New Delhi: Former prime minister Manmohan Singh on Sunday said India is headed for an economic slowdown and accused the Modi government of leaving the economy in dire straits due to its “lack of economic vision”.
Citing the latest economic growth figures to suggest an impending slowdown, the senior Congress leader also said the Indian economy is “over-regulated” and the government controls and interferences are aplenty with even regulators having “morphed into controllers”.
He also rued the “growing interference” of courts in the economic policies, and said the Congress would have handled the economy differently.
In an interview to PTI, the two-time prime minister, who is credited with spearheading India’s economic reform process, alleged that the lack of any vision or understanding of the country’s dynamics of economy by the Narendra Modi-led government has led to “disruptive” decisions like demonetisation.
“Finance Ministry’s latest monthly report now reflects that the country is headed for a slowdown and it has revised the GDP growth figures for this quarter (January April) to just 6.5 per cent,” Singh said.
He said the declining growth of private consumption, tepid increase in fixed investment and muted exports are the key factors which have led to this situation.
“I have no qualms in saying that the Modi government has left our economy in dire straits,” he said.
Singh said the demonetisation was perhaps “the biggest scam” of independent India, dealt a blow on the country’s economy and decimated the informal and unorganised sectors with crores of people turning jobless.
“This was nothing but a criminal act of betrayal for those people who elected this government with such a brute majority,” he said.
“The current government boasts of getting investment, but the reality is that the FDI growth is at a five-year low. Core (indrastructure) sector growth is at a two-year low. Rupee has become Asia’s worst-performing currency. All these are a cause of serious concern,” he said.
Singh said had the Modi government followed the path shown by the previous governments of high economic growth and rapid development, the country could have eliminated poverty in the last five years.
“Instead, they inflicted disruptive and unnecessary decisions like demonetisation on the economy. This is borne out of a lack of economic vision or understanding the dynamics of our economy,” he said.
“Given the extraordinary majority the Modi government enjoyed in Parliament, they could have used their political capital to reap benefits for India on the economic front. Unfortunately they have fallen flat,” he said.
Singh said the Congress’ NYAY scheme (of minimum income for poor) would usher in a new model for social welfare and prudent economics, as economic benefits will give rise in consumption levels resulting in kick starting economic growth.
“We think that spending 1.5 per cent of GDP for 20 per cent of the population is absolutely fair and just. The Congress party is also committed to fiscal discipline. Our nearly USD 3 trillion economy has the fiscal capacity to absorb this expenditure.
“There will be no need for any new taxes on the middle class to finance NYAY. Only those who have no compassion for the poor will oppose NYAY,” he said.
The ex-PM said the Congress promises to review and replace the current GST laws with the GST 2.0 regime to truly reflect the intent and purpose of a non-cascading, value-added, indirect tax.
“Our economy is still over-regulated. Structural problems remain. Government control and bureaucratic interference are aplenty. Regulators have morphed into controllers. There is growing interference by the courts in economic policies. We would not have treaded this path,” he said.
Singh said the Congress’ economic philosophy is based on embracing the idea of an open and liberal market economy, creation of wealth, sustainable development, and reduction of inequalities as also assurance of welfare of all sections of people through inclusive growth. “We would have followed all this with more vigour.”
He said the banking sector is “under severe stress” and the way out of “this mess” is to reverse some “gross distortions”, work closely with the RBI, re-start the process of credit delivery and ensure sufficient liquidity and cash in circulation.
“A comprehensive review of the concept, role and functions of Public Sector Banks in order to make them robust and competitive with healthy balance sheets is the need of the hour. Dispute redressal and priority lending is the key,” he said.
The NPA “scare” has brought lending to a virtual halt, the former prime minister said, adding that a “one-size-fits-all approach” drove companies into insolvency while demonetisation shut out all sources of informal credit.
Singh said there are no jobs in the country as Modi snatched away 4 crore jobs from India’s youth and imperiled their future.
“Unwitting and ill-conceived decisions of Demonetisation and a flawed GST, coupled with tax terrorism, have dealt a body blow to both organized and unorganized sectors,” he said. Small, medium and micro enterprises are reeling under adverse and painful effects of the “double whammy” of demonetisation and GST, he said.
