New Delhi: Former Prime Minister Dr Manmohan Singh said Friday India’s economic development had come to halt on account of a “climate of fear” under the Modi government.
“There is profound fear and distrust among our various economic participants. Public trust in independent institutions such as the media, judiciary, regulatory authorities, and investigative agencies has been severely eroded. This toxic combination of deep distrust, pervasive fear and a sense of hopelessness in our society is stifling economic activity and hence economic growth,” the celebrated economist said as he delivered the valedictory address at the ‘Conclave on the Economy’ organised in New Delhi by Rajiv Gandhi Institute for Contemporary Studies and Samruddha Bharat Foundation.
His observations came on a day when government data showed India’s GDP growth slowing to 4.5 per cent in the July-September quarter — the slowest pace in six years.
Read his full, unedited, speech below:
I am indeed happy that the Rajiv Gandhi Institute of Contemporary Studies and Samruddha Bharat Foundation have taken this initiative to organise this conclave. It is particularly an appropriate time to have such discussions on the state of our economy. The state of our economy is deeply worrying. But today, I will argue how the state of our society is even more worrying and that is a fundamental reason for the precarious state of our economy. I will talk today largely as a concerned citizen and as an economist, so that we can keep politics out of this important discussion.
Of late, I have been remembering my days as a student of economics at Cambridge University in the 1950s. Universities foster an environment that encourages students to pursue the intellectual truth. The university teaches us to be intellectually fearless and honest, lucid in expressing our opinion, being open to argument and dissent.
Most importantly, it is a place to meet people of various beliefs and ideas and not be confined in an echo chamber. I was taught by renowned economists such as Joan Robinson, Nicholas Kaldor, Richard Kahn on how economic growth and development are shaped by the societies in which they operate. One cannot separate society from the economy in any nation.
The state of our economy categorised as industry, agriculture, trade, jobs, taxes, monetary policy and fiscal policy have already been discussed at length by experts in this conclave. There is no one today that can deny the sharp slowdown in India’s economy and its disastrous consequences, particularly for farmers, youth and the poor.
But it is my belief that mere changes in economic policy alone will not help revive the economy. We need to change the current climate in our society from one of fear to one of confidence for our economy to start growing robustly again.
A nation’s state of the economy is also a reflection of the state of its society. An economy is a function of the numerous exchanges and social interactions among the people and institutions. Mutual trust and self-confidence are the bedrock of societal transactions that foster economic growth. Our social fabric of trust and confidence is now torn and ruptured.
There is a palpable climate of fear in our society today. Many industrialists tell me they live in fear of harassment by government authorities. Bankers are reluctant to make new loans, for fear of retribution. Entrepreneurs are hesitant to put up fresh projects, for fear of failure attributed to ulterior motives. Technology start-ups that are an important new engine of economic growth and jobs, seem to live under a shadow of constant surveillance and deep suspicion.
Policymakers in government and other institutions are scared to speak the truth or engage in intellectually honest policy discussions. There is profound fear and distrust among our various economic participants. Public trust in independent institutions such as the media, judiciary, regulatory authorities, and investigative agencies has been severely eroded. This toxic combination of deep distrust, pervasive fear and a sense of hopelessness in our society is stifling economic activity and hence economic growth.
The root cause of this is the government’s policy doctrine that seems to suspect every industrialist, banker, policy maker, regulator, entrepreneur and citizen. This has halted economic development with bankers unable to lend, industrialists unable to invest and policymakers unable to act.
The Modi government seems to view everything and everyone through a tainted prism of suspicion and distrust, through which, every policy of previous governments was considered of bad intent, every loan sanctioned was undeserving, every new industrial project was crony in nature and so on. And the government has positioned itself as some saviour, resorting to foolhardy moral-policing policies such as demonetisation, that have proved to be disastrous.
For economic growth to revive, it is very important that the government enthuses trust and confidence. It is very important for businessmen, capital providers and workers to feel confident and exuberant rather than being fearful and nervous. This is possible only if the government sheds its current doctrine and begins to trust India’s farmers, India’s entrepreneurs and India’s citizens at large.
India is now a $3 trillion global economic powerhouse driven largely by private enterprise. It is not a tiny command and control economy that can be bullied and directed at will. Nor can it be managed through colourful headlines and noisy media commentary. Shooting down messengers of bad news or shutting off economic reports and data is juvenile and does not behove a rising global economic powerhouse. No amount of subterfuge can hide the performance and analysis of a $3 trillion market economy of 1.2 billion people. Economic participants respond to social and economic incentives, not diktats or coercions or public relations.
With an absolute majority in the Lok Sabha and low global oil prices, this is a once-in-a-generation economic opportunity to catapult India to the next phase of economic development and create new jobs for hundreds of millions of our youth. I urge the Prime Minister to set aside his deep-rooted suspicion of our society and nurse us back to a harmonious, confident and mutually trustworthy society that can revive the animal spirits and help our economy soar.