Now That Dr Manmohan Singh Has Spoken, It’s Hard To Remain 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 the Business Standard on bank frauds, on ‘national losses’, and on ‘economic mismanagment’. It is hard to take criticism on economic mismanagement from him. Sorry, sir. He presided over economic mismanagement for 10 years.

Yes, like him, I am also choosing my words carefully. I deliberately said that he presided over it for 10 years, not restricting myself to his second term. In the first term, whatever his government did, showed up in the second term, and they were obscured by the global economic boom. The rising global economic tide lifted many leaky economic boats. India was one of them.

Just what can governments do about bank frauds? It is the job of the bank management to avoid or 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 election of 2009. Even the National Democratic Alliance (NDA) government is not thinking about it. If it did, would his party support it?

He is regretting that the NDA government did not pass on the benefits of lower crude oil prices to Indian consumers. Quite right. 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 per cent that his government achieved in 2013-14 was a myth, and its target of 4.1 per cent was hence significantly overambitious.

Taking advantage of the dramatic drop in the price of crude oil, the NDA government chose to mobilise 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.

Dr Singh is talking about massive losses to the country. Just how does he measure losses 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 6-6.5 per cent. So, how exactly does he measure ‘losses’?

Perhaps he has demonetisation in mind. But, just this week, the usually critical (of Modi, NDA, Bharatiya Janata Party, and Hindu nationalists) Financial Times wrote that both demonetisation and the introduction of the goods and services tax would go down as Modi’s greatest economic legacy.

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

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 Dr Singh led for a decade. However, one of the errors of commission of this government is the perpetuation and deepening of ‘tax terrrorism’ initiated by Dr Singh’s 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.

This piece was first published on the writer’s blog and has been republished here with permission.