Who is response for India's economic mess- Dr Singh, UPA, or Politics?

Is Dr Manmohan Singh alone responsible for India’s underachievement?

            Is India’s under performance in its economy due to Dr Manmohan Singh’s underachievement?   Is he, alone, responsible for slowdown in India’s economy, huge fiscal deficit, falling rupee, corruption scandals, political paralysis due to inept leadership qualities, and unfair power sharing agreements with regional parties who do not share Congress party’s economic  philosophy.

            It is true, that India’s growth momentum is slow and low compared to previous years. The Prime minister is projected as an ‘unachiever”, because he is in no position to launch any of the Second Generation Reforms. Is Dr Manmohan Singh alone the culprit for the economic mess that India is in?

            Foreign Direct Investment and Foreign Institutional Investments brought Crores of Rupees in foreign currency to India. Setting up of collaborative ventures, opening up of aviation to the private sector, auctioning of coal blocks to private sector, Telecom miracle, privatization of infrastructure, disinvestment, giant setting up of Original manufacturers of automobiles, gave fillip to industrial growth, increased  capital formation due to setting up ancillary industries under the patronage of a mother units for original equipment manufacture as well as Replacement parts industry, gave impetus to increasing employment. The growth of the software industry, as a result of which 55% of the foreign exchange came from Service exports, put India in a frontal position in respect of bilateral, multilateral trade. The unemployment got reduced as India’s educated got employment in the new generation banks that began operations in nook and corner of India, the need for software and hardware engineers, aviation personnel for various private sector airlines, big industrial houses which went for Acquisitions & Mergers, acquiring properties abroad, manpower required for on-shore operations abroad, telecommunications which grew vertically and horizontally, export houses , export logistics, export infrastructure, export consultants, requiring qualified personnel, drove the employment market upwards. The purchasing power of the younger generation professionals, their fat pay, the change from joint family to nuclear families, easy loans for buying apartments, motor cars, household items, etc., saw more and liberal spending rather than depositing the money in the Banks, which kick started the economy which saw growth touching two digits. Inflation was at its low, because, there was huge consumption, and all round passing off money, rather than getting blocked in deposits alone. Currency circulation created enough money flow in the market which diminished inflation. Insurance Companies, including foreign companies, set shop here. There was sufficient business for anybody and everybody. The money came into the organized net and got circulating through bank drawls and deposits. Banks had enough money to lend, and with a wide variety of products for which it gave loans, its coffers filled. The loans were given against collateral guarantee, and hence non- performing- assets in the consumer, middle class sector like house loan, gold loan, car loan, durables loan, was nil if not very low. The credit Card/Debit market rose geometrically. The launch of Telecom Revolution saw the increase of teledensity grow by 1000% giving business opportunities across a value chain. Exports which were $ 45 billion in 2004 grew to US $ 300 billion, bringing in the much needed Foreign Exchange. Foreign Exchange Reserves crossed US $ 300 billion. Stock markets began to grow by more than 100 points on a regular basis. Private sector contributed to a Indian Retail Chain, which changed the mind-set of the buyers who flocked to the Retail markets, and big malls, so as to get everything under one roof. BoP position was easily met due to Foreign Exchange Reserves, remittances from Indian Diaspora, FII, FDI, Exports, etc. Banking sector got strengthened, as it was able to contain the excess flow of liquidity which would have created volatility.

            Come UPA II. Everything began to go sour. Rs 80,000 Cr was written off to compensate the farmers’ credit which had become NPA. Reforms halted as one or the other coalition partner refused to tow the line. Enormous money was required for providing subsidy and to undertake popular Schemes. Opposition was relenting which made governance difficult. America’s meltdown caused a lightening strike on India’s software industry. Our exports shrunk as that country was India’s largest bi-lateral trading partner. American economy which became weaker and weaker, and the brakes applied did not work to change the mood of the economy. The economic crisis engulfed to Europe. This struck the European Union in more than one way. Indian professionals or the service industry, felt the brunt. Inflation started to mount. The more the RBI tried to tame inflation, it grew, and increasing interest rates 13 times did not even get an inch of recovery. Government resorted to Keynesian formula. Liberal spending. This caused more discomfort than benefit. People stopped spending. They were careful with the money. It caused a downturn in consumption. Reduction in consumption caused reduction in production. This was instrumental in creating lay offs, and retrenchment. Banks did not credit as it should have got. The robust economy slid to 5.2% against our declared target of 9%. The financial deficit was uncontrollable. The deficit finance which was reckoned at 4.2% went up to 5.9%. Even though Direct Taxes receipt showed an increase, the actual receipt was only 55-60%, as most of the money due got caught in litigation.

            Scandals, scams, became a scourge to our economy. When Parliament was incapacitated to function by pandemonium and when one entire Session was lost, what policy trajectory was possible? There have been crusaders, who have been blocking every move of the Government. The coalition parties were declining to support the Government which is surviving on the mercy of Opposition parties who are ruling some States as regional parties. The fiscal deficit in the State budgets is no better. They want funds infusion like Rs 10,000 Cr (UP), Rs 12,000 Cr (Bengal), Bihar (Rs 10,000 Cr), etc. From where the Government will augment, is another matter?

            Dr Manmohan Singh when he was Finance Minister in Mr Narasihma Rao ’s cabinet, had to look after only Finance. The economic conditions then, were rosy. America was interested in India’s growth and the bi-lateral trade began to grow from US $ 30 billion to US $ 60 billion. The government of Rao was a minority government, and even if it had fallen, there would have been no serious repercussions. Today, if anything happens to the Government, Congress will lose face, and there are no strong statesmen in that party to bring unity in the diversity coalition.  Can we blame only Dr Manmohan Singh for all the ills?

            

             The monsoon , as we take stock, only rains but never pours. the deficiency will be reflected in the final tally of crops, and agricultural output, which will send India into a tail spin. Dr Singh's worries are not over. It would crop up again and again. Mamta is waiting with a bowl. So also others. And we have Anna Hazare waiting at the other end to cleanse the rotten political system which has already saturated.