He said industrial growth in 2018 is 4.45 per cent, which averaged at 8.35 per cent during the Congress-led UPA regime (2004-2014). He said the manufacturing share in GDP grew only by 0.5 per cent between 2014 and 2018 under the Modi government, while agriculture growth has also been abysmal.
Following is the transcript of PTI’s exclusive interview with former Prime Minister Manmohan Singh:
Q1) Prime Minister Modi has often spoken about transforming India in last 5 years and described it as ‘New India’. How would you rate the 5 years of Modi Govt.
A1) Five years of Modi Government is a sad story of governance and accountability failure. In the year 2014, Modiji came to power on the promise of Acche Din’. His five-year rule has ended up being the most traumatic and devastating for India’s youth, farmers, traders, businesses and every democratic institution. Tell me one section of our populace which has not been hit by the ill-conceived and ill-timed policies and decisions of this government.
Demonetisation disaster has wiped away the earnings of traders and small businesses. Micro, small and medium enterprises have lost their confidence in the government. Middle Class has lost their hard earned savings. Women have lost a sense of security and empowerment. Deprived sections have lost their traditional rights. Institutions have lost their unambiguous independence. Scientific temperament has been replaced with irrationality. Regions like Jammu and Kashmir and the Northeast requiring special developmental focus have been neglected by the rhetorical politics of sheer opportunism and propaganda.
Our socio-political ambience has lost cohesiveness. People are fed up with the daily loud rhetoric of cosmetic change. There is a sense of deep despair and disillusionment amongst the masses. There is an undercurrent amongst people against this illusion and boastful self-aggrandizement. People have made up their minds to reject the Modi Government and the BJP so that the future of India is safe and secure.
Q2) PM has flagged nationalism as a major issue in this election preferring it over issues of bread and butter. Some feel that it is resonating considerably. Do you feel that the Congress is able to counter it effectively?
A2) A lie spoken a hundred times does not become the truth. Modi Government’s record on national security is dismal, to say the least. In last 5 years, terror attacks in Jammu & Kashmir alone have gone up by 176% & ceasefire violations at the border by Pakistan have increased by 1000%. Nearly 500 jawans have been martyred in J&K alone in last 5 years. There have been 17 major terror attacks on our security installations. Even in the run-up to the 2019 election, India witnessed one of the most dastardly terror attacks in Pulwama and another attack in Gadchiroli. What’s even more distressful is the fact as Pulwama terror attack happened and even in the aftermath thereof, Prime Minister was filming movies in Jim Corbett Park, instead of chairing the Cabinet Committee on Security. The gross intelligence failure in Pulwama, ignoring the intelligence inputs as also permitting an RDX laden vehicle to ram into a CRPF convoy on one of the most secure national highways, speaks volumes about this government’s preparedness to tackle terror.
Let’s not forget that Narendra Modi’s slipshod policy on Pakistan has been marred by a series of flip-flops — from going to Pakistan uninvited to inviting the rogue ISI to investigate the Pathankot Air Base terror attack. Does it not speak volumes about the strategic failures of Modi Government on National Security front? BJP’s political distress emanates from its failed track record. BJP is searching for new narratives everyday. This reflects the bankruptcy of a national security vision for the country.
Q3) Mr. Modi has often said that India’s reputation in the global arena only increased after his government came to power in 2014. There are a number of countries which he says he visited but his predecessors did not for decades. He has even addressed a number of NRI conferences in the past. Do you accept his arguments?
A3) Foreign Policy of India has always been guided by national Interests and not for image building of any individual. Foreign Policy entails gravitas, a sense of diplomacy and restraint, sensitivity towards the concerns of the host nation and ultimately furthering the interests of India. Regrettably, this government’s foreign policy is founded upon anything but a mature comprehension of diplomacy.
Congress-UPA Government strived to make a strategic framework within which foreign policy initiatives were pursued by government. Our relationship with the US, Russia, France, China, United Kingdom and European Union remained robust and was founded upon a sense of mutual co-operation and our nationalistic concerns.
Some of the major steps taken during our tenure included the civil nuclear cooperation with US, numerous free trade agreements, including with South Korea, Japan, Malaysia, and ASEAN, border talks with China. Post the 26/11 Mumbai terror attack, we were able to diplomatically isolate Pakistan, while expediting counterterrorism cooperation with the international community.
