The Confederation of Indian Industry, a motley group of elitist Indian corporate bosses calling itself the “premier business association of modern India” started an online petition on August 7 urging all political parties to “to have a collaborative and consultative process in the Parliament”, in effect begging the parliament to function so that the important amendments to GST Bill and land acquisition bill can be passed. The petition has over 40,000 signatures now.
Throwing around phrases like ‘democracy is great’ and ‘Parliament is held in great esteem’ can be excused for a cause like urging the parliament to function and asking MPs to do what they are elected and paid for, it is after all very important that the legislative functions of the house are carried out lest governance comes to a standstill.
But dear India Inc, let me draw your attention to something else which you need to really be worried about, over which you have maintained deafening silence and could sink the whole economy of the country if you don’t grow a conscience – your massive corporate debt.
Financial Times reports that a JP Morgan analysis has found that private sector debts in emerging markets has increased by a massive 33% since the global financial crisis in 2008, and the private sector debt in India stands at $1.2 trillion, that’s about Rs 78 lakh crore at today’s exchange rate. India stands fourth in private debt among the 20 emerging economies analysed by JP Morgan.
NDTV reports, based on banking data, that the amount of bad debt in the Indian economy is about Rs. 14 lakh crore.
Here some of the outstanding performers in holding massive amount of corporate debt based on a 2013 credit Suisse report which paints a sordid picture- Adani group had a debt of Rs. 81,000 crore, Essar Group owed Rs. 98,000 crore, Vedanta’s account stood at Rs. 99,000 crore, Reliance ADA group was at 1.13 lakh crore and Jaypee at Rs. 63,000 crore. Just the top ten debtors added up to an astronomical amount of Rs. 6.3 lakh crore.
Business Today reports that between 2009-10 and 2013-14, India’s largest private sector company Reliance Industries Limited’s debt shot up from Rs. 64,000 to Rs. 1.38 lakh crore and Sesa Sterlite’s from Rs 1,961 crore to Rs 80,568 crore. The report says, “Between 2009/10 and 2013/14, India Inc more than doubled the total debt on its balance sheets - from Rs 20 lakh crore to over Rs 41 lakh crore. That is roughly $690 billion - bigger than all global economies, except 19.” Read the full report here.
The borrowing by all these companies put together has been as high, or sometimes higher, than the borrowing by the Government of India. Corporate India, at present, is more indebted than all the state governments put together, says Business Standard.
The situation is quite grim. "The corporate debt situation is very bad. In many cases the debt is very high but the assets created are very low. I don't know how the banking system gets into that. There are no inventories, no working capital available but there is debt," Siby Antony, MD and CEO, Edelweiss Asset Reconstruction Company told Business Today.
The banks are scared. RBI is worried and even the IMF issued a warning to India on its rising corporate debt. This could have significant impact on our employment, exports and the overall health of the economy.
In such dire state of affairs , it is ionic that corporate bosses are taking a moral high-ground, throwing around words like democracy, asking the parliament to function. And since much of the debt is locked in with national banks financed by the tax payer, the business giants must first answer the people of the country before questioning their representatives.