Former finance minister Yashwant Sinha has been in a combative mood over the last couple of days, starting with his opinion piece Wednesday in The Indian Express, in which he attacked the government over its economic management. While the Opposition has taken it up, the government has fielded Sinha’s son Jayant to write a counter on the state of the economy. Yashwant Sinha, who was finance minister in the Atal Bihari Vajpayee government and also during the 1990-91 balance-of-payments crisis, was a colleague of current finance minister Arun Jaitley in the previous NDA government. Excerpts from an interview the day after his article was published:
The obvious question. Many people want to know why this criticism of the government and its handling of the economy now, after having been silent so far after the Narendra Modi government came to power.
In the last three-and-a-half years or so, except taking interest in Jammu & Kashmir, I have generally kept myself aloof from politics. If I spoke up now, I will like to remind everyone they should only look at the first sentence of my article in your paper, where I said it is in national interest that I speak up. When I felt that my remaining quiet will be not in national interest, I decided that I should speak up. One can always ask why did I not speak up in 2014. I waited and waited. After all, the growth rate of the economy has been on the decline for six quarters. So that’s why I spoke up now.
Your critics say that this outburst is because you have been marginalised, and that you have lost ground politically.
To those who are saying that I have been marginalised, let me remind them that I voluntarily did not contest in 2014, even though many people tried to persuade me.
There is a feeling that your opinion piece is a personal attack directed against Finance Minister Arun Jaitley.
For all those who are saying mine is a personal attack, it is not. If it is the economy, it has to be the finance minister and not the home ministry. The finance minister, in a speech today [Thursday], said that there are job applicants at 80. If I were a job applicant, he wouldn’t be there in the first place. Putting Jayant [Sinha’s son, who wrote an article countering the father’s views] against me is an attempt to obfuscate issues. I can also get personal. But I won’t fall into that trap.
You have written that many are not speaking out, out of fear. Are these people in touch with you?
No, I am not doing it as a campaign. You meet people here and there, you meet people socially. And when you discuss issues with them, they tell you that this is the situation, that people are not allowed to raise issues. There was a time when I was in Lok Sabha, [we] used to have parliamentary party meetings every Tuesday, and people were free to raise issues, whichever issue they wanted to raise. Now MPs tell me that in today’s situation, though the meetings are held every Tuesday, nobody is allowed to speak. This is also proved by the fact that the Maharashtra MP who defeated Praful Patel had the same complaint.
In your book, you have said that in the final analysis a finance minister can function effectively only when he has the trust and the confidence of the PM. Now in the context of your pinning the blame for the current state of the economy on the finance minister, how do you weigh that view now?
In the present situation, the added advantage to the present finance minister was [that] he enjoys the confidence of the PM to the extent that he gave him charge not only of the finance ministry but three other ministries. The PM has reposed the fullest confidence in the finance minister, it is only that the finance minister has not delivered.
Is it your belief that the government misread the gravity of the economic situation including the banking crisis?
Absolutely. They completely misread the situation and kept chipping away at the margins, instead of attacking the problem at its roots. And that’s the reason why, year after year, even in this regime, bank NPAs (nonperforming assets) have been going up. In this situation, the first thing that should have been done was to stop the growth of bank NPAs and then deal with them. Every year, the bank NPAs are increasing. And 40 months down the line, you cannot hide behind the [argument] that these are legacy issues.
In its defence, the government has said that it is a scam-free government and important structural reforms have been carried out. Do you see GST and demonetisation as structural reforms?
First, I don’t consider demonetisation as a reform at all. It might have been to clean up the economy. It was an administrative measure, and all the objectives of demonetisation — they appeared as having failed. With all the figures that we have now, none of the objectives of demonetisation appears to have been solved. The entire black money is back in the system. So demonetisation, apart from disrupting the economy, has made no other contribution. They have said there are lakhs of cases with the income tax department, these cases will take their own time. You know how IT cases move, one level to another to another, and ultimately it will go to the Supreme Court. So those who can defend themselves will do so till the bitter end. Those who cannot defend themselves have already suffered.
There are some parallels between the earlier NDA government headed by Atal Bihari Vajpayee and the present one, with both facing a major slowdown. What do you think is the fundamental difference in the handling of the situation then and now?
At that time, we faced a number of problems, including the problem of economic sanctions. And there was the East Asian crisis, economic sanctions, tech stocks had crashed, and crude prices had gone up from $8 to $35-$40. So apart from natural calamity and a failed monsoon year after year, we faced all these problems and we were really struggling to keep the economy on an even keel and take steps which would put it back on the growth path. And we succeeded after a herculean effort of four years. Because it is not possible to turn an economy around in one year or two months.
What is the fundamental shortcoming that you find in the economic management of this government?
As I have said in the article, they 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.
So what would you have done had you been the finance minister?
The first thing that I would have done was to arrest the rise in the NPAs or bad loans. Then to the problems of banks — attend to the problems of stalled projects and get as many of those projects going as possible so that the banks could also breathe easy. Then you could have taken a number of steps. Tell me, why is the telecom sector in distress today? It was one of the healthiest sectors in our economy and now it is the stressed sector. So this is only because of neglect. The information technology sector is feeling the pinch as foreign business seems to be contracting. We should have developed our business at home so that they could have employment opportunities here. There are a number of sectoral issues which should have been looked at, along with the larger picture of macro issues. That is what was needed. And if they can force their will on the Reserve Bank of India with regard to demonetisation, why couldn’t they persuade the RBI to bring down interest rate?