At the London summit of G-20 in April 2009, India played a major role in developing international consensus for taking action against black money and tax havens. It was on India’s initiative in November 2010 at the Seoul Summit that the G20 gave a call for concluding the Tax transparency and Information Exchange Agreement (TIEA).
Our Government always stressed that the foreign policy should evolve from time to time in response to the changing realities of the world. We emphasized on India’s economic interests, its economic relations with the other Asian economies, other developing and developed economies. It is a recorded fact that whenever I visited foreign countries, I made it a point to meet with and interact with NRI’s communities.
Q4) There is a perception that Modi Govt does not have a taint of corruption, but your government was marred by various corruption scandals. How do you counter that narrative?
A4) Congress-UPA government was under tremendous scrutiny and I have always welcomed scrutiny and accountability of government, for same is intrinsic to our democracy. In hindsight, many of the allegations which formed the basis of BJP’s propaganda in 2014, have not stood the scrutiny of judicial process. Please remember that we never showed reluctance in taking action against our own even based on a set of prima facie allegations. Compare this to the Modi Government which considers itself inscrutable and unaccountable to a litany of corruption allegations preferring to brazen it out by often shooting the messenger.
This government came to power on the promise to usher transparency and fight against corruption. In the past 5 years, we have only witnessed the stench of corruption peaking to unimaginable proportions. Demonetisation was perhaps the biggest scam of independent India. The acts of omission and commission in Rafale deal have echoed in public minds, taking the allegations to those at the highest echelons of power. If there is nothing wrong, in Rafale Deal, why has Shri Narendra Modi not agreed to an investigation by a JPC?
We have witnessed how serious economic offenders like Nirav Modi, Mehul Choksi, etc have escaped the country after defrauding our banks of Rs 1 lakh crore. 36 such economic offenders have fled India. There is a definite collusion of people holding political positions and these scamsters. Then how can it be concluded that BJP government is clean? One of the reasons the BJP was voted out last December in Madhya Pradesh, Rajasthan and Chhattisgarh was rampant corruption. Vyapam Scam in Madhya Pradesh, PDS scam in Chhattisgarh and mining scam in Rajasthan are three stark examples of the same. Truth is out for people to judge Modi Government’s track record on corruption.
Q5) Mr Modi counts the economic progress as his key achievement. How do you see the present state of economy?
A5) Given that the extraordinary majority the Modi Government enjoyed in the Parliament, they could have used their political capital to reap benefits for India on the economic front. Unfortunately they have fallen flat. Finance Ministry’s latest monthly report now reflects that the country is headed for a slowdown and has revised the GDP growth figures for this quarter (January April) to just 6.5%. The declining growth of private consumption, tepid increase in fixed investment and muted exports are the key factors which have led to this situation.
There are no jobs. Modiji promised 2 crore jobs per year, but snatched away 4 crore jobs from our youth and imperiled their future. Unwitting and ill-conceived decisions of demonetisation and a flawed GST, coupled with tax terrorism, have dealt a body blow to both organized and unorganized sectors. Small, medium and micro enterprises are reeling under the adverse and painful effects of the double whammy of demonetisation and GST. The hard earned savings of our middle class families have been extinguished. Household savings are at a 20-year low.
Banking system is under severe stress. NPAs have surged five-fold. Fresh investments are at a 14-year low. Disinvestment has only been limited to investing the family silver like LIC to save loss making PSUs.
Our industrial growth in 2018 is 4.45% which was at an average of 8.35% during UPA-Congress Government (2004-14). The share of Manufacturing in GDP grew only by 0.5% under Modi Govt (2014-18). Agriculture growth under Modi Government has been abysmal. Average agriculture GDP growth rate under 5 years of Modi Government is 2.9% compared to 4.2% under 10 years of UPA Government. The current government boasts of getting investment, but the reality is that the FDI growth is at a 5-year low. Core sector growth is at a 2-year low. Rupee has become Asia’s worst performing currency. All these are a cause of serious concern. Our economy is still over-regulated. Structural problems remain. Government control and bureaucratic interference are aplenty. Regulators have morphed into controllers. There is growing interference by the courts in economic policies. We would not have treaded this path. Congress’s economic philosophy is based on embracing the idea of an open and liberal market economy, creation of wealth, sustainable development, and reduction of inequalities as also assurance of welfare of all sections of the people through inclusive growth. We would have followed all this with more vigour.
