Eric Toussaint : In your presentation at the 9^th CADTM South Asia Conference in Colombo you explained that India’s real debt was higher than the figures given by the authorities, would you please explain what this is about?

Sushovan Dhar : As you are aware, the Reserve Bank of India’s figures for September 2022 stand at US$ 617.1 billion as of June 2022 [1]. The same press release stated “Valuation gains due to the appreciation of the US dollar vis-à-vis Indian rupee and major currencies such as yen, SDR2, and euro were placed at US$ 14.4 billion. Excluding the valuation effect, external debt would have increased by US$ 11.9 billion instead of a decrease of US$ 2.5 billion at end-June 2022 over end-March 2022 [2]". The debt-to-GDP ratio fell from 19.9 percent at the end of March 2022 to 19.4 percent at the end of June 2022 [3]. If we consider the total external debt of the country as the only source of debt, the figures look extremely healthy, perhaps leaving room for complacency as has been exhibited by various official sources and the media. However, the figures express only one part of reality. There is a huge internal debt, and it has been steadily increasing. The total government debt went from 68.8% of GDP to a worrisome 85.3% of GDP between 2016 and June 2021 [4]. In monetary terms, the national debt has increased from US$ 1.5 trillion to US$ 2.4 trillion. This is not a very comfortable figure. While the effects are not as dramatic as a balance of payment crisis or an external debt shock, the results are not positive for the economy as a whole. It leads to an inflation that hurts the working classes much more than the upper class. Additionally, the loss of real wages leads to reduced demand. Higher debt servicing leads to a cut in government expenditure, either for job creation or for social security.

Eric Toussaint : Regarding the health of India’s public banks, which still have a majority share in the country’s banking sector, you explained that the level of non-performing loans or non-performing assets was worrying. Please explain what NPL or NPA means.

Sushovan Dhar : In India, NPAs, or Non-Performing Assets refer to loans or advances by banks or other financial institutions for which the principal or interest payment remained overdue for a period of 90 days. Banks are required to further classify these NPAs as Substandard, Doubtful and Loss assets.

Eric Toussaint : It is important for the Indian and foreign public to understand who is responsible for these outstanding loans as it is the large private companies that are the worst payers. Would you please explain the situation to the readers?

Sushovan Dhar : The responsibility for the NPAs lies with large Indian corporations. Fugitive diamantaire Mehul Choksi’s company, Gitanjali Gems Ltd., tops the list of the top 25 wilful defaulters, followed by Era Infra Engineering, Concast Steel and Power, REI Agro Ltd and ABG Shipyard Ltd [5]. In the last four years, the total number of willful defaulters was 10,306. The highest number of 2,840 wilful defaulters reported during 2020-21 was followed by 2,700 the next year. [6]

As many as 38 economic offenders who defaulted on repaying borrowed amounts to banks fled the country in a span of five years, from January 1, 2015, to December 31, 2019, under the government’s watch [7].

Eric Toussaint : Would you please explain these three demands?
A. Recovering the damage caused by the capitalists at the expense of the public banks, from the overall wealth of the major shareholders of the groups in question;
B.Refusing to make taxpayers or depositors, 92% of whom have savings of less than 1,00,000 rupees), bear the burden of the clean-up;
C. Prosecute the top managers of the offending banks and the beneficiaries;

Sushovan Dhar : The onus of recovering the losses that the banks have suffered on account of such defaults lies with those who have defaulted and not with the general public. The properties of these offenders must be attached and auctioned off by the Indian governments to recover the amount syphoned by them. Therefore, we must eliminate the limited liability provision that limits owners’ or directors’ legal accountability for the debts of their company to the value of their shares. Their personal assets are protected, allowing them to syphon off the money that was either stashed away overseas or converted into assets through various illegal entities.What now happens is that willful defaulters walk away while the bank losses are recovered through fresh capital infusions by the government or other means at the expense of taxpayers.It must be noted that almost everyone in India, including the poorest sections of the population, is in the tax net because of the very high prevalence of indirect taxes.
 
Alongside, top managers and directors of the banks, including high government officials, must be prosecuted for their collusion in such “wilful” defaults. The banker-borrower nexus has long been a problem for the Indian banking industry. The PNB heist exposed a deeper connection than anticipated. The bank scams are are not just the product of a few junior personnel but, a deeper systemic fraud.

Eric Toussaint : What is the debt situation of working class families?

Sushovan Dhar : The liabilities of households rose by Rs 6 trillion in 2021–22 to Rs 83.65 trillion, data from the Reserve Bank of India shows. This was even as household debt as a share of GDP came down from levels of 39.3% in 2020-21 to levels of 35.3% in 2021-22 [8].

The rise in liabilities suggests people may have borrowed to spend on basic needs such as medical expenses during the pandemic and also to pay off any past loans. Economists say that while debt levels are not alarming, they are higher than pre-pandemic levels. Debt levels should be monitored because interest rates have risen dramatically in the last six months, despite the fact that the economic environment has not improved significantly.