A cyclone is coming. Not natural.

According to former Governor of the Reserve Bank (RBI) Urjit Patel the government faces a trilemma, wrote Vivek Kaul. Patel said, "It is clear that it is not possible to 1. have dominance of government banks (public sector banks or PSBs) in the banking sector; 2. retain independent regulation; and 3. adhere to public debt-gross domestic product (GDP) targets." "In June the government promulgated an ordinance "to suspend three sections in the Insolvency and Bankruptcy Code to prevent companies from being forced into insolvency due to debt default triggered by the Covid-19 crisis." "In this scenario, the RBI will have to compromise on independent regulation. To dominate the banking system PSBs will have to increase lending at a fast pace. This will lead to accumulation of bad loans", and the government will have to put more money into PSBs which will increase government debt. "Bad loans in the Indian banking system could soar to almost 15% of total loans by March 2021", said a report by the RBI. "What's more, the capital that public sector banks wheedled out of the government and their private counterparts boasted about is now looking very vulnerable. Banks will see 12.5% of their loans turning bad this year, for sure," wrote Aparna Iyer. However, the RBI has a habit of underestimating the amount of bad loans in banks, wrote Kaul. In March 2015, the RBI predicted bad loans would rise to Rs 4.5 trillion in the 'worst case scenario', but total bad loans reached Rs 10.36 trillion by March 2018. According to the Controller General of Accounts, the Center's gross tax revenues contracted by almost one-third in the first (April-June) quarter but "government expenditure has grown in line with what was projected in the Union budget 2020-21". "The economy did not gather pace in July after the June spurt amid rising Covid-19  cases and local lockdowns to contain the spread, holding back the recovery trend." This is serious because not only is it a pause in the recovery but it also reduces tax revenue. Taxes constitute about 69% of fuel prices and the government was looking to earn $21 billion or Rs 1.6 trillion from fuel this financial year. "Indian sales of diesel -- the lifeblood of the Asian giant's economy --  appear to have fallen sharply last month" "from the previous couple of months when rebounding sales of the fuel were heralded as evidence the economy was on the mend following the world's biggest national lockdown". "The government collected goods and services tax (GST) of Rs 87,422 crore (Rs 874.22 billion) for July, lower than that collected in June, indicating a stability in collections, analysts said."  "The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) stood at 46 in July, down from 47.2 in June." Stability it is not. Even though the real economy is contracting the stock markets are booming, wrote Prof Amit Kapoor and Chirag Yadav. "Even in the 2008 crisis, the Indian stock markets took an entire year to reach pre-crisis levels." Retail investors are piling into shares of the weakest companies. "A custom Bloomberg index of 30 most leveraged out of India's top 200 companies has gained 32% since end of March, compared to  28% advance in the benchmark S&P BSE Sensex." A cyclone is coming and common people will get hit. As always.