Former member of parliament and Congress leader Rajeev Gowda in an interview with Amit Agnihotri talks about the condition of Indian economy, role of the government and measures required to revive the economy.
Edited Excerpts from an interview •
Q. Why has the Indian economy performed so badly over the past few months?First we need to correct ourselves how long the economy has been doing badly. The economy has performed badly for a few years and Covid-19 has come as a scapegoat the government can point at this and say all the problems in the economy are because of this extraordinary crisis which the whole world is facing. That is true but there were a lot of problems before Covid-19. Over the past at least eight quarters the economy has been sliding down. The reason is the terrible economic mismanagement which started with a demonetisation which disrupted the informal economy and disrupted the agriculture and essentially got the whole country to a halt. What we experienced was a formal lockdown most recently in response to the Covid-19 crisis but what experienced during demonetisation was a kind of an informal lockdown as people stood in lines trying to get some money out of the banks. Then also people died now also people died. It really hurt the informal economy which employs a large number of people. Lots of businesses used to run on cash and probably still do if they are alive.
Q. Did GST play a role?
Another problem was the hasty GST which was difficult to implement and confusing. The rules kept changing and created a preference for formal suppliers instead of informal suppliers as well, which hurt our exports. Along with this, the government did not take action early enough on the banking crisis and allowed it to fester and become much larger. They kept pointing fingers while the truth is the bank NPAs crisis has its roots in the then opposition BJP attacks on perfectly legitimate coal, power and telecom sector allotments. The then CAG came up with some fantastic set of numbers and you ended up creating a paralysis kind of situation.
Q. You mean the government did nothing?
There was nothing stopping this government with a massive mandate from going and fixing the economy. It is just that they are incompetent and they don’t care. They would rather polarise the country and set people against each other than fix the economy. They don’t care for the poor and those who lose jobs. They don’t care for 50 percent of the population that lives off agriculture. Over the past five six years they have been so hung up on fixing inflation that they have made sure that there is not enough money going into the rural areas. A recent survey revealed that food consumption is falling in villages which means people are going hungry or suffering from malnutrition. The government trashed the survey.
Q. So where do we stand?
The government has been denying facts and data, they have been cooking up data and as a result they don’t know what is true and what is not. The biggest example of all this is the response to Covid-19. While countries the world over have provided income relief to people and supported businesses, this government chose to do a mega drama saying it will invest 10 percent of GDP to boost the economy. But all economists said it was actually only 1 percent of GDP. Basically it was jumlanomics. The PM will go on making announcements everyone will believe him and at the end of it people will die and businesses will shut. Six months or one year later, what we see today -23 percent GDP is actually only the tip of the iceberg as the informal sector job losses were not counted in this assessment.
Q. What is your take on the green shoots of economy claims made by the government?
The government argument is wrong. What they are seeing as green shoots is the pent-up demand being addressed. You need to see more investment, more demand, more credit off-take and more manufacturing output. Yes, after the lockdown there was a spike in demand but that has begun to slow down. People who have money in their pockets are not ready to go out and spend because of the great uncertainty as the Covid-19 crisis continues unabated in the country. Everyone is extremely risk averse. The government is deluding itself. One example is that companies moving out of China are not coming to India rather going to Vietnam. The problem is going to be with us for longer and that is the challenge.
Q. The Congress has been attacking the government over the economy but the centre behaves as if nothing has happened. What are your views?
Government can evade the blame but job losses are escalating. More people and more families are going through difficult times. Hopefully they will realise this is not caused by an act of God but as much caused by acts of human beings…very very incompetent human beings running the finance ministry. When people’s personal lives are affected and the government is not responding they will realise something is wrong. Another problem is that people are not sure who to blame the central government or the state government. The states are bearing the brunt of Covid response and the centre tells them we will not give you GST due and you go out and borrow. The entities supposed to help the states are not doing that.
Q. Are the Congress state governments doing enough to cushion people?
Yes, in Punjab we have come with a series of measures. In Chhattisgarh we have implemented the NYAY programme which offers financial help to people below a certain income threshold.
Q. The Congress protests over economy issue have been limited to pressers and social media. Should the party not hit the streets over the issue?
We are living in an environment where organising protests/rallies is fine but people are concerned over their own safety. We did come to the forefront when migrant workers were on the road. In Karnataka we arranged buses to help migrants reach their homes. Priyanka Gandhi Vadra tried the same in UP but the state government did not cooperate and instead tried to score political points. We don’t want to risk the people’s lives. If Covid-19 would have been better controlled, we would have been on the streets. At present, we are organising social media protests. We are trying to tell the story but the media should also raise relevant issues about people’s livelihoods rather than getting distracted by the Rhea-Sushant case.
Q. Is the Congress attack on the economy issue having any impact on the central government?
The centre tries to divert attention from real issues. They come up with empty slogans. That is what is happening right now. Remember the PM’s appeal to people to clap to deal with Covid. His latest slogan is atmanirbhar, which basically is a message to people that you take care of yourself because the government does not have the capability to protect you.
Q. What would you want the government to do?
The government is not able to raise revenues as it has done foolish things. The government gave tax cuts to corporates when demand needed to be revived. The government has been bailed out by petrol taxes, by RBI dividends and that is how they manage to stay on. They should stop worrying about deficits and come up with measures to revive the economy and pump in extra fiscal investment that will trigger demand.
Q. Are there any hopes of an economic recovery in the near future?
When businesses are shut there are bank NPAs. People can’t repay loans. I anticipate much worse numbers. Not enough demand to sustain agriculture. Problem is likely to continue till the next 4-8 quarters. The human price to be paid by the poor is going to be enormous. Government will remain callous and will continue to make statements about export surplus which means low demand for our imports.
Q. Are you missing former PM Manmohan Singh whose policies bailed out India during the 2008 global financial crisis?
Absolutely, he was sensible and open to ideas. He always focused on the welfare of the people in an egoless manner.
