Ever since former Finance Minister Yashwant Sinha has started his campaign against what he calls the mishandling of the country’s economy, an atmosphere is being created that the country is headed towards economic catastrophe. In the last three decades, there have been two occasions when India’s economy has actually been in the doldrums. The first time was in 1991 when Yashwant Sinha was himself the finance minister (FM) and the second time during UPA 2 in 2013 when the rupee came under attack because of the high twin deficits — on the current account and fiscal.
Moreover, those were days when Manmohan Singh was under pressure from the corrupt. The corrupt acts of people from A. Raja to Suresh Kalmadi were taking a toll on the government. But it’s not the same situation today. There is a government which has a clear majority; whose leader says he is committed to taking the country to the next league of economic development. History will judge Narendra Modi’s vision, but he has earned the admiration of even his critics for his efforts to achieve economic targets. Even his critics do not accuse him of corruption.
In his article (‘I need to speak up now’, IE, September 27), Sinha has repeatedly spoken about the poor state of Indian economy. He has picked demonetisation and GST as the biggest roadblocks to development. He has been particularly critical of the incumbent FM. Even the FM has tried to put him down by calling him a job applicant at 80. Sinha has been an IAS officer, held important posts and discharged important responsibilities. But whenever he talks about economy, the face of Chandrashekhar comes to the fore. Sinha was the FM in the government headed by Chandrashekhar.
V.P. Singh’s government had fallen following a trust vote. Chandrashekhar became the PM with help from Congress. Sitting in his chamber at his official residence at 3, South Avenue in Delhi, Chandrashekhar was finalising his cabinet. Some of his well-wishers were present there. Subramanian Swamy was very close to Chandrashekhar. There were murmurs that being an expert on economy, it was he who should get the responsibility of rescuing a sinking economy.
But Yashwant Sinha was chosen as the next finance minister. Those were turbulent times. There was a balance of payments crisis, the issue of an internal debt trap had been flagged earlier. During Sinha’s tenure, the economy went through one of its scariest phases. Sixty-seven tonnes of gold belonging to the country had to be mortgaged in England and Switzerland.
In June 1991, the Chandrashekhar government fell and P.V. Narasimha Rao took over with Manmohan Singh as the FM. Singh commands respect around the world. As FM, his words were accorded respect by the IMF and World Bank. He spoke about pulling the country out of a mixed economy and putting it on the path of capitalism. This brought down the crisis of payments hovering over the country.
So when Sinha speaks about the country’s economy going from bad to worse, one is reminded of the same era. The state in which India’s economy was in 1991 when Sinha left is also well known. Fortunately, Singh salvaged it and it continues to follow the path he put it on. Today, the country is neither in the state it was in 1991 nor in 2013. It is flush with foreign exchange. Banks have enough funds to support industry. After demonetisation, all the black money has come back into the system, an important step in to a formal economy.
Immediately after coming to power, Modi made a resolve to make the country an economic superpower. He was aware that there was a paucity of trained people in the field of enterprise. So he made a separate ministry for skill development. It was hoped that in the next two to three years the ministry would spawn an army of trained entrepreneurs who could dream big.
Similar experiments are conducted in IITs and IIMs. Graduates who want to set up their own company or industry are trained through “incubators”. They are helped to get venture capital from big banks and international institutions. These entrepreneurs go on to head big companies, contribute to GDP growth and generate employment.
The skill development ministry should have tapped into this model but didn’t. It kept defining its mandate as adding security guards and mechanics to the army of the unemployed. There has been a change in the leadership of the ministry but a crucial three years were lost. Now, with a new minister, work has started again.
GST, which Manmohan Singh described as essential for economic development, has come into force. There is a consensus that the economy will gather a new momentum after GST. There is no doubt that there are some management hiccups after demonetisation and GST were pushed through quickly one after the other. These are natural disruptions when big structural changes happen. Already the government has assured of easing the “pain points”.
Today, there are also many schemes which have been made primarily to promote production. Make in India and Start Up India are programmes which can jump-start the economy. Going by electoral politics, the PM is the undisputed leader and he is best placed to use this political strength to empower development.