FALSE PROPHETS OF POLICY
Beware the economic prophecies of the UPA. Remember the time, not so long ago, when the UPA’s brains trust told us that inflation was a price that had to be paid for prosperity. That was in 2010- 11 when growth was 8.4 per cent and inflation was in double digits. Prosperity has since disappeared, with growth having fallen to around 5 per cent, but we continue to pay the heavy price of inflation. Sadly, no one in the UPA is accountable for what is either gross incompetence or plain lies.
Prime Minister Manmohan Singh, whom we once trusted for his safe pair of hands on the economy, has now stepped up to assure us that the “fundamentals of the economy are still strong”. He says that the rate of savings and investment in India are still among the highest in the world. Like the rest of his colleagues in UPA, the Prime Minister is hiding behind half- truths even as the economy sinks. Even an undergraduate studying economics could tell the Prime Minister that the fundamentals of the Indian economy are not strong.
The rate of inflation is an important fundamental. It is in a chronic state of hyperactivity, refusing to fall below 7 per cent. The fiscal deficit is a fundamental. At 5.9 per cent of GDP, it is out of control and with the Government unwilling or unable to cut subsidies, there is little chance of it showing improvement. The state of the current account deficit— the difference between imports and exports— is a fundamental. It is dangerously high at levels close to the crisis year of 1991. The combined effect of high oil prices and massive gold imports on the one hand and sluggish exports on the other have doomed the current account deficit to danger territory. As long as those fundamentals are awry, the rate of economic growth cannot recover to 7- 8 per cent or above. It will hover around 5 per cent, no matter what the Prime Minister says.
Even the rates of saving and investment the Prime Minister is showing off are well below their peak levels. Private investment, in particular, has suffered, not only because of the Government’s policy paralysis but also because excessive government expenditure is reducing the availability of resources for use by the private sector.
It is widely accepted that private sector is way more efficient in delivering outcomes than government expenditure, much of which is wasted. The Prime Minister, as the father of economic reforms, knows that well, but he refuses to acknowledge it.
If the Prime Minister wants to talk fundamentals, he needs to talk about the extraordinary ability of Indian entrepreneurs to get things done despite all odds. He needs to talk about the industrious aam aadmi who drives the economy through his consumption despite the Government’s best attempts to rob him of purchasing power. India’s entrepreneurs and citizens can revive the growth story, but first the Government needs to get out of denial mode and correct the policy fundamentals that are in its control.
Manmohan Singh may not lead the Congress at the next General Elections, but whoever does will have to pay the price for the false prophecies of this disastrous Government. The much vaunted dream team of economic policy has delivered a nightmare.
LIKE THE REST OF HIS COLLEAGUES IN UPA, PRIME MINISTER MANMOHAN SINGH IS HIDING BEHIND HALF- TRUTHS EVEN AS THE ECONOMY SINKS.