Former Prime Minister Manmohan Singh on Sunday said the Narendra Modi government had left the economy in “dire straits” because of its “lack of economic vision”.
“The finance ministry’s latest monthly report now reflects that the country is headed for a slowdown and it has revised the GDP growth figures for this quarter (January–April) to just 6.5 per cent,” Singh said, in an interview to PTI.
Declining growth of private consumption, tepid increase in fixed investment and muted exports are the key factors that have led to this situation, he said.
“I have no qualms in saying that the Modi government has left our economy in dire straits,” Singh said.
“The current government boasts of getting investment, but the reality is that FDI (foreign direct investment) growth is at a five-year low. Core (infrastructure) sector growth is at a two-year low. Rupee has become Asia’s worst-performing currency. All these are a cause of serious concern,” said the economist who as finance minister had ushered in economic reforms in India in 1991.
Had the Modi government followed the path shown by the previous governments of high economic growth and rapid development, the country could have eliminated poverty in the last five years, he said.
“Instead, they inflicted disruptive and unnecessary decisions like demonetisation on the economy. This is borne out of a lack of economic vision or understanding the dynamics of our economy,” Singh said.
The two-time Prime Minister described demonetisation as perhaps “the biggest scam” of independent India that had dealt a blow to the country’s economy and decimated the informal and unorganised sectors, turning crores of people jobless.
“This was nothing but a criminal act of betrayal for those people who elected this government with such a brute majority,” he said.
Given the “extraordinary majority the Modi government enjoyed in Parliament, they could have used their political capital to reap benefits for India on the economic front,” Singh said. “Unfortunately they have fallen flat,” he added.
The Congress’s Nyay or minimum income for poor scheme would usher in a new model of social welfare and prudent economics, Singh said, speaking about the party’s election promise to give Rs 72,000 a year to the country’s 20 per cent poorest families. Economic benefits would raise consumption levels, kick-starting growth, he said.
“We think that spending 1.5 per cent of GDP for 20 per cent of the population is absolutely fair and just. The Congress party is also committed to fiscal discipline. Our nearly $3 trillion economy has the fiscal capacity to absorb this expenditure,” he said.
“There will be no need for any new taxes on the middle class to finance Nyay (Nyunatam Aay Yojana or minimum income scheme). Only those who have no compassion for the poor will oppose Nyay,” he added.
The Congress promises to review and replace the current GST laws with a GST 2.0 regime that will truly reflect the intent and purpose of a non-cascading, value-added, indirect tax, he said.
“Our economy is still over-regulated. Structural problems remain. Government control and bureaucratic interference are aplenty. Regulators have morphed into controllers. There is growing interference by the courts in economic policies. We would not have treaded this path,” he said.
The Congress’s economic philosophy is based on embracing the idea of an open and liberal market economy, creation of wealth, sustainable development, and reduction of inequalities as also assurance of welfare of all sections of people through inclusive growth. “We would have followed all this with more vigour,” Singh said.
The banking sector is “under severe stress” and the way out of “this mess” is to reverse some “gross distortions”, work closely with the RBI, re-start the process of credit delivery and ensure sufficient liquidity and cash in circulation.
“A comprehensive review of the concept, role and functions of public sector banks in order to make them robust and competitive with healthy balance sheets is the need of the hour. Dispute redressal and priority lending is the key,” he said.
The bad debt “scare” has brought lending to a virtual halt, the former Prime Minister said, adding that a “one-size-fits-all approach” drove companies into insolvency while demonetisation shut out all sources of informal credit.
Singh said there are no jobs in the country because Modi snatched 4 crore jobs from India’s youths and imperilled their future.
“Unwitting and ill-conceived decisions of demonetisation and a flawed GST, coupled with tax terrorism, have dealt a body blow to both organised and unorganised sectors,” he said. Small, medium and micro enterprises are reeling under adverse and painful effects of the “double whammy” of demonetisation and GST, he said.
Industrial growth in 2018 is at 4.45 per cent, as compared to an average 8.35 per cent during the Congress-led UPA regime (2004-2014).
Asked if he sees a “wave” in favour of one person, as in 2014, Singh replied: “I cannot foresee any wave for a particular person in this election. The only wave which is clearly visible in the present day context is the wave against unemployment, a wave against rampant agrarian distress, a wave against the decimation of our small and medium enterprises and businesses, a wave against persecution and prosecution of our deprived sections, a wave against the snatching of rights from the poorest of the poor, a wave against the denigration of our institutions, a wave against the politics of division. This is the only wave I can see.”