By Vipin Pubby
A newspaper article by former union finance minister, Yashwant Sinha, who has been sidelined and made a member of ‘margdarshak mandli” of BJP, regarding the state of economy has stirred a hornets’ nest. Even though Sinha is considered a ‘rebel’, and may be having personal biases, he has articulated views that would find resonance even within a section of die hard party supporters.
In the edit page article in The Indian Express titled “I need to speak up now” he said the economy was “on a downward spiral (and) is poised for a hard landing. Many in the BJP know it but do not say it out of fear”.
He went on to say that union finance minister Arun Jaitely had made a”mess” of economy and that the growth rate has drastically come down due to government policies. “The PM claims he has seen poverty from close quarters. His FM is working overtime to make all Indians also see it from equally close quarters”. Interesting while the article attacks the FM, the actual target appears to be prime minister Narendra Modi himself. He even said that it was clear that Jaitely would become the finance minister even before the Modi government was formed.
Sinha’s views have come at a time when the economy is faring badly and the two major economic reforms undertaken by the Modi government are coming under close scrutiny. Both the shocking decisions on demonetisation, which sucked out 86 per cent of the currency at one ago, and the implementation of the Goods and Services Tax (GST) which caused havoc among trade and business, have come under severe attack.
The shifting of goalposts since the announcement on demonetisation is a well known fact. None of the major justifications given in the prime minister’s announcement about demonetisation, or the goals set to reap benefits of demonetisation, have been achieved. He had said that curbing of black market and choking of funds to terrorist organisations was the main motive behind demonetisation. It is evident that none of these goals have been met.
The government subsequently said the aim was to suck out counterfeit notes and unofficial figures gave an impression that the government was not expecting more than 90 per cent of the currency in circulation, including counterfeit currency, to be returned to the banks. By government’s own admission about 99 per cent of the currency notes released by the RBI have been returned to the banks. Clearly, the government failed to exclude counterfeit notes from circulation or those in the business successfully deposited such currency, may be with the connivance of bank officials.
The government then shifted the goalposts to say that the main aim was to make India a cash-less society. When that did not click, it settled down to say that the aim was to make it less-cash society. Apparently even that has not happened.
Besides the huge inconvenience it caused to the ordinary people, with long queues outside banks and ATMs, the step had taken a huge toll of the small and medium industry as well as those who were self-employed as they were not able to pay wages. The poor implementation of demonetisation and lack of preparedness for the aftermath were equally responsible for the blunder. For instance, instead of preparing for it by printing huge quantities of Rs 100 and Rs 500 currency notes, it introduced the high denomination Rs 2000 notes.
Even as people were coming to terms with demonetisation and attempting to rebuild their businesses, came the other ill prepared implementation of GST. Again proper homework was not done even though it was a good measure and has been successfully implemented in some countries. Broadly speaking the large number of slabs and exemptions, together with lack of clarity and training, has made a mess of a progressive measure.
The two major steps in a short period of time have given a huge shock to the economy. The GDP has dipped by over two per cent to merely 5.7 per cent. India has lost the momentum it had gained to become the fastest growing economy.
Yashwant Sinha has found the right time to hit the government. Although he has targeted the finance minister Arun Jaitely but clearly he was aiming at prime minister Narendra Modi. The opposition Congress, including former Finance Minister P Chidambaram, has expectedly latched on to his comments to criticise the government but even a section of economists are now questioning the implementation.
In his stinging reply, Jaitely said Sinha was a “jobseeker at 80”, evidently to allege that Sinha was keen to get a ministerial post. However he did not refute any of the figures given by Sinha. Instead he took the plea that he doesn’t “have the luxury of being a former Finance Minister who has turned a columnist. And therefore, I can conveniently forget about a policy paralysis, I can conveniently forget the 15 per cent NPAs (non-performing assets) of 1998-2002, I can conveniently forget the $4 billion reserves left in 1991. And I can switch over and change the narrative,” he said while taking digs both at Chidmabaram and Sinha. He, of course, defended the demonetisation as well as implementation of GST.
To be fair to the government, it had done so with good intentions and deserve credit for taking initiatives after years of inertia. Modi and his government may have also been aware of the political risks involved in taking such drastic measures. It must also be credited for curbing corruption at the highest levels although the same can’t be said about corruption at lower levels and particularly that affecting ordinary people.
But with popular sentiments taking a turn, and experts questioning the moves, the government needs to start worrying. It can’t roll back the measures but it should listen to professionals and seek advise on how to deal with the situation. Sitting on ego won’t help.