Kashmir Chief Minister Mehbooba Mufti, has said there is a “concerted effort” at various levels to “destroy even the last shred of the [People’s Democratic] party’s core political base in Kashmir and completely erode its credibility”.
  2. Hindi could be made compulsory till Class 10 in all Central Board of Secondary Education schools.
  3. Tamil Nadu: The Delhi Police has issued a lookout notice against TTV Dhinakaran, Sasikala’s nephew and All India Anna Dravida Munnetra Kazhagam general secretary.
  4. West Bengal chief minister Mamata Banerjee met Trinamool MPs Sudip Bandyopadhyay and Tapas Paul in a Bhubaneswar hospital this evening, fuelling speculation that the gesture was aimed at sending out a message that she would stand by those “victimised” by the CBI.
  5. Supreme Court calls for a Special Investigative Team to probe rape charges against soldiers operating in Manipur.
  6. A Muslim man was sentenced to three years in prison in Gujarat for cow slaughter. In his judgment, the judge argued that it is a “scientifically proved fact” that cows sustain the “health of the nation”.

Punditry

  1. Pakistan is grappling with the boundaries of Iqbal’s idea of religious toleration. India is going down the same path, writes Pratap Bhanu Mehta in the Indian Express.
  2. Excess focus on bilateralism is leaving India isolated in its larger neighbourhood, argues Happymon Jacob in the Hindu.
  3. In Mint, Manas Chakrabarty profiles the meat-eating India.

Giggles

Don’t Miss

‘Bring back my daughter,’ says mother of political activist arrested for a land stir in West Bengal. Subrata Nagchoudhury reports.

“One dreadful January night in 1987, I lost my doctor-husband in a road accident in Durgapur,” she said. ‘My daughter was just about eight years then. And in another January night, this year, the police picked up Sharmistha.’

Sharmistha Choudhury, a political activist with the Communist Party of India (Marxist-Leninist) Red Star, has been in jail for over 80 days now. Her party is spearheading a farmers’ agitation in Bhangar in South 24 Parganas district in which local residents are pushing for a Power Grid Corporation of India sub-station project to be shifted out of the area. The West Bengal Criminal Investigation Department is prosecuting Choudhury under the provisions of the draconian Unlawful Activities (Prevention) Act, which is usually applied in terrorism-related cases.”