Former Indian prime minister Dr Manmohan Singh has expressed concern over the state of the country’s economy and blamed mismanagement by the current Narendra Modi Government for the slowdown – calling upon the government to eschew “vendetta politics” and approach “sane voices” to rescue the economy from a ‘”manmade crisis.”
India’s June quarter growth at 5% is the worst in more than six years, with private consumption expenditure growth falling to an 18-quarter low from 7.8% to 3.2%. Manufacturing has come down from 12% to 0.6% growth.
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Singh, who is also a noted economist and alumnus of UK’s Cambridge and Oxford universities, said low June quarter gross domestic product numbers indicated that the country was in the midst of a prolonged economic slowdown.
The Indian economy grew the fastest under his stewardship between 2004 and 2014, despite a period of global recession between 2008-09.
“India has the potential to grow at a much faster rate, but all-round mismanagement by the Modi government has resulted in this slowdown,” Singh said in a video statement.
Singh had warned two years ago that the economic downturn was inevitable after the Modi government banned 86% of India’s cash overnight. This resulted in a major loss of jobs and small and medium scale enterprises had to shut down. Economists say that the economic damage to the informal sectors of the Indian economy is now impacting the formal economy.
Taking a swipe at the Modi government’s controversial decision to demonetize high-value currency notes in 2016, he said, “It is particularly distressing that the manufacturing sector’s growth is tottering at 0.6%. This makes it very clear that our economy has not yet recovered from the man-made blunders of demonetization and a hastily implemented GST,” Singh said, referring to the goods and services tax.
It may be recalled that in 2016, a few weeks after demonetization was announced, Singh said on the floor of Parliament House that it was an “organized loot and legalized plunder” and would result in the fall of country’s growth rate.
He also pointed out that the current government’s policies were resulting in widespread joblessness. More than 350,000 jobs “have been lost in the automobile sector alone. There will similarly be large scale job losses in the informal sector, hurting our most vulnerable workers,” Singh said.
The former prime minister said farmers are not receiving adequate prices and rural incomes have declined. “The low inflation rate that the Modi government likes to showcase comes at the cost of our farmers and their incomes, by inflicting misery on over 50% of India’s population,” he added.
Singh, who had himself served as governor of Reserve Bank of India from 1982-85, said the recent decision by the central bank to transfer 1.76 trillion rupees (US$ 24.45 billion) to the government as payout will put the bank’s resilience to test. He also expressed concern about erosion of its autonomy.
Raghuram Rajan, resigned as the central bank’s governor and refused to agree to the demonetization. He was replaced by Urjit Patel, who agreed to the cash ban, but balked when faced with a proposal to hand over the bank’s strategic reserves. He also quit and this was followed soon after by the resignation of deputy governor Viral Acharya.
When asked about Singh’s remarks, Finance Minister Nirmala Sitharaman said: “Is Dr Manmohan Singh saying that instead of indulging in political vendetta, they should consult sane voices? Has he said that? All right, thank you, I will take his statement on it. That is my answer.”
“I have no thoughts on what he said. He said it and I listened to it,” she said at a press conference in Chennai.
Earlier when she was asked how government plans to spend the Reserve Bank payout she was non-committal, “I cannot comment right now on how these funds would be deployed. We will inform [the media] only after we have taken a decision on this.”
Last year the then finance minister Piyush Goyal even boasted that the country would achieve 10% growth rate.
While commenting on the slow growth rate, the ruling Bharatiya Janata Party spokesperson Amit Malaviya tried to put the blame on previous regimes. He said that for the last five years, the government has been trying to clear the banking mess that was left by former finance minister P Chidambaram and former prime minister Manmohan Singh.
Commenting on the growth slowdown Chief Economic Adviser K V Subramanian has said it was due to domestic and global factors.
He said the government is taking all steps to revive the economy and expressed confidence that the country would be on a high-growth path “very soon”.
However, RBI had cautioned that a broad-based cyclical downturn is under way in several sectors — manufacturing, trade, hotels, transport, construction, agriculture and communication and broadcasting – and recovery will take time.
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