The immediate challenge before the new government is to arrest the slide in the economy, says former Union Finance Minister P. Chidambaram. Replying to questions put by Tathagata Bhattacharya, he questions the propaganda that coalition governments cannot take tough decisions.
On the contrary, he points out, the minority government of Narasimha Rao initiated radical economic reforms. And coalition Governments led by Deve Gowda, I K Gujral and Manmohan Singh took some of the toughest decisions. Excerpts:
What are the immediate challenges before the new government and what sort of economic mess are we really in?
We are headed towards macro-economic instability, declining investment, demand and supply constraints and possible pressure on inflation. The first task of the next government will be to arrest the slide and take steps to restore stability.
What could the Modi government have done to ensure we did not reach this point?
They could have deferred to the wisdom of economists instead of driving every one of them out of the government!
Besides Demonetisation and the ill-planned GST, what are the policy mistakes that led to this situation?
The BJP government has killed the entrepreneurial spirit of business persons and shaken the confidence of consumers. Frequent policy and rate changes have caused great uncertainty. The government spent money without evaluating the outcomes in schemes like Swachh Bharat, Ujjwala Yojana, PMAY etc. Most of the expenditure has been unproductive.
This govt claims that FDI and Forex reserves looked up during its tenure. If that is true, is that accidental?
Increase in foreign exchange reserves is a normal function of economic growth even if the growth rate is modest. The present moment is uncertain. FDI in 2018-19 was the lowest in five years. Foreign Portfolio Investment turned negative in March 2019. Let’s wait for the impact.
Would you agree with the perception that Modi government concealed more and revealed less on the economy?
I cannot comment on the published numbers without access to the basic information. Generally speaking, this government has been less transparent and very economical with the truth.
What kind of tough steps will the next government have to take to get the Indian economy back on track?
The task of the next government is cut out. This question should be put to the next Prime Minister and Finance Minister after they have been in office for a few days. Without full information, it is not possible to spell out the remedial steps.
The government declared that petrol and diesel prices would be determined by market forces. But during the election campaign, they have been constant. Also, how did the government spend the windfall owing to low price of crude in the international market?
The windfall was reaped in 2014-15, 2015-16 and 2016-17. The government simply blew away the money. The BJP’s idea of ‘market-determined’ is market and election determined! The market must go to sleep when elections take place.
The Prime Minister has been saying that weak, coalition governments would not be able to take tough economic decisions…
This is a completely wrong notion. Tough economic decisions were taken by governments led by Prime Ministers HD Deve Gowda, IK Gujral and Manmohan Singh. They were all leading coalition governments. Historic reforms were done by the Narasimha Rao government which was a minority government.