Q6) The Congress has often accused the BJP of being divisive and that it has not ensured even and inclusive growth. Is such a government good for the country?
A6) No economic progress can take place when the society is not peaceful. Harmony and cohesiveness are the prerequisite for sound economic progress. Division and hate have become synonymous with BJP. BJP thrives on societal fissures. This results in social unrest. The various agitations in recent times in many states are a direct result of this policy. A government which does not believe in inclusive growth, and is only worried about its political existence at the altar of disharmony should be immediately shown the exit door.
Q7) The finance minister says fast economic growth and rapid urbanisation would slash the number of people in extreme poverty by 2021 and end it completely in the decade after that. Do you agree with him?
A7) Nearly 70% of Indians were poor when India attained Independence from the British in 1947. With sound policies adopted by successive governments over the last seven decades, poverty levels have been brought down from 70%to about 22% now.
Had the present government followed the path set by the previous governments of high economic growth and rapid development, this 20% would have been eliminated in the last 5 years. Instead, they inflicted disruptive and unnecessary decisions like demonetisation on the economy. This is borne out of a lack of economic vision or understanding the dynamics of our economy. The backbone of our economic structure — the informal or the unorganized sector — was systematically decimated. Crores of people became jobless and had to sustain on part time works as their savings evaporated. This was nothing but a criminal act of betrayal for those people who elected this government with such a brute majority.
I have no qualms in saying that Modi Government has left our economy in dire straits.
Q8) How will you fund NYAY should Congress get elected? There are concerns about funding? Would some existing subsidies be rationalised?
A8) We are firmly committed to the path of ‘Creating Wealth, Expanding Welfare’. As the Indian economy grows, we must ensure that the fruits of growth are shared equitably. The poor must receive a larger share than they get at present.
Under NYAY, the poorest 20% of Indian families will be given an annual income support of a uniform amount of Rs.72000 for each family. NYAY is an idea whose time has come. In five years, India’s GDP will increase from Rs 210 lakh crore to Rs 400 lakh crore. We say, set apart 1.2%- 1.5% for the poor. When rolled out fully to cover all 5 crore families, NYAY will cost Rs 3.6 lakh crore. We think that spending 1.5% of GDP for 20% of the population is absolutely fair and just. The Congress party is also committed to fiscal discipline. Our nearly USD 3 trillion economy has the fiscal capacity to absorb this expenditure. There will be no need for any new taxes on the middle class to finance NYAY. Only those who have no compassion for the poor will oppose NYAY.
Q9) Many top economists including Vijay Kelkar feel competitive populism as witnessed in farm loan waivers and direct money in people’s accounts through NYAY are harmful policy interventions for India which wants to break into the developing nations category.Your take?
A9) My humble opinion is that any economic benefit which leads to rise in consumption levels resulting in kick starting economic growth is not harmful. If the target of these economic benefits does not result in leakage and are implemented smoothly, then the resultant spur in economic activity is beneficial for the economy. It is the Congress-UPA which first implemented AADHAAR based cash transfers of subsidies and scholarships. We take some satisfaction in the fact that DBT i.e. Direct Benefits Transfer’ linked through AADHAAR accounts for the needy is our initiative. Before leaving office, we ensured that 60 crore people were enrolled in the AADHAAR system. This path-breaking initiative became the basis for the present government to implement many schemes.
Money in the hands of the needy will stimulate demand in the economy which can then lead to increased economic activity and job creation, referred to as the Keynesian effect by the economists. At a time when private investment and industrial production are low, NYAY can help bring our economy come back to life and create new factories and jobs.
Just as we brought the Right to Work under MGNREGA, I am confident that a Congress party led government in 2019 will implement NYAY successfully and usher in a new model for social welfare and prudent economics.
Q10) You have been critical of Modi Govt’s Demonetisation decision and that of the GST? If elected what are the 3 steps would a Congress Govt take to rectify those follies?
