Even as the macroeconomic indicators continued to present a dismal picture, the Narendra Modi government continued its word war with the Congress, especially with former prime minister Manmohan Singh. It is not that the government has not taken any good, important decisions to boost the economy. Weeks after announcing corporate tax rate cuts, the government okayed the privatization of such major public sector undertakings (PSUs) as Bharat Petroleum Corporation Limited, Air India, and Shipping Corporation of India. But this has not stopped bad news.
Days after the World Bank brought down India’s growth projection for 2019, the International Monetary Fund (IMF) followed suit, pegging it at 6.1 per cent. The Reserve Bank of India also revised the growth rate downward. Finance Minister Nirmala Sitharaman, however, put up a brave face, saying, “The IMF reduces the growth [rate] for all the global economies. It reduces the growth for India too. But even with that, India is still growing as the fastest growing economy.”
The IMF recently projected India’s growth rate at 6.1 per cent for 2019 and at 7 per cent in 2020. In 2018, it grew at 6.8 per cent. “I wish it can be more. I wish it can grow faster. I’ll make every effort to make it grow faster. But the fact remains that it is still growing faster,” the Finance Minister said. She blamed the past regime for much of what is wrong today. “Recalling when and what went wrong during a certain period is absolutely necessary,” she told reporters in the US.
This eliblockquoted a sharp retort form Manmohan Singh. He conceded that there were some “weaknesses” when he was at the helm of affairs, but chided the incumbent regime to stop blaming others for current problems: “When I was in office, what happened did happen. There were some weaknesses. But you can’t claim that the fault lies with the UPA always. You have been in office for five years. Mainly passing buck to UPA is not enough.”
Both Sitharaman and Singh are correct to some extent. Many of the present problems—for example, high non-performing assets, a bloated expenditure bill, and populist schemes—are a legacy of the Congress-led UPA government. Singh also has a point: the present government has not done much to carry out structural reforms, and Sitharaman is still non-committal over the issue.
To a query whether the slowdown of Indian economy is cyclical or structural, Sitharaman said, “I’m not getting into that at this stage. I don’t have the luxury of sitting and looking at which way it is going.”
But she should get into this issue; it’s the duty of the Finance Minister to find out the problem; by no stretch of imagination doing that can be called a luxury. Besides, how do you prescribe a medicine if you don’t diagnose the disease? And, at present, the ailments are numerous. Industrial production registered a negative growth; core infrastructure industries are doing badly, as also that of capital goods which is an indicator of capacity building. The auto sector is still in trouble.
Equally big is the problem that when the government is not denying the deep-seated rot in the economy, it is blaming previous regimes for all that is wrong. “I don’t need to put the blame,” Sitharaman said, and then went on to do the same. “It is more than apparent as to when the wrongdoings happened in banks and which is the government which is spending time to clear the clog from public sector banks and which is the government which is pursuing all those who have taken money during the UPA government and who’ve gone out to the country out of fear that action is being taken now under this government.” But haven’t seen this movie before?
Sitharaman, however, continues to pontificate about the virtues of her government and the sins of the regimes under the grand old party: “We never committed mistakes and corruption. We’ve not given any loans to cronies. We’ve never supported any wrongdoing…”
She seems to be in the election mode, forgetful of the fact that her party has already won it for the second time consecutively, that the issue here is not the intentions of the current dispensation but the state of the economy which is not looking good.
Thankfully, as mentioned above, the government has taken a few good steps. Privatization, which is a major reform, has finally appeared, and appeared quite high, on the Narendra Modi government’s economic agenda. It wants to sell its entire stake in BPCL, Air India, and SCI. With Rashtriya Swayamsevak Sangh (RSS) chief Mohan Bhagwat supporting, or at least not opposing, the sale, political resistance to the bold move is likely to be insignificant. If it happens, it will help meet the disinvestment target of Rs 1.05 lakh crore for this fiscal.
It is bold because privatization is the most visible rollback of state from the economy. By selling a public sector undertaking (PSU), government proclaims loud and clear that it is leaving that space for private enterprise to step in, that it is limiting its role in the economy. In fact, in the run-up to the 2014 general poll, Modi did say that the government has no business to do business. It is another matter that Modi Government did not follow this free market principle in practice in its first term. So, the decision to sell off big PSUs is indeed welcome. Better late than never.
By the way, it is not the first time that BPCL is on the block. In the early 2000s, the government under Atal Bihari Vajpayee had tried to privatize the oil retailer but failed. A Supreme Court judgment stopped the process, as the apex court accepted the argument of the anti-sale activists that the privatization of BPCL would need Parliamentary clearance. This was not possible; there were several opponents of privatization even within the government.
The Modi government did away with the legislative hurdle three years ago with the Repealing & Amending Act, 2016. This Act annulled “187 obsolete and redundant laws lying unnecessarily on the statute-book”. These included the Act of 1976 that had nationalized the erstwhile Burmah Shell. “The Act has been repealed and there is no need for a Parliament approval for strategic sale of BPCL,” a senior official recently told PTI.
The Congress has slammed the government for the 2016 legislation as well the proposed BPCL sale. Party spokesperson Pawan Khera said, “So, this is, in a way, a very surreptitious way to bring BPCL and other such PSUs away from Parliament scrutiny and sell them. You do not want any Parliament oversight on your action. Why? Why are you afraid of Parliament of India?”
But the question is: why did Khera’s party let the annulling legislation get cleared in Parliament? It is well-known that the Bharatiya Janata Party-led National Democratic Alliance didn’t have—still doesn’t have—a majority in the Rajya Sabha. The GOP seems to have woken up three years late.
The government has also started the process of the sale of Air India, which has been fleecing the taxpayer for ages. A year ago too, such an attempt was made, but it was not serious. The same cannot said about the latest move; this is evident from the fact committee of ministers with the mandate to sell AI is headed chaired by Home Minister Amit Shah.
Since the RSS chief doesn’t seem to object to privatization, the Swadeshi Jagran Manch is unlikely to raise a stink. The Congress is too weak and confused to resist the sale. And the government doesn’t care two hoots about Left-leaning intellectuals. In short, the prospects for privatization are very good; if anybody can torpedo the sale of PSUs, it is the government itself; that can happen only if it takes some snide remark like ‘suit-boot ki sarkar’ seriously.
There is no reason that the government should become defensive about its reforming moves in the foreseeable future. Its welfare schemes have done better than they did in the past; nobody can accuse it of being a government of the rich; it has little political opposition to face; and public discourse today is not dominated by pinkish intellectuals as it was two decades ago.
The need of the hour is greater economic liberalization; the government should focus on that. It should also steer clear of unnecessary and futile debates regarding past vs present with the Congress.