Millennium Post

Dwindling growth

While the government’s optimism vis-à-vis economy is remarkable, a fallen GDP growth rate in second-quarter sings the true tale of a pervasive slowdown

Dwindling growth

Finance Minister Nirmala Sitharaman is endowed with a rare 'discerning eye', which has certain magical powers to see imaginary things and filter out the real ones. Not everyone can be expected to have such special faculties. But she has a problem there: she cannot imagine that not everyone is as lucky as she is.

During a short discussion on economy in the Rajya Sabha the other day, the finance minister categorically denied that the economy was in recession. "If you look at the economy with a discerning eye, you see that growth may have come down... but it is not a recession yet and won't be a recession ever," she asserted. It did not quite matter to her whether those sitting opposite to her were really convinced. She was convinced and that is all that mattered.

It seems that she is taking things a bit too personally. True, she is the finance minister.

But all the problems of the Indian economy are not solely because of her. The problems with the economy started much before she shifted from South Block to North Block to take up the mantle of the finance ministry.

But Nirmala Sitharaman is not like other ministers. From the way she defends the economy—there is very little that is left to defend though—she seems to think that she is personally responsible. At least, that is what her body language suggests.

She is lucky that her Rajya Sabha 'discussion' happened a couple of days before—and not after—the release of the latest GDP statistics. According to the government's own figures, the second-quarter GDP growth rate fell to 4.5 per cent, the lowest in more than six years, compared with 7.1 per cent in the same quarter of 2018-19.

For argument sake, there is something positive for the finance minister here. In the first quarter, the slowdown was the lowest in seven years; so there is an improvement of one year, although the growth rate was half a per cent more.

The finance minister said that the government was aware of the situation and had taken sector-specific decisions to alleviate the distress. But does it mean that she is admitting there is distress? One does not know really, because she thinks everything is hunky-dory.

As long as she continues to be in a denial mode, nothing much can be expected from her. The first step to solve a problem is to acknowledge that the problem exists. Only then can something be done about solving it. If there is no problem how can it be solved?

It may be unreasonable to expect her to solve the problems of the economy, to which she has no clues. Her own colleague Subramanian Swamy says Nirmala Sitharaman "does not understand economics". It is true that he may have an axe to the ground when he criticises the finance minister, a post he thinks he would fit into eminently, but he cannot be faulted for his assessment of Sitharaman's capabilities as an 'economist'.

"If you see the press conferences, she is handing the mic to civil servants to answer. What is the problem in the country today? Poor demand. Supply is not the problem. But what did she do? She relaxes taxes for corporates. Corporates are flushed with supply. They will just use it to write off their debts. That is what they have done," he said in an interview to a news portal.

Swamy has been saying that the real economic growth in India may not be more than 1.5 per cent. "Do you know what the real growth rate today is? They are saying that it is coming down to 4.8%. I'm saying it is 1.5%," he said.

Sitharaman seems to be still stuck in her obsession with the UPA regime in finding a scapegoat for the Modi government's dismal performance with the economy. She is conveniently forgetting that this is the second term of the Modi government and, therefore, it has only itself to blame. A time frame of five years is a reasonable period by any standard for a course correction.

The fact is that the Modi government not only failed to steady the economy but it also added a few problems of its own making, driving the country to the hopeless situation that it is today. With no policy initiatives of any substance, there is little hope for a turnaround any time soon.

This would mean that the government would continue to pick holes in its own data and the methodologies which can give it a false sense of satisfaction but will not help the economy achieve any progress.

As Swamy points out, part of the problem is that Prime Minister Modi's advisors are too scared to tell him the truth. He is told wonderful things to please him.

Views expressed are strictly personal

K Raveendran

K Raveendran

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