Across the aisle: Truth, post-truth and again the truth

Twenty-seven days before the Budget, it was an awkward time to speak extensively on the state of the economy or to give any assurances.

Written by P Chidambaram | Updated: January 14, 2018 8:01 am
Arun Jaitley, economy, Indian Economy, GDP, IIP, Finance Minister, Budget, winter session, Parliament winter session, P Chidambaram, The truth about the economy is known to everyone. Mr Jaitley’s reply was the post-truth. I think it is necessary to state the truth once again.

As Parliament’s delayed Winter Session was nearing an end, the Finance Minister found himself in an awkward situation. On January 4, 2018, the Rajya Sabha had listed a short duration discussion on the state of the economy and he was required to reply. Twenty-seven days before the Budget, it was an awkward time to speak extensively on the state of the economy or to give any assurances. The truth about the economy is known to everyone. Mr Jaitley’s reply was the post-truth. I think it is necessary to state the truth once again.

Growth rate, fiscal deficit

1. FM: “Over the last three-and-a-half to four years, the government has taken several steps to ensure that the decision-making process with regard to economy is in the interest of both public and economy and remains reliable.”

The decision-making process of the NDA government was either opaque (demonetisation) or erratic (GST). Given the many instances of reneging on promises, certainly, there was no reliability. The result is the slowdown, now admitted, reluctantly, by the government. In the seven quarters beginning January 2016, the quarterly growth rate of GVA was 8.7, 7.6, 6.8, 6.7, 5.6, 5.6 and 6.1 per cent. In the same period, the growth of GDP had declined from 9.1 to 6.3 per cent and IIP remained almost stationary between 121.4 and 120.9.

2. “FM: You have expressed concern whether fiscal deficit can have slippage. Today, we get the concern about marginal slippage… Your fiscal deficit was nearing 6 per cent.” After the international financial crisis of 2008, the UPA government increased public expenditure and allowed the fiscal deficit to rise to 5.9 per cent in 2011-12. In the next two years it was brought down to 4.9 and 4.5 per cent (as on 31-3-2014). The NDA will bring it down to 3.2 per cent as on 31-3-2018. Both are commendable reductions — 1.4 per cent by the UPA in two years and 1.3 per cent by the NDA in four years. When the Finance Minister achieves his fiscal deficit target at the end of 2017-18, I shall compliment him.

Doing Business, Exports

3. FM: “You had left the country at 142nd rank in ‘Ease of Doing Business’ in a total of 168 countries. If we come to 100th place from 142, you think the other way, you know its impact.” India’s rank was 134/183 in 2011 (UPA) and 142/189 in 2015 (NDA). In 2017 it rose to 130/189. That is good news, although it is based on surveys in only two cities and attributable to improvements in two parameters. However, the ‘impact’ is doubtful. Look at two metrics:

4. FM: “It is natural that when economy of the world would be weak, there would be less purchasing by buyers, exports would be slow. But this year data of export is getting changed.” Here are the figures. There is no direct correlation between world growth rate and value of merchandise exports. Even when world growth rate improved, merchandise exports remained below USD 300 billion. There is no explanation.

Investments, NPAs

5. FM: “Capital formation, on the basis of which you said public investment was challenging, was pertaining to the data of the last quarter… It has started nearing 4.7 per cent, in the positive territory again, and similarly the data pertaining to non-food credit is between 10 and 11 per cent.”

GFCF has steadily declined since Q1 of 2014-15 (32.2 per cent). It touched a low of 28.9 per cent in Q2 of 2017-18. Credit growth has been sluggish since Q1 of 2014-15 (12.9 per cent). It touched a low of 5.4 per cent in Q4 of 2016-17 and recovered to 6.5 per cent in Q2 of 2017-18. Do the Q2 numbers point to a recovery? Obviously, it is too early to reach a conclusion. One swallow does not make a summer.

6. FM: “That is why a huge recapitalisation plan has been made and therefore we have enhanced the ability of these banks.”

The NPA data is self-explanatory. NPAs have jumped from Rs 2,63,372 crore in 2013-14 to Rs 7,76,087 crore by September 30, 2017. After 43 months in office, no issue can be termed as a legacy issue. There has been no explanation so far why loans that were performing as on March 31, 2014, became non-performing in the last four years.

The Truth

The truth is that the economy is poorly managed, not able to attract investments and not able to create jobs. The post-truth is the economy is the fastest or second fastest growing economy in the world and therefore “we are the best”. The truth, again, is that 2017-18 will end with 6.5 per cent growth, maybe even lower; and 2018-19 will be a challenging year for prices, investments and jobs, leaving the people to ask, “What did we get in the last five years?”

Website: @Pchidambaram_IN

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  1. R
    RMP Jawahar
    Jan 20, 2018 at 10:34 pm
    One of the greatest economic minds of our times without doubt. Id this government had listened to his advice the country would have been better off. Modi would have been better off. He need not have to plead "Do not judge me my GST and Demonetization" if he is not ashamed of them. If only Modi could read this Across the Aisle by PCji he could have been greatly bene ed. Nation would have saved many lakhs of crores. Alas Modijih could not read nor understand this. So we are paying a great price for that.
    1. B.Narayan Murthy
      Jan 15, 2018 at 11:53 pm
      Nowadays anyone can talk about truth. A butcher can lecture on protection of animals.. .
      1. Mohammad Dar
        Jan 16, 2018 at 12:23 am
        First know what is truth, before speaking of the truth, truth is not a commodity under mans grip, but truth is the lord of the universe, give up hind crime of hindrance to truth, the hinduism denial of the truth as a faith, and be free with in the limit of the truth, like a King.
      2. acharya shreesha
        Jan 15, 2018 at 8:53 pm
        Judiciary needs reforms. Advocates donot follow Laws. They go after money. They are prepared to take cases diametrically opposite. No principles a way they are right. It is their livelihood
        1. Ishan Rathi
          Jan 15, 2018 at 6:58 pm
          Sir, For Point 1> Can we start with Q by Q from Q2 CY2014 oneards rathier than Q1 2016. Data will clearly show the grorth from dismal figures when Congress left (LY figures were much better than 2014 even considering revised com tion formula)
          1. Archna Kaul
            Jan 15, 2018 at 1:00 pm
            1. Ankur Mishra
              Jan 15, 2018 at 6:12 pm
              Wow nothing can shake your blind faith in Modi.perfect example of won't be soon before long you and your family out on the streets begging.economy collapsing infront of our eyes and we only care about what Pakistan is doing.we should be competing with Finland or Canada not Sudan or Pakistan
              1. Ankur Mishra
                Jan 15, 2018 at 6:21 pm
                But then again what do you expect from a political party that only functions to demonize the minority so that it can the vote of the majority population.
                1. suresh VRG
                  Jan 15, 2018 at 8:17 pm
                  Wow !!! Nothing can shake your hatred for Modi. It is very evident that if you are not a Porki then surely you have lost a of a lot of money during Demonetisation. Even after the two massive shocks of DeMo and GST the Indian Economy grew at 5.7 whereas after 8 years of humungous corruption under "Economist" Dr Maun Mohan Singh and the sneaky Lungi Mama as FM the Indian Economy grew at 4.5 in 2012-13 and at 4.7 in 2013-14. ( Check this out on Google) Now the Economic growth rate is expected to be 6.1 and you are ranting and raving like a lunatic. Tryly pathetic !!!
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