http://thecitizen.in/city/the-economic-legacy-of-manmohan-singh-4/
The executive head of the world’s largest democracy, India’s Prime Minister Manmohan Singh held a national press conference for the first time in three years on 03 January. He did so ostensibly to announce that he will not serve a third term even if his government is re-elected. All signs point towards reelection being an increasingly unlikely prospect. He did not, however, miss the opportunity to also applaud his government’s efforts in steering India towards a record rate of economic growth in the last nine years. He did so while admitting that the country has entered into a period of “slowdown initiated by the global financial crisis”. This was a curious admission at a time when global growth has finally begun to pick up.
The most recent projections of the International Monetary Fund (IMF) point towards an increase in global growth. The IMF projects global growth at 3.6 per cent in 2014. However, in its forecasts, the IMF has also stated that this growth will be led by an increase in growth in advanced economies. Meanwhile the ‘emerging economies’, of which India is a part, will continue to be exposed to downside economic risks. This is the ‘new normal’ global economy that Manmohan Singh has to contend with until he is in office. Reaffirming this trend, the Reserve Bank of India (RBI), in its mid – quarterly review released in December stated that there will be “uneven recovery” across industrial countries. Indeed 2014 will continue to be unpredictable and challenging.
While aware that this may be the last time he would address the country, Mr. Singh did not seem as confident as he did in 2010, the last time he held a similar press conference. His explanation for a remarkably poorly managed reversal in India’s fortunes, was that India is “no exception” to “all emerging economies”. There is little merit in pointing out that sub 5 per cent growth, India’s new reality, is reminiscent of the closed and controlled economy it once was. It is hardly characteristic of a progressive, liberal market economy with a large and young demographic base. And this is precisely the flaw in the PM’s argument. How can India be in a race to the bottom with all other emerging economies when once, hyphenated with China, it was once touted to be in a race to the top?
Mr. Singh insists that this phase will not last long. He says that the Indian people should not “focus overly on the short term”. He should perhaps revisit the transcript of the 2010 press conference where he exuded confidence in India’s inherent resilience to the financial crisis. He said that his government would “ensure” that India “gets a growth rate of about 10 per cent”. Surely the executive head of the country should have tempered such optimism with an informed understanding of the domestic and external environment? He failed to do so. Unfettered revenue spending, policy flux and focus on populist legislation, has left India with little to celebrate.
Growing from a low base, with close to 800 million people struggling to live decently, there is no ambiguity that India is at a crossroad. Perhaps at no other juncture in history have so many people stared at such an uncertain and inequitable future. Nearly 12 million enter the job market in India every year – close to half the population of Australia. A vast majority stares at grim prospects of sustainable and productive employment. The manufacturing sector is stagnating, choked by an inoperable business environment. Over 550 infrastructure projects are facing inordinate delays and cost escalation estimated at rupees two lakh crores.
To make matters worse, Ben Bernanke, the Governor of the US Federal Reserve, decided to ‘taper’ the on-going Quantitative Easing (QE) programme last month. The gradual scaling back of QE is premised on the simultaneous upturn in the American economy. The central bank will gradually stop buying mortgage backed securities which it was doing to provide banks with cash against the purchases – in a bid to stimulate investments. This means that the excess liquidity in the global banking system will no longer be available to the Indian economy in the form of short term flows, to camouflage the investment deficit. No doubt the deficit is structural and should have been addressed by meaningful policy and administrative reforms.
Mr. Singh insists he will be judged by history. Historians must note then, the irrational exuberance of Mr. Singh and his government over the past few years, despite multiple warning signs. The problems of the Indian economy raised here are not new. Indeed, many domestic and foreign stakeholders have repeatedly tried to sound the alarm. They have been stonewalled by the government. Now, in his veritable farewell to the nation, the PM has expressed concern over his government’s failure to create employment in the manufacturing sector and inability to combat price rise. By doing so now, did he want to suggest that these are recent issues? Why was he silent on these systemic challenges for the past three years? Perhaps only history will tell.
