Debates over the Indian Economy are a never ending tug of war between various politicians and economic experts who regularly differ over its assessment. A similar “war of thoughts” was recently unleashed by senior BJP leader and former Finance Minister Yashwant Sinha who wrote an article titled, “I need to speak up now”.
In the article, Sinha makes sweeping charges against the Modi government and its management of the Indian economy. He claimed that what he was about to speak, echoed the sentiments of a large number of people in the BJP who weren’t speaking out due to fear.
After taking a jab at Arun Jaitley having being made the Finance Minister even after losing his Lok Sabha election and for handling more than one important ministry (Like defence) which according to him resulted in lack of focus, Sinha began his economic assessment.
He claimed that Jaitley was lucky with depressed global crude oil prices which put lakhs of crores at his disposal. He claimed that this bonanza should have been imaginatively used but it was wasted and legacy problems like NPAs and stalled projects remained.
He broadly claimed that private investment had shrunk, industrial production has collapsed, services, exports have slowed down, demonetisation was a disaster, a badly conceived and poorly implemented GST had played havoc with businesses and countless millions had lost their jobs.
He also pointed out the declining growth rates which reached a low of 5.7% in Q1 of 2017. Plus he pointed out the fact that the central government had changed the GDP calculation to statistically increase the growth figures by 200 basis points or 2% which might mean that the economy is in an even worse shape than what is currently portrayed.
He claimed that PM Modi is worried by it all and Finance Minister who had promised a growth reviving package, had not yet delivered on that front. He kept going further by claiming that the Small & Medium Enterprise (SME) sector was stressed and also lamented the possible new age Tax terrorism. He finished the article by claiming that the Indian economy was scheduled for a hard landing and also took a parting jab at Jaitley.
Such a damning article by a leader of Yashwant Sinha’s statue who himself had been carried out path-breaking reforms in sectors like petroleum and telecom, meant that the media was sent into a tizzy. The high profile coverage of the article led the Modi government to respond and it cheekily chose Jayant Sinha (Yashwant Sinha’s son) to lead the front.
Jayant Sinha fired the counter-shots via a blog titled, “New economy for new India: Fundamental changes put in place for an open, transparent, competitive and innovation-driven economy”.
After claiming that “several articles” were written about the challenges being faced by the Indian economy, he claimed that, they drew sweeping conclusions from a narrow set of facts and missed the fundamental structural reforms which are transforming the economy.”
He claimed that these reforms are necessary to create a ‘New India’ and provide jobs for one-billion strong workforce. He also claimed that the new economy which will be created would be, “ transparent, globally cost-competitive, and innovation driven”. Even though for obvious reasons he didn’t provide a point to point counter to Sinha senior’s article, he decided to approach it by listing out his government’s schemes and how they are designed to benefit the nation:
- He claimed that GST and demonetisation were designed to formalise India’s economy by bringing transactions into the tax net which in the long term would mean more resources at the state’s disposal and less economic friction meaning higher GDP.
- He claimed that licenses were being allocated transparently and a new bankruptcy code would mean a relief to the bank’s NPAs.
- He pointed out that FDI had increased from $36 billion in FY2014 to $60 billion in FY2017 which means confidence in the economy.
- Schemes like direct-benefit-transfer which are designed to bring in transparency, Atal Innovation Mission, Mudra programme, StartUp India and massive infrastructure revamp, found a mention.
- Drums were beaten about the almost completed achievements like 100% village electrification by 2018 and road construction pace had gone up to 133 KM per day.
Overall this article talked about the designed impact of the government’s schemes on the Indian economy without really being more forthcoming about Yashwant Sinha’s concerns. Though it might be argued that Sinha senior himself didn’t back many of his claims with numbers which made it easier for Jayant Sinha to “conveniently ignore” them.
Today entrepreneur, Rajya Sabha member and NDA Kerala Chairman, Rajeev Chandrashekhar too decided to step into the whole “article wars” by writing an article intelligently titled, “I too need to speak up now”.
This article which was openly a rebuttal to Yashwant Sinha’s piece, claimed that Sinha had joined others in a desperate attempt to build a narrative of a failing economy which can’t be further from the truth.
He mentioned the ironic embrace of Sinha’s article by Chidambaram and pointed out that Sinha himself had written that he (Chidambaram) presided over the destruction of the economy during UPA 2.
Rajeev also claimed that Sinha’s article was not factual and was dictated by his antipathy to the government. He claimed that Sinha had not compared the relative health of the economy as compared to the “dark and dangerous” UPA days which had meant 12 consecutive quarters of GDP decline, 24 quarters of rising inflation, a record deficit of $400 billion, plummeting investor confidence among others.
He claimed that Modi government after inheriting such a dilapidated economy, slowly built it back over the last 3 years which has meant, GDP and per-capita income growth, high FDI and foreign exchange reserves, end of crony-capitalism in public sector banks and high medium to long term investor confidence.
He claimed that some of the challenges faced by the government are global like disruptive changes in manufacturing thanks to sharp increase in automation leading to loss in jobs.
He also poked holes in Sinha’s claims that “petroleum windfall” wasn’t managed properly. Rajeev claimed that the charge was vague and the government had indeed used the cash to fix the devastated balance sheets of the oil marketing companies, increase public spending in programmes, subsidies and infrastructure.
He took on the badly implemented GST and failed demonetisation charge by Sinha and claimed that short term disruptions were expected and conceded that implementing GST so soon after demonetisation compounded the the short-term-impact. This timing though according to him, was determined more by the oppositions reluctance to let the bills pass earlier.
He also called the criticism of the GST as laughable as all its featured were derived after taking the Opposition in Parliament, state legislatures and the GST council in confidence. Further he claimed that if indeed the heightened compliance rate continued, the tax structure might be simplified in the near future.
While talking about the aspect of low GDP growth, Rajeev stated that government intervention was a legitimate demand but it shouldn’t be a knee jerk reaction which in 2008 resulted in inflation and fiscal challenge.
He concluded the article by claiming that Sinha was off the mark in his assessment of the present situation which was perhaps a case of personal dislikes overcoming facts and reality.
Finally, one major point which was skipped by both the respondents was about the NDA government changing the GDP calculation which others too have expressed their reservations about. Having said that, it remains to be seen if such counter arguments result in Yashwant Sinha elaborating on his allegations and even possibly responding to the responses that have come his way.