Opinion If FM Sitharaman can take credit for economic success, she must take blame for failures

In her speech in the recently concluded session of Parliament, the FM pleaded helplessness about such a steep increase in costs for the Indian family and blamed it on external factors such as the Ukraine war, global inflation etc. But when such costs declined from 2014 to 2019, the FM never missed an opportunity to take full credit for herself and her government and equally, castigated the then UPA government for high inflation between 2009 and 2014.

The truth is much simpler. Crude oil (Indian basket) went up from an average price per barrel of $80 in 2009 to $106 in 2014, came down to $70 in 2019 and has climbed back up to $101 now. The rise and fall in the cost of a dal dinner for the Indian family is synchronous with global crude oil costs, regardless of which government is in power. While levels of inflation may change, the trend of domestic prices is tightly correlated to global crude oil costs.

Similarly, the FM gloated in Parliament about how India will be the world’s fastest-growing economy this year but when India’s economy was among the world’s worst in 2020, she famously blamed it on an “act of God”, the Covid-19 pandemic. If India’s economy is growing fast this year, it’s the same “God” who deserves credit, since it’s nature’s law that when something falls sharply, it will also rebound sharply.

Fleeing foreign investors have triggered a collapse in the value of the rupee. The FM and her cheerleaders’ defence is that the rupee is not falling, only the dollar is gaining or that other currencies have fallen even more, akin to a defeated sportsman’s laughable excuse that he did not lose, only his opponent won. But when foreign inflows were strong in previous years, in a heartbeat the FM proclaimed that the same foreign investors were flocking to India enamoured of the Modi government. The reality is that a weaker rupee makes a dal dinner much more expensive for the average Indian family and it is of no solace to them that the Bangladeshi or the Sri Lankan family is paying even more for their dal.

There is also much nationalistic chest-thumping by the FM and her cheerleaders about India’s stout defiance of Western wisdom to provide a large fiscal package during the pandemic which, in their view, has now caused runaway inflation in Western countries. But the data completely contradicts such gloating. India’s fiscal package in 2020 was a measly 10 per cent of GDP, compared to the US’s 28 per cent, Canada’s 20 per cent, Germany’s 43 per cent and Japan’s 45 per cent. As a direct consequence, India’s economy was the worst hit, with a negative 6.6 per cent growth (FY2021 real GDP) vis-à-vis the US’s -3.4 per cent, Canada’s -5.1 per cent, Germany’s -4.6 per cent and Japan’s -4.5 per cent. And in FY2022, India had the highest inflation among all these countries. So, India neither avoided the high inflation of other nations nor a steep GDP fall. In fact, there is much to be embarrassed about in India’s pandemic economic management.

If there is one issue that affects nearly every Indian, it is the state of the nation’s economy. Politics is the only legitimate medium to voice concerns and raise issues that affect the common people. India’s economic condition is not merely a topic for debate among elite economists and technocrats but a burning political issue. Such a serious issue warrants a serious discussion in Parliament and state legislatures, not just among policymakers and commentators in the media. Unfortunately, the current discussion on the economy has been reduced to a political “tu-tu, main-main” (blame game) for which both the government and the Opposition are equally culpable.

The discussion on the value of the rupee should be about how a strong rupee is not a sign of a nation’s strength and a weaker rupee may boost exports and create jobs. But it can also cause “mehengai” (price rise) through imported inflation and every government has to strike a delicate balance. It would help the nation greatly if the FM would boldly explain this to the people rather than hide behind a “rising dollar” excuse and if the Opposition could demand a coherent currency strategy rather than make puerile jokes about rupee value and ageing leaders.

Similarly, the discussion on increasing GST rates should have been about progressive direct taxes that affect the rich more than the poor versus regressive GST which affects the rich and the poor alike. In 2010, out of every 100 rupees in Union government taxes, corporate taxes accounted for 40 but today they only contribute 25. So, the tax burden has shifted enormously from corporates to individuals. The Opposition should have clamoured for correcting this skew by reversing the indiscriminate 2019 corporate tax cut, rather than make some facile and factually wrong arguments over paneer and crematorium taxes.

The quality of discourse in a democracy shapes its future direction. India’s economic future will be shaped by the quality of political discussion on economic issues. Parliament is the appropriate forum to raise such issues in the larger spirit of finding solutions to India’s woes and not for shallow, tit-for-tat political rhetoric. Both the government and the Opposition must share equal responsibility for this. India’s state of the economy is far too important to be left just to technocrats or social media memes.

The writer is chairman of the data analytics department of the Congress Party