Economic Masochism

Chidambaram’s barrage of criticism of current economic policies, is understandable because as a former finance minister and a leading member of the opposition that is what is expected of him. But when RSS diehards like Subramaniam Swamy (“the economy is in a tail spin and headed towards depression”) and S. Gurumurthy (“economy has hit rock bottom; the informal sector is crippled after the note ban”) joined the chorus the government’s continued denial is surprising. Ex-finance minister, Yashwant Sinha’s scathing comments finally provoked a reaction. “I shall be failing in my national duty if I did not speak up even now against the mess the finance minister has made of the economy”; and “Private investment is at a two-decade low; industrial production has collapsed.” So how is it that all these experts of diverse ideologies are on the same page?

The unifying belief is that demonetisation was an “unmitigated disaster”; a sound idea ruined in the execution and compounded by an equally badly conceived and executed GSTN. Arun Shourie alleged “the government is managing headlines instead of the economy”, and accused it of conducting a money laundering exercise. RSS organisations like the Bharatiya Mazdoor Sangh, Bharatiya Kisan Sangh, and others, have also been critical of the growing economic distress and highlighted the adverse impact of the GST and demonetisation on BJP's traditional support base of traders and small business.

Expecting SMEs’ to cope with 35 modifications, 5 tax slabs, 5 levels of car cess, returns three times a month, confusing FAQs -- can only be described as bureaucratic cuckoo land. Of course the fact that cow vigilantism caused a 50% drop in leather and other cattle related industries is not spoken about. Even the Centre for Monitoring Indian Economy (CMIE) raised a red flag, stating that investments in new projects dropped by 60%. The PM’s silence appears to be sheer economic masochism.

Unfortunately current economic policies spewed a series on cons; and your sins eventually catch up with you. “We will bring back so much black money into the economy, that every Indian will have Rs 15 lakh in his account” thundered the pre poll promise now conveniently forgotten. The demonetisation that was supposed to achieve this failed miserably. All that happened was long queues at banks to get at your own money. The daily wage earner was hit so hard that he hasn’t yet recovered; thousands of small businesses’ face ruin. Headlines trumpeted farmers loan waivers; sure, but waivers of one paise and a few rupees were an insult to Indian intelligence. A cashless economy was meant to materialise mysteriously overnight. How was this ever considered possible given the lack of power and pathetic connectivity in the rural areas? Even in urban areas all of us have experienced botched transactions because of sudden power failures or dropped connectivity. Many of us have even had to bear financial losses because of such mess-ups. It was a case of trying to run before you can crawl. All villages would have power by May 2017 we were told. The cables did reach the villages; the problem was that power did not reach the household dwellings; no problem, now announce “soubhagya”. You don’t like the GDP figures? Ok just change the manner in which GDP is calculated, so that 3.7 becomes 5.7. And you can always claim that GDP has slowed down only in one quarter, ignoring the downturn in the previous 5 quarters. Such mathematical gymnastics gave rise to a new term “jumalanomics” and brings to mind Abraham Lincoln’s famous quote on fooling people all the time.

KJ Alphons Kannanthanam gave a classic response to protests over rising fuel costs in spite of falling world oil prices. “Who buys petrol? Somebody with a car, somebody with a bike. Certainly they are not starving. Somebody who can afford to, has to pay”. Recall Marie Antoinette’s infamous comment when told the peasants did not have bread to eat; she said “let them eat cake”. And we all know what happened to her after the revolution! Mercifully better sense (and Gujarat elections?) prevailed. Tax evasion is a universal phenomenon; it only varies in degrees. In India there is an additional incentive for evading taxes. The “aam admi” does not have the confidence in politicians to reassure him that his hard earned money when paid in taxes will not be swallowed up in some scam or other. Witness the way politicians of all hues dealt with party funding; they created “electoral bonds”!

It is not as though this country is short of expertise. Talented individuals like Arvind Panagariya and Arvind Subramanian appear to be headed for the exit after a brief stint. There has been unending speculation on Reserve Bank Governor Raghuram Rajan’s departure after three years without an extension. He maintained a dignified silence, because “I did not want to intrude on my successor’s initial engagement with the public, so I determined to stay silent on India for a year”. The release of his book “I Do What I Do” and the related interviews provided many answers. His views on demonetisation were sought in February 2016 and given orally. He reveals that he categorically stated that the short term economic costs would outweigh any long term gains and advised that if the government was insistent on going ahead, adequate preparation was required. An RBI note outlined the preparation required with the time frame, and flagged what would happen if preparation was inadequate. In fact the introduction to his book provides a refreshing insight into his brilliant mind. Even his explanation for the title of the book is remarkably honest and charming. And he closed the door on all speculation on his departure with his frank disclosure: his term ended and an extension was not forthcoming. 

As they say, you never know the worth of water till the well is dry. Let’s hope the EAC fares better.

(The author is a founder member of the Voluntary Health Association of Goa)