FALSE PROPHETS OF POL­ICY

India Today - - SIGNATURE -

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.

SAU­RABH SINGH / www. in­di­a­to­day­im­ages. com

DHI­RAJ NAYYAR

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