The debate on the state of India’s economy has heated up and key politicians from both sides of the aisle have voiced their opinion of late.
While the Narendra Modi government has faced flak from even within his Bharatiya Janata Party (BJP)—apart from the opposition—for allegedly mishandling the economy, it has also received support from outside.
Here are some important voices.
Former finance minister and senior BJP leader Yashwant Sinha, in a provocatively headlined column in The Indian Express newspaper on Sept. 27, repeatedly blamed Arun Jaitley, the “lucky finance minister,” for the mess that India currently finds itself in. He wrote about the depressed global crude oil prices, which left the government a kitty of “lakhs of crores of rupees” that hadn’t been taken advantage of.
Private investment has shrunk as never before in two decades, industrial production has all but collapsed, agriculture is in distress, construction industry, a big employer of the workforce, is in the doldrums, the rest of the service sector is also in the slow lane, exports have dwindled, sector after sector of the economy is in distress, demonetisation has proved to be an unmitigated economic disaster, a badly conceived and poorly implemented GST has played havoc with businesses and sunk many of them and countless millions have lost their jobs with hardly any new opportunities coming the way of the new entrants to the labour market. For quarter after quarter, the growth rate of the economy has been declining until it reached the low of 5.7% in the first quarter of the current fiscal, the lowest in three years. The spokespersons of the government say that demonetisation is not responsible for this deceleration. They are right. The deceleration had started much earlier. Demonetisation only added fuel to fire…
The prime minister claims that he has seen poverty from close quarters. His finance minister is working over-time to make sure that all Indians also see it from equally close quarters.
A day after Sinha’s column appeared, his son and India’s minister for civil aviation countered it.
In a column for The Times of India newspaper, Sinha junior questioned the sweeping conclusions made in recent articles from a narrow set of facts. “Moreover, one or two quarters of GDP growth and other macro data are quite inadequate to evaluate the long-term impact of the structural reforms underway,” he wrote. Detailing the various initiatives of the government, Jayant said the economy Modi is building is much more equitable.
Virtually every Indian will now have a basic safety net guaranteeing food, electricity, some employment, housing, a bank account, toilets, gas-based cooking, insurance coverage, micro-loans, and an all-weather road. In parallel small and large enterprises will be able to flourish in a transparent, rule-based environment that provides necessary facilities and financing. We are creating a robust new economy that will power long-term growth and job creation for ‘New India’.
The Indian home minister, too, was quick to rebut Yashwant Sinha. The Indian Express reported Rajnath Singh as saying:
The whole world admits that India is the fastest growing economy in the world. No one should forget this fact. In the matter of economy, in the international arena, India’s credibility has been established.
Meanwhile, some claims of Modi’s ministers are suspect.
While earlier this year, India lost the tag of the world’s fastest-growing economy, railway and coal minister Piyush Goyal thought otherwise. “The whole country and the world has seen that under the decisive leadership of prime minister Modi, India has become the world’s fastest growing economy for three consecutive years in a row. For the first time in the Indian history, India is driving world growth at all levels, ” Goyal said on Sept. 28.
The government received support and even earned praise from unexpected quarters. On Sept. 27, Baijayant ‘Jay’ Panda, the Lok Sabha MP of the Biju Janata Dal party, wrote in The Times of India that demonetisation—the banning of two key high-value currency notes in November 2016— may not have been an entirely wasted idea.
Recall that in the weeks after demonetisation, RBI kept changing the rules for depositing and withdrawing cash, know your customer (KYC) norms, and suchlike. Though there was criticism of those frequent changes, what was happening was a cat and mouse game between hucksters trying to launder black money and the authorities trying to clamp down on it. It now bears watching how much of that deposited money gets entangled and inaccessible as a result of the stricter norms. Data mining by the taxman, linking Permanent Account Number (PAN) cards to Aadhaar and other such measures will undoubtedly cause grief to those who cannot legitimately explain the source of those funds.
A member of the opposition Congress party and a former finance minister himself, Chidambaram has constantly called out the alleged flaws in the Modi government’s handling of the economy through his newspaper columns and tweets. In a Sept. 17 article for The Indian Express, titled Clueless in Delhi, he wrote:
In the last three years, gross fixed capital formation as a percentage of GDP has been 31.34%, 30.92%, and 29.55%—well below the peak of 34.31% achieved in 2011-12. Another indicator of private investment is growth of credit to industry. That has been negative for every month since October 2016. The worst hit are medium enterprises where the bulk of the jobs are. Outstanding credit to medium enterprises declined from Rs1,19,268 crore in July 2015 to Rs1,00,542 crore in July 2017—a shrinkage of 16%! (Yet government wants us to believe that jobs are being created in the industrial sector!)
And, like the proverbial last straw, growth of private consumption has declined. It slowed down to 6.7%, year on year, in April-July 2017. According to the latest RBI survey, the current situation index fell to 96.8 in June from 100 in May 2017 “slipping into the pessimistic zone with sentiment showing deterioration across all parameters.” The survey found that while urban sentiment has been subdued, the mood in rural areas has also begun to sour.
While the Congress party vice-president hasn’t delved deep into economics, he has made passing observations in this connection. His latest comment, rather uncharacteristically snarky, came in a tweet citing Yashwant Sinha’s column.
Jaitley, the man in the eye of the storm, has tried to soothe nerves even as he has come under attack. Referring to the slowdown, on Sept. 22, he said, “Don’t think we need to panic. It calls for analysis and responsible action.”
Amidst calls for a fiscal stimulus to kickstart the economy, he said, “Can’t comment on stimulus but we have to see how we maintain the balance between continuing to spend and at the same time be fiscally prudent.”