How to get out of the trap of strength?

"India's macroeconomic fundamentals are much stronger, and the country is all set for robust growth on the back of structural reforms, the government's capex push and rapid vaccinations, Chief Economic Advisor KV Subramanian said," Economic Times (ET). "Our expectation is that the inflation in the next few months should be within that range, between 5-6 percent, but less than 6 percent," despite hardening global commodity prices. "The Union government has announced its intention to 'monetise' about Rs 6 trillion worth of assets held by it, and public sector units (PSUs)," "by letting the private sector bid for operating such assets for 25 years, for a lump sum payment up front, but without giving away title to the underlying assets," wrote Sonali Ranade. Why? Because, "The government has been nursing a 'silent' fiscal crisis, as economist Rathin Roy puts it, ever since (Prime Minister) Modi tanked the economy with serial disasters like demonetisation, and GST; and followed it up with a disastrous tax cut for corporates of Rs 1.45 trillion in 2019, without giving any thought to how the shortfall would be made up." The fiscal deficit was 9.3% of GDP in 2020-21, Business Standard. "India's fiscal deficit reached 21.3% of the full year target (between April-July), according to numbers released by the government," ET. Following the global financial crisis, India's economy started recovering in 2013, more than a year before Modi became prime minister in 2014 (wikipedia), the GDP growing by 8% in the 2016-17 (FY17) and then the rate of growth fell steadily to about 4% in FY20, just before Covid-19 hit the country, wrote Udit Misra. GDP per capita has fallen, unemployment is higher as 1.5 million lost jobs in August (Hindustan Times, HT), retail inflation was 5.59% in July (infoline), fiscal deficit is high and the rupee has fallen from Rs 59 to the dollar in 2014 to around Rs 73 today (xe) "As a result of continuously falling GDP growth, disruption in revenue caused by serial disasters, and the corporate tax cuts, Modi has had to steeply hike prices of inelastic commodities like petroleum products to pay for the corporate tax cuts. The burden of hikes in direct taxes falls on the lower and middle class consumers indirectly, and hence, their consumption falls, dragging GDP growth down even further," Ranade. Telecom company Bharti Airtel chairman Sunil Mittal "while addressing an investor call, said that out of Rs 100 earned, Rs 35 goes to the government", ET. So, an essential service such as telecom attracts taxes at the same level as alcohol, tobacco and pornography, insights. Monetising public sector assets is an attempt to bring private sector investment into India. An analysis of 333 firms in the S&P BSE500 index showed that "their aggregate cash and bank balances grew at the fastest clip (27.3%) in a decade in 2020-21 (FY21)", and that "The growing cash reserves seem to have come at the cost of investments," wrote Niti Kiran. To make it easy for firms to borrow, the Reserve Bank (RBI) has held the interest rate at 4% and maintained an 'accommodative stance', which means a bias towards lowering rates further, despite retail inflation nearly at the upper limit of tolerance of 6% for the RBI (Business Standard). "For every Rs 100 of deposits that enter the banking system, what are the accompanying costs for the system?" asked Madan Sabnavis. "These are deposit costs, provisioning for NPAs (bad loans), return on assets (ROA or minimum profit), and the regulatory cost of cash reserve and statutory liquidity ratio balances (CRR and SLR) that perforce have to be held." All these costs add up to 8.9% so, "By lending at 7.23%, the system is actually mispricing capital." With companies reluctant to borrow, banks are parking Rs 4-7 trillion of funds, costing 8.9%, with the RBI at the reverse repo interest rate of 3.35%. "The worry of capital mispricing is that it spells excessively easy money, which could have repercussions when the chips are down." Modi has built up an image as a strongman (ET), which means he cannot acknowledge his mistakes and allow others to correct them. Caught in his own trap.