For a man in CBI custody since 21 August on charges of money swindling and corruption, P Chidambaram is in high spirits. He has not lost his sense of arrogance either. While leaving the Supreme Court premises after a hearing led by CBI officers and the police, Chidambaram was accosted by reporters who wanted a sound bite on his 15-day custody. The former Union finance minister chose to take a swipe at the Centre instead.
A report in NDTV quotes the exchange as follows: “Sir, you want to say anything? You have been in custody for 15 days”, asked the reporter. “5 percent,” Chidambaram, now facing custodial interrogation from CBI, was quoted as saying, presumably ridiculing the NDA 2 government over latest GDP figures. “You know what is 5 percent? You remember 5 percent,” he apparently went on repeating, highlighting India’s economic growth in the first quarter of fiscal 2020.
It is said that the erudite Chidambaram has an elephantine memory. He should remember what is “five percent” quite well. As the Union finance minister in UPA 2, he presided over one of the worst phases in the Indian economy, and the amusing thing is, he had managed to sound supremely arrogant even while defending those abysmal figures. Chidambaram is perhaps betting on the transience of public memory.
In the entire 2012-13 fiscal, under the ‘able hands’ of economist prime minister Manmohan Singh and finance minister Chidambaram, India’s GDP growth had crashed to 4.8 percent in the January-March quarter and fell to a decade’s low of 5 percent for the entire 2012-13 fiscal, dragged down by horrible performance of farm, manufacturing and mining sectors, as Times of India had reported in a 31 May, 2013, edition. As the report had elaborated quoting data Central Statistical Organisation (CSO), India’s growth — that was recorded at 6.2 percent for the 2011-12 fiscal — was steadily declining. It was 5.4 percent, 5.2 percent and 4.7 percent in the first, second and third quarters, respectively, of 2012-13.
Chidambaram’s media interactions have always been accompanied by a condescending tone, resembling a principal scolding errant students in the class who have flunked their exams. At a news conference following the release of those numbers, Chidambaram told reporters: “Growth slowed down to 5 percent in 2012-13 and we expect that the growth trend will remain flat-ish in the first quarter. Even so, we are in better health than many other countries in the world. Therefore, there is no reason for excessive or unwarranted pessimism.”
The words of Chidambaram, then the Union finance minister, are instructive. He was defending India’s slow GDP growth and weak parameters in manufacturing, farm and mining sectors by saying that India was still better placed than certain other nations and dismissed the critics who had slammed government’s handling of the economy. It is worth recollecting the fuller picture of the Indian economy during that time when it was being shepherded by an economist prime minister (then in his second consecutive stint) and a scholarly finance minister.
By October 2017, a number of multilateral agencies were writing off Indian economy. The World Bank issued a forecast. It said India will grow at 4.7 percent as against 6.1 percent projected in its April forecast, a cut of 1.4 percentage points. India’s GDP growth had by then crashed to 5 percent from over 8 percent over past decade, but Chidambaram had gone into a denial mode, rejecting the International Monetary Fund forecast on India and calling for a review of its methodology, as Economic Times had then reported.
In its edition dated 30 May, 2014, The Hindu had reported that the Indian economy was expected to grow by 4.7 percent in 2013-14, quoting GDP provisional estimates. The report further mentioned that GDP growth rate in the previous year was a decade-low of 4.5 percent — the second year in a row during which the economy’s growth had nosedived below 5 percent mark. The last time India had faced such a fisco was in 1984-85 to 1987-88, according to the report.
The state of the economy, under Manmohan-Chidambaram combination, was so dire that the then finance minister had been taking regular potshots at his predecessor and party colleague Pranab Mukherjee amid crashing rupee and falling bourses. Speaking on the floor of the Rajya Sabha, Chidambaram had said: “One of the domestic factors (behind the crash) is that we allowed fiscal deficit to be breached and we allowed current account deficit to swell because of certain decisions that we took during the period 2009 to 2011.”
