Summer of 2014 to autumn of 2017
I did not set the cat among the pigeons. In fact, my grievance was that nothing that more knowledgeable persons (leave aside my views) wrote or said seemed to have any effect on the government and its management of the economy. A course correction was not effected or even hinted at. On the contrary, the government steadfastly and stubbornly maintained that “God is in heaven and all's well with the world”. Quite unexpectedly, Mr Yashwant Sinhawrote a centre page article in The Indian Express on September 27, 2017. I did not rush to endorse him, I simply pointed out that Mr Sinha had said the same things that many others and I had been saying for 15 months. Mr Sinha Agrees Let's look at the main points of Mr Sinha's article ( and how they coincided with the views I had expressed in this column on the dates mentioned below): 1. that the BJP/NDA government got an unprecedented oil bonanza that was wasted (January 14, 2016) 2. that private investment has shrunk as never before in two decades (January 15, 2017) 3. that industrial production has all but collapsed (June 11) 4. that exports have dwindled (January 1) 5. that demonetisation has proved to be an unmitigated disaster (September 3) 6. that a badly conceived and poorly implemented GST has played havoc with businesses and sunk many of them (July 2) 7. that countless millions have lost their jobs with hardly any new opportunities coming the way of the new entrants to the labour market (April 9) 8. that the growth rate of 5.7 per cent is actually 3.7 per cent or less Naturally, the government is red-faced and livid and is pulling out all the stops to heap ridicule and abuse. The Promise Belied The summer of 2014 held great promise. The BJP was the first party in 30 years to form a government with an absolute majority. It inherited an economy that had accelerated from 5.5 per cent in 2012-13 to 6.4 per cent in 2013-14 (the government's numbers). Inflation had begun a steady decline from 10.5 per cent in September 2013 (thanks to breaching the fiscal deficit and expenditure limits) to 5.77 per cent in June 2014. The current account deficit had been contained at 0.24 per cent in the quarter January-March 2014. The stage had been set for bold structural reforms. The socalled ‘legacy' problems is a fake argument. Every government will inherit some issues and it is expected that the government will address them. Fast forward 40 months. The autumn of 2017 presents a bleak picture. Economic growth decelerated to 5.7 per cent in April-June 2017; CAD climbed up to 2.4 per cent in that quarter; industrial productions shrunk by 0.17 per cent in June and grew by a paltry 1.2 per cent in July; and an estimated 1.5 million jobs were lost between January and April 2017. How did we go from the great expectations of the summer of 2014 to the disappointing autumn of 2017? We cannot blame global economic conditions because they have been benign. Actually, according to the IMF, after 3.2 per cent growth in 2016, the global economy is poised to grow at 3.5 per cent in 2017 and 3.6 per cent in 2018. Besides, crude oil prices remain low at USD 58.30 per barrel. It is pointless listing the causes once again. Let me examine the deeper reasons behind the apparent incapability of the government to tackle the causative factors. The Deeper Reasons Firstly, the absence of a deliberative and inclusive process of decision-making. All authority is concentrated in the Prime Minister's Office. The model may have worked in Gujarat (which I doubt) but it will certainly not work in a federal set-up and when there are so many ministries and departments, autonomous authorities, regulators and adjudicatory bodies and courts. Secondly, the bench strength of the BJP. If talent is available, why saddle a minister with multiple portfolios? Thirdly, by the accounts we hear, the present Cabinet is not a deliberative body. It is more like the Cabinet of a President that will meekly endorse the decisions taken elsewhere. Example: demonetisation. When a Cabinet does not function as a Cabinet, good ideas will not take root and bad ideas will not be stopped. Fourthly, the government failed to build a credible economic policy team at the beginning of its term. At any given time, there should be at least halfa-dozen internationally reputed economists in the larger government system. Nor did the government place economist-civil servants in key positions in the administration. The government did not wish to retain Dr Raghuram Rajan and could not retain Dr Arvind Panagariya. While Dr Arvind Subramanian has reluctantly agreed to stay on for one more year, it is anybody's guess if he will actually do so. Fifthly, there is no accountability. A wellintentioned but failed minister of railways has been made minister of industry and commerce. The engine of exports was sputtering, yet the minister of commerce is the new minister of defence. The redeeming feature is Mr Suresh Prabhu is an honest gentleman and Ms Nirmala Sitharaman's appointment is a blow for women's empowerment and breaks an unjust glass ceiling. Finally, it is possible to infer that the BJP believes it has forged an election-winning (UP) and/or deal-making (Bihar) formula and hence it need not worry about performance or outcomes. I don't really care about the deeper reasons as long as the government will acknowledge the causes of the economic slowdown and address them.