A10) Congress promises to review and replace the current GST laws with the GST 2.0 regime that will truly reflect the intent and purpose of a non-cascading, value-added, indirect tax. The GST 2.0 regime will be based on a single, moderate, standard rate of tax on all goods and services instead of multiple taxes, as is being implemented by this government. The rate will be revenue neutral to the current indirect tax revenues of the Central and State Governments and will take note of the potential of GST 2.0 to boost their tax revenues.
The GST implemented by the Congress party will be easy to administer, easy to understand by the taxpayer, and easy to comply with. We are confident that GST 2.0 will promote growth, new businesses and employment. The taxpayer will be required to file a simple, single quarterly return for his/her business and an annual return. Every tax payer will be subject to assessment by a single authority based upon turnover.
We have also proposed that the GST Council will be the policy-making body and will be served by a permanent secretariat of tax economists, tax policy experts and tax professionals so that political one-upmanship is minimized. Its minutes will be put in the public domain.
Q11) The banking sector seems to be in a mess. There have been questions about rising NPAs and willful defaulters. Mr. Modi has pinned the blame of rising NPAs on your government. He says loans were given under your regime through “phone banking” (on the basis of calls from leaders). How do you counter that charge?
A11) NPA scare has brought lending to a virtual halt. A one-size-fits-all approach drove companies into insolvency. Demonetisation shut out all sources of informal credit. The result is that the agriculture sector is in acute distress, MSMEs are shut or struggling to survive, trade is paralysed, and the volume of merchandise exports has been flat for 4 years. NPAs of scheduled commercial banks (as per Reserve Bank of India’s data on domestic operations), increased from Rs. 2,51,054 crore, as on 31.3.2014 (UPA) to Rs. 10,36,187 crore, as on 31.3.2018 (Modi Govt). But experts are of the view that it would have crossed Rs 12 Lakh Crore by 31st March 2019. Additionally, bad loans worth Rs 5.5 Lakh Crore of select cronies have been written off by the present BJP Government. This has placed our banking system in dire straits.
The way out of this mess is to reverse these gross distortions and, working closely with the RBI, re-start the process of credit delivery and ensure sufficient liquidity and cash in circulation. A comprehensive review of the concept, role and functions of Public Sector Banks (PSBs) in order to make PSBs robust and competitive with healthy balance sheets is the need of the hour. Dispute redressal and priority lending is the key. Congress, in its manifesto, has also promised to take hard measures to prevent fraud in the banking sector, securities and financial markets (including money collection schemes) and deliver swift and deterrent punishment to offenders. Q12) Do you think that even this election like 2014, is a presidential form of election, where there is a wave’ for a particular person? Do you think a presidential form of election is good for democracy?
A12) Our forefathers envisaged India to be a Parliamentary Democracy and not a Presidential one. Multiple parties are represented by a variety of leaders representing the aspirations of the people. Multiple parties represent the voice of people belonging to different regions and social issues. By imposing the thought process and will of one person’ on a diverse country like India, one would not do any justice to the aspirations and hopes of the people. Representation in India is very important. A single man can neither represent all the desires of 130 Cr people of India and can also not solve the variety of problems faced by them. The idea of one man as the monolith of knowledge cannot be applied to India. We have to have multiple voices, functioning together as representatives of the entire country. We have to resolve the problems of chronic hunger, poverty, regional aspirations, linguistic aspirations and cultural aspirations of every region.
I cannot foresee any wave for a particular person in this election. The only wave which is clearly visible in the present day context is the wave against unemployment, a wave against rampant agrarian distress, a wave against the decimation of our small and medium enterprises and businesses, a wave against persecution and prosecution of our deprived sections, a wave against the snatching of rights from the poorest of the poor, a wave against the denigration of our institutions, a wave against the politics of division. This is the only wave I can see. This wave has now taken its peak and the results of this election may surprise many commentators.
Q13) Should a situation arise, would Congress back a non-Congress Government at the Centre? Who according to you should be the PM should the opposition form a government?
A13) These are hypothetical questions. I am hopeful that a secular alternative shall form the government. I want to see a progressive, liberal and democratic government at the Centre in which the Congress party plays a frontline role. – PTI
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