The nation came to the realisation yesterday that the Prime Minister Manmohan Singh actually has a voice. And then we all came to the conclusion that just because he decided to speak, he spoke well. One commentator even went onto christen the event as “Manmohan on steroids”.
The part that the media loved the most was when Singh told the Parliament, Jo garajte hain, woh baraste nahin (Thunderous clouds do not bring showers)', a clichéd statement which was supposed to put the Bharatiya Janata Party (BJP), the main opposition party, in its place.
As far as clichés go, I would take this opportunity, to bring to your notice, dear readers, a dialogue written by Akhtar-Ul-Iman and delivered with great panache by Raj Kumar in the Yash Chopra directed Waqt. The line goes like this: “Chinoi Seth…jinke apne ghar sheeshe ke hon, wo dusron par pathar nahi feka karte,”
Now Singh may not have time to sit through a movie which runs to 206 minutes, given that he is the Prime Minister of the nation, and probably has decisions to make and things to do. But he would be well-advised to watch this 18-second YouTube clip and hopefully come to the realisation that those who live in glass houses, like Singh and his government, do not throw stones at others.
In fact, Singh's speech to Parliament yesterday was riddled with many inconsistent and wrong claims. It is a real surprise that the BJP has not tried to rubbish the arguments presented by Singh. Let us examine a few claims made by Singh:
Even Bimaru states have also done much better in the UPA period than the previous period: Bimaru is an acronym used for the states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. These are states which have lagged in economic growth for a long period of time. There has been a recent spurt in their economic growth and this, claims Singh, has been because of the UPA government.
Three out of the four states (except Rajasthan) have had a non-Congress-non UPA government for the entire duration of the UPA rule in Delhi. Rajasthan has had a Congress government since December 2008.
So trying to claim that the growth in these states has been only because of the UPA government is misleading, to say the least. The argument is along similar lines where Congress politicians and some experts have tried to claim over and over again that Bihar has grown faster than Gujarat. Yes, it has in percentage terms. But what they forget to tell us is that Gujarat is growing on a much higher base, meaning the absolute growth in Gujarat is higher. In fact, it is three times higher than that of Bihar (The entire argument is explained here).
If we look at the MSP across various commodities, they have increased by 50-200 percent since 2004-05: The government offers a minimum support price on various commodities, including rice and wheat. At this price, the Food Corporation of India (FCI), or a state agency acting on its behalf, purchases primarily rice and wheat grown by Indian farmers. The theory behind setting the MSP is that the farmer will have some idea of the price he would get when he sells his produce after harvest. What it has led to is that more and more farmers are selling to the government because they have an assured buyer at an assured price. The government now has nearly Rs 60,000 crore of rice and wheat in excess of what it needs to maintain a buffer stock.
While the government is hoarding onto more rice and wheat than it needs, there is a shortage in the open market that is pushing up food and consumer price inflation. It has also pushed up food subsidies and the fiscal deficit. And if the government continues with this policy it likely face other negative consequences as well. (The entire argument is explained here).
The current slowdown in industrial growth is a concern: This was the most tepid statement in the entire speech. Is it just a concern? Some of the biggest Indian industrialists have gone on record to say that they would rather invest abroad than in India. As Kumar Manglam Birla recently said in an interview, “Country risk for India just now is pretty elevated and chances are that for deployment of capital, you would look to see if there is an asset overseas rather than in India...We are in 36 countries around the world. We haven’t seen such uncertainty and lack of transparency in policy anywhere.” The Birlas have known to be very close to the Congress party for a very long time.
And numbers bear this story. Indian corporates are investing abroad rather than India. In 2001-02, this number was less than 1 percent of the gross domestic product (GDP) and currently it stands at 6 percent (Source: This discussion featuring Morgan Stanley’s Ruchir Sharma and the Chief Economic Advisor to the government Raghuram Rajan on NDTV). So the situation is clearly more than just a "concern". If Indian industrialists don't want to invest in India who else will? Is it time to say good bye to industrial growth? Maybe the Prime Minister has an answer for that.
Economic growth has slowed down in 2012-13 because of a difficult global situation: This is something which Finance Minister P Chidambaram also alluded to in his budget speech. But there is very little acknowledgement of the mistakes that have been made by this government led by Manmohan Singh over the years.
When India was growing at 8 percent or more, there was a lot of chest thumping by various constituents of the government. Now that we are not growing at the same speed its because of a difficult global situation.
Ruchir Sharma, in the NDTV discussion, made a very interesting point. India has consistently been at around 24-26th position among 150 emerging markets when it comes to economic growth over the last three decades.
We thought we were growing at a very fast rate over the last few years, but so was everyone else. As Sharma put it, “The last decade we thought we had moved to a higher normal and it was all about us. Every single emerging market in the world boomed and the rising tide lifted all boats, including us.”
But now that we are not growing as fast as we were it is because the global economy has slowed down. Sharma nicely summarised this disconnect when he said: “When the downturn happens it is about the global economy. When we do well it's about us.” India currently has fallen to the 40th position when it comes to economic growth.
Will bring the country back to 8 percent growth rate: This is kite flying of the worst kind. As Sharma of Morgan Stanley told NDTV: “I see people in government today, including the Prime Minister, talking about 8 percent GDP growth rate as if that is the level we should be. There is nothing to suggest that is our potential.”
Singh said that the government was committed to achieving 8 percent growth rate for the period of the 12th five-year plan period of 2012-17. In the first year of this plan (2012-13), the Indian economy is expected to grow at around 5 percent (numbers projected by the Central Statistical Organisation).
What that means is that if the 8 percent target is to be achieved, the economy has to consistently grow at 9 percent per year for the remaining four years of the plan. And India has never experienced such consistent high growth ever in the past.
Given that, Singh's statement needs to be taken with a pinch of salt. It is essentially rhetoric of the worst kind.
As Nate Silver writes in The Signal and the Noise, “Sometimes economic forecasts have expressively political purposes too. It turns out that economic forecasts produced by the White House, for instance, have historically been among the least accurate of all, regardless of whether it's a Democrat or Republican in charge. When it comes to economic forecasting, however, the stakes are higher than for political punditry. As Robert Lucas pointed out, the line between economic forecasting and economic policy is very blurry: a bad forecast can make the real economy worse.” Singh's 8 percent growth statement needs to be viewed along similar lines.
There were many things that Singh did not talk about. Among 150 emerging markets, the fiscal deficit of the Indian government is currently at No 148. Only two countries are worse than us. When it comes to inflation, India is currently at the 118-119th position. The current account deficit (which Singh did talk about) will touch an all-time high during the course of 2012-13. Interest rates have stubbornly refused to come down. And so on.
To conclude, Manmohan Singh was in poetic mood yesterday. "Humko hai unse wafa ki umeed, jo nahi jaante wafa kya hai (We hope for loyalty from those who do not know the meaning of the word)," the PM said quoting Mirza Ghalib, while taking pot-shots at the BJP.
It's time the BJP got back to him with what are the most famous lines of the poet Akbar Allahabadi.
“Hum aah bhi karte hain to ho jaate hain badnam,
wo qatl bhi karte hain to charcha nahi hota.”
(badnam = infamous. Qatl = murder. Charcha = discussion)
Vivek Kaul is a writer. He tweets @kaul_vivek
Updated Date: Mar 07, 2013 14:38:30 IST