So, you think there was a case for deeper interest rate cuts?
I firmly feel that we should, in this country, follow a dynamic interest rate policy. If I am not forgetting, that was the recommendation of the committee of RBI that was appointed under the chairmanship of Venugopal Reddy — which said that there should be a dynamic interest rate, keeping in mind a real rate of 2 per cent above the rate of interest. Look at the level of inflation over a period of time — the time period could be three months or six months — and adjust your interest rates accordingly.
What, in your view, are the tangible reforms that this government has carried out in the last 40 months?
See, we must make a distinction between an actual economic reform measure and welfare measures to help the people. They have taken a number of steps for the welfare of the people, like the latest Soubhagya Yojana. But as far as real economic reform measures are concerned, except GST and the Bankruptcy Code, I don’t think any major steps have been taken.
What is your view of the ongoing debate on nationalism and related issues?
These are diversionary tactics to take people’s mind away from the real issues of their daily life into these trumped-up issues.
On Thursday, your son Jayant wrote an article outlining some of the reforms carried out by the government, and seeking to contradict your views. How would you react to it?
My simple reaction is that it is not a father-son issue, it is not a family issue with Jayant on one side and I on the other. That is not a national issue and, therefore, if anyone is trying to debase it or turn it into a family issue it should be condemned.
Your attack on the government’s economic management could well have an impact on your son’s political career, couldn’t it? That you had been silent for long was, perhaps, because of that?
If it is a question of national interest, other interests become insignificant. And if there is a collateral damage to his career, so be it.
Are there other issues that you, as a party member, find discomfiting now ?
Yes, there are other issues in the polity that are discomforting and naturally, they are having an impact on the economy also. Look at what has happened to the cattle-based professions and trade.
Given the kind of reaction your article has evoked, are you reconciled to the fact that now you could perhaps be more marginalised, and also the consequences?
I don’t care about that. I will go on performing my national duty and I will try my best to bring the focus back on the economy.
Do you have anything in mind beyond this?
No, nothing at the moment. We will see how things develop.
But are there any points on which you agree with this government?
There are a lot of points. Some of the steps they have taken are very welcome. Welfare measures that they have taken are welcome. The fact that it is generally a clean government is welcome. But as far as the economy is concerned, it is not enough.
You feel strongly about the delegation to Kashmir. You have done work on that, and apparently you had sounded out Rajnath Singh at that time and the delegation had the blessings of probably the home ministry. Is that true?
It’s not true, I had not sounded out anyone. We went there and came back and met Rajnath Singh. It was my first visit and we had a detailed discussion. Then subsequently, after my second visit, I asked for time from the Prime Minister. It’s been 10 months, but no time has been given. And after my third visit, I asked for time from Rajnath Singh. And it’s more than six weeks now, and he has not thought of it to give me time.
At this point of time, given the slowdown and the demand for a stimulus, possibly breaching the fiscal deficit, how would you look at it ?
I would strongly suggest, don’t breach the fiscal deficit. It will have unintended consequences and therefore the government should tighten its own belt and cut out all splurge and unnecessary expenditure and use that money for developmental purposes.
Now, are you ready to reconcile to whatever it is from within the party?
No, what I have in mind is to raise issues of national importance, out of which I consider economy to be very important, if not the most important. And I will continue to… whether I am listened to or not.
Are other MPs in touch?
No. As I said, I am not giving it the shape of a campaign, not contacting anyone. Yes, people have been rung me up, spoken to me, saying that you have done a good thing. But I am leaving it at that.
Do you think that is because they are all feeling vulnerable in the current set-up, with only 18 months to go for the next Lok Sabha elections?
Yes, and the threat that the party will not give them nominations.
In terms of institutional development, how would you compare 1998-2003 and now?
During 1998- 2003, a number of institutional changes took place. And during the last few years, I don’t see any.
Why do you think this has happened?
What can I say?
Or the fact that now you have a Prime Minister’s Economic Advisory Council?
The Economic Advisory Council has come so belatedly that it will not be able to deliver. It has come too late in the day.
With just a few quarters left until 2019, how do you foresee the economy?
They have one budget. Next year’s budget will be the last regular budget of this government, and the 2019 budget will only be vote-on-account. And whatever they do in the budget of next year will take its own time to produce results. So I don’t see results being produced before the election of 2019. Employment is the most important thing . The economy must grow, private investment must come, the demand in the economy must go up to absorb the present capacity, leading to the creation of fresh capacity.
In the next couple of quarters, do you see any significant changes happening in terms of economic management now?
I don’t know. Let’s just wait and see what the Economic Advisory Council recommends, and what the finance minister says in the budget of February 1.
Do you feel it’s time for a change in guard, now that you have directly blamed the person handling the finance ministry?
It is up to the PM. But I don’t see that happening, because reshuffles have taken place and that has not happened. The point is, we have lost precious time, and now very little time is left and a new finance minister will not be able to do much.