In a major turn of events the country is witnessing two grueling leaders blaming each other and a third one relishing the scene. Day before yesterday, former finance minister in the Atal Behari Vajpayee regime, Yashwant Sinha, in a scathing Op-ed in the Indian Express slammed the Modi government saying ‘the economy is on a downward spiral’ and blamed Finance Minister Arun Jaitley for “the mess the finance minister has made of the economy”. He wrote: “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.”
“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 work force, 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,” wrote Sinha.
In return Finance Minister Arun Jaitley took a jibe at the former said “Being a former finance minister I can conveniently forget a policy paralysis (during UPA-II). I can conveniently forget the 15 per cent NPAs of 1998 and 2002 (during Sinha’s term as finance minister). I can conveniently forget the USD 4 billion reserve left in 1991 and I can switch over and change the narrative.” Speaking at a book launch Jaitley made fun of Sinha by saying that he is a job seeker at this age for making such comments. He said “Probably, a more appropriate title for the book would have been ‘India @70, Modi @3.5 and a job applicant @ 80.”
Jaitley also rejected the accusation levelled by Sinha that the economy is in a downward spiral. In support of his claims of India having a strong economy he gave the figures of tax. “Direct tax figures are 15.7 per cent over and above last year’s figure, so this so-called slowdown visualized by some, hasn’t even impacted,” said Jaitley.
Sinha has accused Jaitley that “he should have first admitted that there is a problem. They did not admit that there is a problem. Month after month, quarter after quarter, they kept singing praises of their own performance, kept patting their own backs while the problems were building up. And they were not attending to the problems. So that’s why the problems accumulated over time. It was clearly a lack of application of mind to tasks at hand.”
In answer to this Jaitley said “Today the challenge really is during the boom period of 2003 to 2008-09, our private sector expanded when global economy slowed down. Private companies had undertaken large liabilities from bank, did not find demand. When global commodity prices went down, many of them did not find their loans serviceable.
“Then came a situation in 2012-14 when the government virtually gave up, there was no policy initiative, they allowed things to drift on their own. When you allow this, the figure (NPAs) mounted up. I must say that those in government, those in banking industry, those in RBI, when reckless lending took place, all looked the other way.
“Then suddenly some harsh steps were required. So debate is, are all those steps taken a bit too harsh? Bankers believe the steps with regard to excessive provisioning are a bit too hard on them. Therefore the private sector area itself was one area we have not grown…several areas of private sector have grown.
“Large industry is borrowing more from the bond market than the banks itself. That is the problem that needs to be addressed by us.”
While the two stalwarts are fighting with each other, the happiest is P Chidambaram, who was a finance minister in the UPA government. The Congress endorsed former Finance Minister Yashwant Sinha’s view that the “Indian economy is in a mess” under the Narendra Modi government.
“It is not often that the principal Opposition party will welcome a statement of a veteran leader of the ruling party. Today, I warmly applaud the article of Mr. Yashwant Sinha because it speaks the truth about the economy,” former Finance Minister P. Chidambaram said at a press conference on the day Sinha’s article appeared in Indian Express. He said that he agrees with Sinha’s observation that the economy’s actual growth was 3.7 per cent instead of 5.7 per cent if one took into account the change in the methodology for computing GDP.
Accusing the Modi government of being “clueless about what is causing the economic decline,” he said: “It will be a miracle if they can turn it around.”
Both Jaitley and Sinha may trade barbs at each other, but one is clear about one fact that Yashwant Sinha is not an economist. His tenure as Finance Minister was disastrous and shook the faith of the middle class who voted whole-heartedly for the BJP in the 1998 and 1999 elections. The BJP had to pay a heavy price for the UTI scam that affected and shook the faith of the small investor. This along with falling returns on fixed deposits, financial instruments, pension schemes and Provident Funds shattered the faith of the common man in the reform process and that put the BJP on the back foot for two successive general elections. Farmer distress allowed the Congress to head for the elections with a promise to waive loans, which the UPA famously executed in the fourth year of its first term, leading to a resounding victory in the 2009 election. Yashwant Sinha had become so unpopular with the BJP cadre that finally Atal Behari Vajpayee replaced him with Jaswant Singh, who, as Finance Minister, then retrieved the economy, leading to the “India Shining” slogan of 2004. Perhaps Vajpayee lost because he advanced the polls by over six months, before the fruits of India Shining could percolate to the masses. And today he is saying that economy is shattering, that’s obfuscating. What he is doing is just shows the frustration of a man who has nothing to do and is trying to make some relevance for himself.
By Uday India Bureau