In an era of global convergence, it is hardly surprising if the government’s response to criticism of its handling of the economy appears to reflect a template. The blame-game regarding the state of the economy, featuring Union finance minister, Nirmala Sitharaman, and former prime minister, Manmohan Singh, in some ways mirrors the scenario in the US, where President Donald Trump has blamed not just the US Federal Reserve and its chairman, Jay Powell, but also the Democrats for trying to will the economy to be bad before the election next year. The backdrop to this is the release of indicators that has fuelled concerns about a slowdown. With multiple economic indicators showing that the slowdown is deepening, a fact confirmed by the International Monetary Fund and the Reserve Bank of India, which have sharply revised the growth rate for FY20 downwards, criticism by economists and others seem to have rankled the government further.
At an event in the US, Nirmala Sitharaman said India’s state-owned banks had their worst phase when Singh was the prime minister and Raghuram Rajan the RBI governor. That seemed to have provoked Singh to retort that unable to find a solution to revive the economy, the Narendra Modi government was blaming the UPA. It is true that the roots of the banking sector can be traced to the second term of the UPA government, which was marked by several scams. The voters recognised that by punishing them in the last two elections. Blaming another messenger of bad news — Rajan — too seems strange. It was during Rajan’s tenure that the process to clean up the banking system through the Asset Quality Review was initiated. The voters, who have rewarded the NDA with a second term, expect that it would put the economy back on track. It is unfortunate that instead of shutting out the noise, the government is getting distracted by criticism, especially at a time it has indicated a willingness to course correct, as reflected in the corporate tax cuts and other changes, and thereby rekindling investor interest. The biggest risk in these public exchanges is a further erosion of faith that can dampen investment.
The Modi government cannot, and should not, squander its second term by reacting to such criticism. Rather, stepping the gas on a range of reforms and hunkering down as these changes play out over the next couple of years, and at a time when conventional monetary and fiscal policy tools look inadequate globally, should top the government’s agenda.