One gets it. With Chidambaram, it is always someone else’s fault. It is equally amusing, therefore, to note the remarks made by former Manmohan Singh, blaming the Narendra Modi government for “man-made blunders of demonetization and a hastily implemented GST”.
Our economy has not recovered from the man made blunders of demonetisation & a hastily implemented GST... I urge the govt to put aside vendetta politics & reach out to all sane voices to steer our economy out of this crisis: Former PM Dr Manmohan Singh #DrSinghOnEconomicCrisis pic.twitter.com/83cBJWHay9
— Congress (@INCIndia) September 1, 2019
In the statement, Manmohan also says that “India has the potential to grow at a much faster rate, but the all-round mismanagement by the Modi government has resulted in this slowdown”. The former prime minister, an eminent economist, did not care to explain why the economy had crashed to even lower figures under his tutelage.
Leaving aside the political slugfest, let’s just put in perspective the doomsday scenarios that are being painted over India’s current economic growth that has dropped to 5 percent in the April-June quarter of 2019-20 due to a deceleration in manufacturing and agriculture sectors. There is bad news from the auto sector as well.
Automobile sales — considered a bellwether sector — crashed again by nearly a third in August 2019 over last year marking the 10th straight month that sales have declined. According to reports, Maruti Suzuki, India’s largest carmaker, has announced a two-day shutdown of Gurugram, Manesar plants on 7 and 9 September after reporting a nearly one-third decline in sales at 1,06,413 units in August.
Obviously, there is a problem. But is the slowdown in the Indian economy and the dismal performance of consumer goods sectors solely due to “nutty policies” of Modi government and its “mishandling of the economy” as Congress party and a section of the commentators have alleged.
Interestingly, India is not the only country to witness a slowdown. The other Asian giant, China, whose economy is much bigger than India’s, is experiencing an unprecedented crisis in the auto sector. According to data from China Association of Automobile Manufacturers, China’s auto sale is projected to witness a double-digit drop in 2019 after a 13 consecutive monthly decline in sales and is on track for its worst year in history.
The month of July witnessed a fall of 4.3 percent in sales in China and an employee at a dealership in Guangzhou was quoted, as saying, in Nikkei Asian Review: “Our revenue has fallen more steeply than last year… It’s because the economy is bad.”
Analysts say that “slowing demand for gas guzzlers has plunged automobile markets worldwide into a decline, led by a historic drop in China”.
Chinese slump after three decades of growth in automobile sales is an indication that consumers are growing wary of the global uncertainty around US-China trade war and that is edging the world towards a recession. The indications are too many to miss.
Latest data from the US manufacturing sector shows a clear contraction for the first time in a decade, suggesting that the trade war is triggering a global downturn. But the US isn’t the only one. CNN reports that five of the world’s biggest economies are at risk of recession, and it cites data from Britain, Germany, Italy, Mexico and Brazil to make its case.
“Germany, Britain, Italy, Brazil and Mexico each rank among the world's largest 20 economies. Singapore and Hong Kong, which are smaller but still serve as vital hubs for finance and trade, are also suffering. While growth has been dragged lower in each country by a specific cocktail of factors, a global manufacturing slump and a sharp drop in business confidence have made matters worse,” reports Charles Riley in CNN.
The situation in Germany, world’s fourth-largest economy, is apparently so bad that its latest PMI data suggests manufacturing sector remains “firmly in contraction,” and output expectations “at a seven-year low — the lowest since the financial crash.”
Unless Modi’s “nutty policies” have made possible a global recession, it is likely that the real reason behind India’s slowing economy is the threat of recession looming large triggered by the US-China trade war. If anything, Morgan Stanley believes that even if global economy faces recession in nine months, India will likely remain an exception.
While we may take these predictions with necessary scepticism, the bottomline is that it is very difficult to firewall a nation’s economy from worldwide economic trends in a globalized world. India is going through a rough path but the process is perhaps more cyclical than many partisan analysts, whose analyses are clouded by politics, would have us believe.
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Updated Date: Sep 05, 2019 21:48:32 IST