A Matter of Economics
Vajpayee and Manmohan
By Dr R. Balashankar
It took six years of clean, purposeful governance of Vajpayee to blossom the Shinning India dream. It took just seven years for Manmohan Singh to abort it.
The killing of the India story is only being written about. We have been writing about this in this column and editorials in the last four years. But we never expected it to happen so soon.
Nostalgia is an enduring human pastime. It is natural we reminiscence on the immediate past especially when it is too good to forget. Human memory is short, particularly the collective human memory but seven years are not so long that we cannot recollect.
What the NDA achieved at the end of its six year rule is important to recall to realise the mess Manmohan Singh has brought about.
An eight per cent GDP growth, which was the highest till that date in our history, prices of essential commodities under check, low inflation of three-four per cent for a prolonged period, bank interest rates(6 per cent) lowest since 1973, five billion dollar external debt pre-paid, a 20 per cent increase in export, Rs 50,000 crore infrastructure fund for port, power and road, $104 billion (the highest ever till then) foreign exchange reserve, a Rs.10,000 crore small and medium industry fund, FII inflow of $15.8 billion and FDI inflow of $ 4.66 billion(2003) and despite a severe drought in 14 states in 2002-03 no price rise or shortage of food grains. This, in short, was Vajpayee’s economic legacy.
Now that the Retail FDI has been put in abeyance the Congress megaphones are propagating that the opposition is standing in the way of India’s growth. The talk in the Dalal Street today is that as long as this government continues in power there is no hope of an economic recovery. The rollback on Retail FDI has no relation with the present condition of the national economy. How did the UPA mismanage the economy so much that we have below zero industrial production? The rupee has fallen to an all time low of more than 54.30 against the dollar. Industrialists are either running away or holding their cash reserve without investing here for over two years now. Food grains are rotting out in the open for want of storage. The government trying to market its desire to invite FDI in retail, proudly claims that half of our vegetable and fruit produce are getting spoilt for want of cold storage and better transportation. It should be ashamed.
The Vajpayee government initiated the ambitious Pradhanmantri Grameen Sarak Yojna to connect every village to the nearest mandi by road. It was a massive village renewal plan that Manmohan Singh killed. So has he killed the equally ambitious golden quadrilateral and highway plans for double, four and six laning the national highway. Till 1998 at a rate of 11 km per year only a total of 556 km 4/6 highways were built. Where as the NDA at a rate of 11 km a day 25,000 km of 4/6 lane highway were built in the six-year period. Under the UPA road building as a priority has been given good bye, with all projects either mired in corruption or contract or land acquisition problems. This is the story with all infrastructure issues. These are things government can do without so-called second stage of reforms, or creating more FDI friendly policies.
The UPA projects as though reforms are all about FDI and FIIs. Governance is at the crux of reform. Creating agriculture infrastructure has nothing to do with FDI. Or for that matter building highway, schools, hospitals and rural roads. Rupee is falling against dollar. But interest rate for loans is skyrocketing. The RBI has intervened 13 times in the last two years to help the government control inflation. There is no investment, no loan off take for business purposes. A recent report said, banks have an exposure of Rs five lakh crore to the power sector which is facing a crisis of acute shortage of coal supply. The steel sector which again is saddled with another Rs one lakh crore is stagnant for want of coal and iron ore. The telecom sector, so far booming is now in jeopardy, because of scams and policy paralysis, and also has taken a loan of Rs three lakh crore. The aviation industry, which was competitive and attracting more new players during the NDA is now clamouring for another Rs 20,000 crore loan. As of now these are all in the non-performing asset category, and one can imagine the state of our banking sector. Add to this the woes of Rs 64,000 crore farm loan waiver. Another report last week said, Rs 47,000 crore bank loans have been defaulted in the last two years by powerful individuals and groups, which the banks are finding impossible to recover. Who are these powerful people but the cronies and hangers-on of the ruling clique?
We have thus a situation of the Indian banks sitting with over Rs.10lakh crore loans not knowing what its fate will be. The rating agencies have downgraded Indian banks. During the first round of recession in the West our government used to boast that Indian banks are not exposed to foreign toxic stocks and that our banks are safe. But in the last two years banking stocks have fallen twice as fast as those of other major sectors.
Manmohan Singh wants to open the banking, insurance and pension funds for FDI invasion. These are sectors which the government claimed not exposed so far to toxic stocks and reserves of hard cash. These are not sectors which will bring FDI, but will take away the only advantage we today have, hard cash, for which the West is starving. If this sector also is opened up Manmohan Singh would have completed his agenda of totally making Indian financial sector vulnerable to predatory foreign encounters.
This is a story of a dream gone sour. Under the NDA, India became the second fastest growing economy in the world. The decline of the West was already being talked about. Some foreign economic writers even predicted India outpacing China in the next decade. Manmohan Singh can take heart, he has restored the Nehru rate of growth. And set new national records in corruption, price rise, inflation, high interest rate, low value for rupee, low productivity, capital flight and above all leadership inefficiency, ineptitude, low national prestige and an uncertain future.