Delhi Deputy Chief Minister and Finance Minister Manish Sisodia issued the following statement on the worrying condition of the country’s economy :
Two former Finance Ministers of India, Mr Yashwant Sinha and Mr P Chidambaram, both of whom have presented atleast 10 union budgets between them, have sound a very serious alarm on the current situation of Indian economy.
Mr Yashwant Sinha has today reiterated what many leading economists have been saying since recent months that – INDIAN ECONOMY IS ALREADY IN A MESS, IT IS FURTHER HEADED FOR DISASTER.
The current worrying condition of Indian economy, which is a matter of national concern and not a party specific issue is because the individuals running the Central Government have little understanding of economic policies.
From fastest growing economy, the Modi government has thrown the Indian economy into a free fall, which will have disastrous consequences for the country.
How has the BJP’s Central government Driven India’s Economy into Ground
Point 1 – BJP came to power in 2014 on the promise of complete economic transformation of the country. As Yashwant Sinha ji expressed today, it seems the BJP has achieved its goal in three years. The country’s economy is in complete shambles.
- All key economic indicators show that the Economy is going through its worst in many years. From being world’s fastest-growing major economy just one year ago, we have become a “free-fall economy” with slow growth, low investmentand no jobs.
o Lowest GDP growth rate since 2014 – Our growth rate has fallen consistently over the last six quarters from 9.1% in Jan-Mar 2016 to 5.7% last quarter – the lowest since 2014. This is a catastrophic fall especially since 1 per cent lower annual GDP growth = loss of Rs 1.5 lakh crore national income and loss of millions of jobs. Manufacturing and Agriculture sectors, which employ a majority of Indians, have suffered the worst decline.
o Lowest Private Investment in 25 years – Fresh investments by the country’s top 1000 non-financial companies hit a new low of just 5.8% growth in fiscal year (FY) 2016-17, the slowest since 1992. In absolute terms, these companies invested only Rs 2.07 lakh crore in FY17 as against an all time high of Rs 5.7 lakh crore in FY 14.
o Lowest Job Creation in 8 years–Most worryingly, the state of the economy throws into dark the future of 1.2 crore Indian youth entering the job market every year. PM Modi promised to create 1 crore jobs every year and launched Skill India, Startup India and Make in India. None of these have worked so far as official figures from the Labour Bureau show that only 1.55 lakh jobs were created in 2015 and 2.31 lakh jobs in 2016. Besides manufacturing, massive job cuts are being reported from service industries such as IT and Banking.
(The picture of gloom in Indian economy is being echoed everywhere – all of the country’s financial media houses, most reputed industry leaders (SBI, Hindustan Lever, L&T etc.) have all expressed that the economy is in crisis.)
The big question therefore is how did we get here?
Point 2 – Decisions have been based solely on political rhetoric rather than sound economics or common sense. As a result, major financial reforms have been botched up
- Demonetisation was a complete failure– We all know whose decision was it. It’s clear now that Demo had negligibleimpact on black money, and ended upcreating an unprecedented crisis in agriculture and SME sectors. The unprecedented spate of farm loan waivers by several state governments are the legacy of demonetisation. Overall, 15 lakh jobs were lost and 150 people died due to hardship caused by demonetisation. Who is answerable for this man-made disaster?
- Botched up GST design and rollout– GST was widely accepted as a positive reform for the Indian economy. But thanks to this government’s incompetence, today we have among the most complicated GST structure globally which is causing severe compliance issues, lower than expected tax collections and a crisis-like situation in sectors such as textile.Moreover, tax slabs of many items are as high as 28%. In comparison, Delhi’s experience – based on sound economics – shows that reducing tax rates to 5% or 10% increases compliance and overall tax collections.
- Raid Raj– Post demonetisation and GST rollout, Raid Raj is now an accepted way of functioning in the Finance Ministry. In February this year, Section 132 of the IT Act was amended to legalise tax raids on people based on mere suspicion or unsubstantiated rumour. In comparison, Delhi has shown in the last 2 years that putting a complete stop to Raid Raj only boosts confidence among the traders and industry and spurts economic growth.
- Formation of Economic Advisory Council after 3 years– acceptance that decisions in past 3 years were devoid of sound economics
Point 3 – Strong economies cannot be built on a foundation of fear and intolerance
- India’s greatest strength has been its culture of tolerance and protection of constitutional rights
- However, over the last 3 years, a climate of hate and intolerance is being systematically propagated by the ruling party. Journalists are being killed, media has been become state puppet and opposition parties are being victimised through state institutions.
- Even the former RBI governor and one of world’s topmost economists, Raghuram Rajan, said earlier this month that intolerance will derail India’s economic growth.
Point 4 – Difficult yet most urgent structural reforms have been ignored because they they are not glamorous
- Issue of NPAs– Right from when this government took charge in 2014, it was clear that NPA issue in Indian Banking sector was the severest in its history. Three years have passed, and the problem has only worsened and reach to the point of Rs 8 lakh crore in loan defaults. This is adversely affecting private investment and job growth
- Black money– Tall claims have been made that this government was serious is tackling black money. Yet, there has been no action on the Swiss bank accounts and Panama papers issue.
- Monetary Policy– RBI has been too inflation focused leading to artificially high interest rates and dampening of investment and consumption
- Minimum wages– Private consumption will increase only if there is more disposable income in each household. While the Centre has accepted the 7th Pay Commission Recommendations, what about minimum wages in all sectors including for NREGA workers? Earlier this year, Delhi government took a historic decision on this front and increased minimum wages for unskilled, semi-skilled and skilled workers by 37%
The Aam Aadmi Party demands that Modi government should take immediate corrective measures to save the country from an economic disaster. It should not sit in ego and must consult all stakeholders, including elected state governments on how to salvage the situation.