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I need to speak up now

Yashwant Sinha writes: The economy is on a downward spiral, is poised for a hard landing. Many in the BJP know it but do not say it out of fear

Written by Yashwant Sinha | Updated: September 27, 2017 4:54 pm
yashwant sinha, Arun jaitley, GSt, Goods and services tax, Narendra Modi, PM Modi, Economy, demonetisation, For quarter after quarter, the growth rate of the economy has been declining until it reached the low of 5.7 per cent in the first quarter of the current fiscal, the lowest in three years. (Representational)

I shall be failing in my national duty if I did not speak up even now against the mess the finance minister has made of the economy. I am also convinced that what I am going to say reflects the sentiments of a large number of people in the BJP and elsewhere who are not speaking up out of fear.

Arun Jaitley is considered to be the best and the brightest in this government. It was a foregone conclusion before the 2014 elections that he would be the finance minister in the new government. His losing his Lok Sabha election from Amritsar was not allowed to come in the way of this appointment. One may recall that in similar circumstances Atal Bihari Vajpayee had refused to appoint Jaswant Singh and Pramod Mahajan, two of his closest colleagues in the party, to his cabinet in 1998. His indispensability was established further when the prime minister rewarded him not only by giving him the finance ministry including the department of disinvestment, but also the ministries of defence and corporate affairs. Four ministries in one go out of which he still retains three. I have handled the ministry of finance and know how much hard work there is in that ministry alone. Finance ministry, in the best of times, calls for the undivided attention of its boss if the job has to be properly done. In challenging times it becomes more than a 24/7 job. Naturally, even a superman like Jaitley could not do justice to the task.

Jaitley was, to begin with, a lucky finance minister, luckier than any in the post-liberalisation era. Depressed global crude oil prices placed at his disposal lakhs of crores of rupees. This unprecedented bonanza was waiting to be used imaginatively. The legacy problems like stalled projects and bank NPAs were no doubt there and should have been managed better like the crude oil bonanza. But the oil bonanza has been wasted and the legacy problems have not only been allowed to persist, they have become worse.

So, what is the picture of the Indian economy today? 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. For quarter after quarter, the growth rate of the economy has been declining until it reached the low of 5.7 per cent 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.

And please note that the methodology for calculation of the GDP was changed by the present government in 2015 as a result of which the growth rate recorded earlier increased statistically by over 200 basis points on an annual basis. So, according to the old method of calculation, the growth rate of 5.7 per cent is actually 3.7 per cent or less.

Even the SBI, the largest public sector bank of the country, has stated with unusual frankness that the slowdown is not transient or “technical”, it is here to stay and the slowdown in demand has only aggravated the situation. It has openly contradicted what the BJP president said just a few days ago that the slowdown in the last quarter was on account of “technical” reasons and will be corrected soon. According to the SBI chairman, the telecom sector is the latest entrant to the long list of stressed sectors.

The reasons for this decline are not far to seek nor have they appeared suddenly. They have been allowed to accumulate over time to cause the present crisis. It was not difficult to anticipate them and take counter measures to deal with them. But that called for devoting time to the task, serious application of mind, understanding of the issues and then working out a game plan to tackle them. It was perhaps too much to expect from a person who was carrying the heavy burden of so many extra responsibilities. The results are there for all of us to see.

The prime minister is worried. A meeting convened by the prime minister with the finance minister and his officials appears to have been postponed indefinitely. The finance minister has promised a package to revive growth. We are all waiting with bated breath for this package. It has not come so far. The only new thing is the reconstituted Economic Advisory Council of the prime minister. Like the five Pandavas they are expected to win the new Mahabharat war for us.

The performance of the monsoon this year has not been flattering. This will further intensify rural distress. The farmers have received “massive” loan waivers from some state governments varying from one paise to a few rupees in some cases. Forty leading companies of the country are already facing bankruptcy proceedings. Many more are likely to follow suit. The SME sector is suffering from an unprecedented existential crisis. The input tax credit demand under the GST is a whopping Rs 65,000 crore against a collection of Rs 95,000 crore. The government has asked the income tax department to chase those who have made large claims. Cash flow problems have already arisen for many companies specially in the SME sector. But this is the style of functioning of the finance ministry now. We protested against raid raj when we were in opposition. Today it has become the order of the day. Post demonetisation, the income tax department has been charged with the responsibility of investigating lakhs of cases involving the fate of millions of people. The Enforcement Directorate and the CBI also have their plates full. Instilling fear in the minds of the people is the name of the new game.

Economies are destroyed more easily than they are built. It took almost four years of painstaking and hard work in the late nineties and early 2000 to revive a sagging economy we had inherited in 1998. Nobody has a magic wand to revive the economy overnight. Steps taken now will take their own time to produce results. So, a revival by the time of the next Lok Sabha election appears highly unlikely. A hard landing appears inevitable. Bluff and bluster is fine for the hustings, it evaporates in the face of reality.

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.

The writer, a member of the BJP, is a former Union finance minister

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More From Yashwant Sinha
  1. I
    Oct 22, 2017 at 2:00 pm
    Modiji should appoint Yashwant Sinha as high commissioner to Zimbabwe where he can proffer his wisdom to the wise president Mugabe.
    1. V
      Oct 16, 2017 at 12:04 pm
      Giving full majority of a whole nation of billion people to an irresponsible lad who ditched his parents at an early age is going to prove the costliest b er in the long run for the Indian economic history as it was stage-managed by a bunch of frustrated self goaling industrialists belonging to the erstwhile UPA stable led by the Reliance and Tata groups disillusioned after their own failures in KG and Singur due to a poor understanding of the gross reality of the states and burning their fingurs out of a self-greed for business and world domination. Boiled suffocated and murdered or facing genocide is the gullible citizenry that does not understand even how the Kirana prices are controlled by a Hitler Govt both in states and centre. In a race to the top seat of economy in the world, fuelling up such ugly desires in the minds of common people and creating illusions overs such unhealthy ambitions using the media and print channels as post men messagers of doom to its advantage
      1. Mahesh Kumar Rathi
        Oct 11, 2017 at 8:55 am
        He is 100 percent right. His first lines are enough..I need to speak up now and shall be failing in my national duty if I didn't. How many politicians in India have the guts to tell the truth ?Truth may be bitter. But it is the truth and should be taken seriously solely because the writer has said everything in the national interest. we all know no eighty year old man would have any personal agenda to grind. Kudos to Yaswant Sinha ji. We hopes he writes at least once a month.
        1. R
          Oct 8, 2017 at 12:49 pm
          nice and thought provoking article. Had it been supported by Statistical data it would have been more rationale and scientific. In the absence of such supportive data, there is an apprehension that the article may be prejudiced or biased because the author was denied ministerial berth by BJP.
          1. N
            Nikunj Desai
            Oct 6, 2017 at 8:06 pm
            The current Indian economy and it's deteriorated condition are purely thanks to hectic, unthoughtful financial policies and economic reforms. Well, it is also a big question whether they should be called reforms or deformation? In a country where the finance minister is just a spokesman of PM and who has nothing to say or to take any decision of his own! You never know what will happen to Indian economy in upcoming year.
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