More Credit , more NPAs?

It is a fact that some of the normal economic theories have no relevance to India. As rightly said, investment in India is rate insensitive and this is what we experience. Like wise NPA formation in banks is also insensitive to the theory of credit deployment. More you deploy the credit the expectation is that more it will produce, more employment it will generate,more demand it will create, more revenue will accrue to the economy,and there will be less of fiscal deficit and less of NPAs. Nothing happens in our economy. More the loan, less is the production, less is the employment, less is the revenue , more is the deficit, more is the NPAs and more wealth to the loan takers and more wealth to the politicians, bankers, brokers and middlemen.. Banks suffer, Depositors suffer, good borrowers suffer, and tax payers also suffer because of more NPAs. In India no economic theory works is the ground reality and politicians know more about this than the economists. Bureaucrats also know the theories well but they also know how not to practise the theories . Politicians are also totally insensitive to any economic theory or to any comment .

Dr T V Gopalakrishnan

( This comment is published in BS dated 20/2/16 against the Article by TCA Srinivasa Raghavan)