New Delhi: In a scathing attack on the Narendra Modi government’s handling of the economy, former Prime Minister Manmohan Singh has said it may take a few years for the country to get out of this slowdown, provided the Centre acts sensibly now.
Calling for the Centre to come out of its habit of “headline management”, Singh, an eminent economist himself, said the “first step in a crisis is to acknowledge that we are facing one”.
In interviews to 'Dainik Bhaskar' and 'The Hindu Business Line', Singh predicted this slowdown would be “prolonged” as it is cyclical as well as structural. Calling for structural reforms to address the slowdown, he said the government was wasting its historic mandate by not focusing on economic growth.
“We cannot deny that India is facing an economic crisis. Already, a lot of time has been lost. Instead of wasting its political capital by adopting a sector-wise piecemeal approach, or on monumental blunders like demonetisation, the time has now come for the government to carry out the next generation of structural reforms and promote sectors that can generate mass jobs,” Singh said.
When asked to suggest structural reforms to revive the economy, the former PM said five points require immediate attention:
1. Rationalisation of GST, even if it leads to loss in revenue in the short term.
2. Focus on increasing rural consumption and reviving the agriculture sector. He said government can take clues from Congress manifesto, which lays down several measures to free up agriculture market.
3. Liquidity crisis needs to be addressed. He said that not only public sector banks but NBFCs are also suffering.
4. Revive major job-generating sectors such as textile, auto, electronics and subsidised housing. He said easy loans need to be provided for this purpose, especially to MSMEs.
5. Government needs to identify new export markets opening up due to the ongoing trade war between US and China.
He pointed to his own record at steering the economy successfully, first as a finance minister and later as the PM, and said the economy has come to a grinding halt now because of a “man-made crisis”.
Addressing Congress leaders later at a meeting here, Singh said at least a million people may lose their jobs if a stimulus package is not given to the auto sector, which is crying for aid, and investment in the private sector is not promoted.
"The country today is in the midst of a dangerously protracted slowdown. And this is something which is not the statement being made only by the Congress party people but everywhere whether you talk to people in the industry, journalists -- the common theme is that the economy is going from bad to worse. The dangerous thing about the present situation is that the government is complacent enough to not realise that we are in the midst of a protracted economic slowdown," he added.
Singh said Modi has been talking about achieving a $5 trillion-economy by 2024 but in the present situation, it looks like a "piped dream". He said the size of the economy was $2.7 trillion in the current financial year and to reach $5 trillion by 2024, the country needs a growth rate of 12% by the nominal terms and 9% in real terms.
"If the economy is going the way it has been going down quarter after quarter, then there is no hope that the prime minister's promise of a $5 trillion economy becoming reality," Singh said.
He said the general feeling in the industry is that if the present trend of auto sales is not reversed, there will be at least a million people who would face the prospect of losing their job.
"Therefore, the atmosphere in the country as a whole is that of gloom and doom. One could hope that the BJP government would come out with a package to stimulate demand, to promote investment. But you talk to any body in the industry today, the general feeling is that there is tax terrorism in place of incentivising investment and that's the reason why private sector investment is sluggish and there are no signs that private sector investment will pick up," he said.
Singh said the stock markets are showing signs of reacting to this atmosphere of gloom. He said the responsibility of the Congress party is to tell the country that the promises that were made by the BJP during the elections are being ignored and the economic reality of the country are very different from the targets that were set.
"It is our responsibility and it is our duty to take all this message to the country and to point out how the BJP has misled the country and what is being now done is only cosmetic to push up the atmosphere," he said.
If income growth slows down month after month, quarter after quarter, the scope for creating more jobs for our young people is going to be very seriously affected, Singh said.
The growth rate has declined for five successive quarters and now it stands at 5%, he noted, adding the real wage rate in agriculture have been static for the last five years of the BJP government.
Singh said the manufacturing sector has been affected for want of demand, for want of investment incentives, and the result is that there is an all-round atmosphere of gloom. He said the rupee is getting weaker and advantage could be take to push up exports but outbound shipments in the last five years of the BJP government have been sluggish, resulting in the balance of payments situation getting worse.
Earlier this month, the government had reported that GDP growth rate had dipped to a six-year low of 5 per cent during the first quarter of the ongoing fiscal.
(With inputs from PTI)