When he talks, we cannot be silent

Dr. Manmohan Singh might have earned the distinction of being a ‘maun’ (silent) Prime Minister. But ,when he talks, it is difficult for others to remain silent.

I saw his remarks in ‘Business Standard’ on bank frauds, on ‘national losses’ and on ‘economic mismanagment’. It is hard to take criticism on economic mismanagement coming from him. Sorry, Sir. He presided over economic mismanagement for ten years.

Yes, like him, I am also choosing my words carefully. I deliberately said that he presided over it for ten years, not restricting myself to his second term. The consequences of whatever his government did in the first term showed up in the second term because, during his first term, the global economic boom helped hide weaknesses. Rising global economic tide lifted many leaky economic boats. India was one of them.

Quite what governments can do about bank frauds? It is the job of the bank managements to avoid or to detect them in time. The government could privatise the public sector banks. His government did not do that. If his government did that, he could not have announced a massive waiver of farm loans one year before the elections of 2009.  The NDA government too is not thinking about it. If it did, will his party support it?

He is regretting that the NDA government had not passed on the benefits of lower crude oil prices to Indian consumers. Quite correct. This government did not do it and should have done it. But, he should know why and he should be embarrassed about it.

This government chose to make good a hollow fiscal deficit target that his government had bequeathed. The fiscal deficit target of 4.9% that his government achieved in 2013-14 was a myth and its target of 4.1% was hence, massively overambitious.

Taking advantage of the dramatic drop in the price of crude oil, the NDA government chose to mobillise tax revenues to legitimise a bogus fiscal deficit target. It was a mistake. The NDA government should have made haste more slowly and should have taken the nation and the world into confidence about the economic mess, including the fiscal mess, it had inherited.

He is talking about massive losses to the country. Quite how does he measure lossses for the nation? Over what time frame? If anything, the 2008 global crisis and the fiscal deficit + current account deficit + double digit inflation record of his government had lowered India’s potential growth rate to a range of 6.0% to 6.5%. So, how exactly does he measure ‘losses’?

Perhaps, he has demonetisation in mind. But, just this week, the usually critical (of Modi, NDA, BJP and Hindu-Nationalists) FT wrote that both demonetisation and the introduction of GST would go down as Modi’s greatest economic legacy:

The numbers are so stark that some say it will go down as Mr Modi’s greatest economic legacy, while others are offering India as a model for other developing countries looking to tackle widespread tax evasion. (Source: https://goo.gl/ejqCg4)

The numbers that the journalist is referring to is the increase in the number of people filing tax return.

In short, the NDA government is guilty of many acts of omission on the economic policy front. Chief among them is its failure to understand the gravity of the economic situation it was inheriting from Dr. Singh’s government.

It is not guilty of many acts of commission. That honour belongs to the government he led for a decade.  However, one of the errors of commission of this government is the perpetuation and deepening of ‘tax terrrorism’ initiated by his government.

But, set against that could be its many structural reforms that might help future  governments and elevate the future growth rate of the country.

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6 thoughts on “When he talks, we cannot be silent

  1. I understand you have a special liking (or not) for MMS but given the handicaps he had (coalition govt, not being elected, major global financial and oil headwinds) I think he did alright. Most of the ideas being implemented by Modi like Aadhar, MNREGA, GST all have had been started during MMS time only.

    So when you say Modi has bought in structural reforms to the economy, did you mean only GST and IBC or a whole new way of doing business or governance in India.

    Shouldn’t a strong leader with a single party majority govt with huge global tailwinds (oil & financial) have done much more. Bangladesh and Vietnam have done much better in this global environment.

    Its been a wasted mandate in my opinion.

    regards !!

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    1. First part of your first paragraph – disagree. GST started much much before MMS.

      I am afraid, in my book, it is very far from ‘he did alright’. The banking crisis in India is substantially due to cronyism and corruption in the UPA years from 2005 onwards.

      Structural reforms: GST, IBC, tax ratio improvement, financial inclusion, DBT.

      Agree with the third paragraph.

      Liked by 1 person

      1. Just as a side note, I think India will continue to add record IT payers more due to our population profile as more and more young people start employment and less due to any government push.

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  2. I’m confused, is the following a crime of commission or omission:
    https://economictimes.indiatimes.com/news/economy/policy/budget-2018-has-ensured-the-return-of-protectionism/articleshow/62876012.cms

    Hasmukh Adhia is arguably the most despicable babu around these days, belongs to the Gujarat cadre with a Phd In Yoga. While there is nothing wrong with whatever the heck someone wants to do a PhD in, at least MMS would have kept such people away from finance. I have no problem if he wants to run a Yoga ministry full-time but please stay the heck away from finance. I think he is responsible for the fact that I’m seeing 50%+ customs duties on computer parts that I need to order today. If he is, I’m going to swear off Yoga and Gujarat forever.

    Targeting tax evasion is nothing to be proud of when we are languishing at 143 in the economic freedom rankings. Reforms, improved economic conditions, economic freedom, revival of investment should have come first as part of a holistic vision. If there are more incentives for reinvestment, perhaps people won’t mind so much about reporting their income. The sceptic would argue that tax revenue maximization is simply going to go into filling political coffers and/or funding populist programs, so perhaps it would have been better if it had not been done. And then the libertarian would argue that taxes are better in private hands, even more so when you have a dysfunctional state. Nothing to get excited about when FT reports something or when other bureaucracies start seeing something in India that they like.

    While MMS might have been a moron, I’ll echo Aroon Shourie: BJP = Congress + cow.

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    1. Good and robust comment on the tax terrorism angle. I had acknowledged it here and also written about it more than once, in MINT. I have also written that, when it comes to economic policy, India is a one-paty State. So, this was a specific response to Dr. MMS’ comments.

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