If FM Sitharaman can take credit for economic success, she must take blame for failures

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If you take credit for the rains, be prepared to take the blame for the drought is a maxim that Finance Minister (FM) Nirmala Sitharaman would do well to imbibe.

For the average Indian family of five, cooking a simple dal, tomatoes, onion, garlic, ginger, salt and oil on an LPG gas stove costs roughly Rs 51 today. It would have cost them only Rs 36 in 2019, Rs 38 in 2014 and Rs 28 in 2009.

In her speech in the recently concluded session of Parliament, the FM pleaded helplessness about such a steep increase in costs for the Indian family and blamed it on external factors such as the Ukraine war, global inflation etc. But when such costs declined from 2014 to 2019, the FM never missed an opportunity to take full credit for herself and her government and equally, castigated the then UPA government for high inflation between 2009 and 2014.

The truth is much simpler. Crude oil (Indian basket) went up from an average price per barrel of $80 in 2009 to $106 in 2014, came down to $70 in 2019 and has climbed back up to $101 now. The rise and fall in the cost of a dal dinner for the Indian family is synchronous with global crude oil costs, regardless of which government is in power. While levels of inflation may change, the trend of domestic prices is tightly correlated to global crude oil costs.

Similarly, the FM gloated in Parliament about how India will be the worlds fastest-growing economy this year but when Indias economy was among the worlds worst in 2020, she famously blamed it on an act of God, the Covid-19 pandemic. If Indias economy is growing fast this year, its the same God who deserves credit, since its natures law that when something falls sharply, it will also rebound sharply.

Fleeing foreign investors have triggered a collapse in the value of the rupee. The FM and her cheerleaders defense is that the rupee is not falling, only the dollar is gaining or that other currencies have fallen even more, akin to a defeated sportsmans laughable excuse that he did not lose, only his opponent won. But when foreign inflows were strong in previous years, in a heartbeat the FM proclaimed that the same foreign investors were flocking to India enamored of the Modi government. The reality is that a weaker rupee makes a dal dinner much more expensive for the average Indian family and it is of no solace to them that the Bangladeshi or the Sri Lankan family is paying even more for their dal.

There is also much nationalistic chest-thumping by the FM and her cheerleaders about Indias stout defiance of Western wisdom to provide a large fiscal package during the pandemic which, in their view, has now caused runaway inflation in Western countries. But the data completely contradicts such gloating. Indias fiscal package in 2020 was a measly 10 per cent of GDP, compared to the USs 28 per cent, Canadas 20 per cent, Germanys 43 per cent and Japans 45 per cent. As a direct consequence, Indias economy was the worst hit, with a negative 6.6 per cent growth (FY2021 real GDP) vis–vis the USs -3.4 per cent, Canadas -5.1 per cent, Germanys -4.6 per cent and Japans -4.5 percent. And in FY2022, India had the highest inflation among all these countries. So, India neither avoided the high inflation of other nations nor a steep GDP fall. In fact, there is much to be embarrassed about in Indias pandemic economic management.

If there is one issue that affects nearly every Indian, it is the state of the nations economy. Politics is the only legitimate medium to voice concerns and raise issues that affect the common people. Indias economic condition is not merely a topic for debate among elite economists and technocrats but a burning political issue. Such a serious issue warrants a serious discussion in Parliament and state legislatures, not just among policymakers and commentators in the media. Unfortunately, the current discussion on the economy has been reduced to a political tu-tu, main-main (blame game) for which both the government and the Opposition are equally culpable.

The discussion on the value of the rupee should be about how a strong rupee is not a sign of a nations strength and a weaker rupee may boost exports and create jobs. But it can also cause mehengai (price rise) through imported inflation and every government has to strike a delicate balance. It would help the nation greatly if the FM would boldly explain this to the people rather than hide behind a rising dollar excuse and if the Opposition could demand a coherent currency strategy rather than make puerile jokes about rupee value and aging leaders.

Similarly, the discussion on increasing GST rates should have been about progressive direct taxes that affect the rich more than the poor versus regressive GST which affects the rich and the poor alike. In 2010, out of every 100 rupees in Union government taxes, corporate taxes accounted for 40 but today they only contribute 25. So, the tax burden has shifted enormously from corporates to individuals. The Opposition should have clamoured for correcting this skew by reversing the indiscriminate 2019 corporate tax cut, rather than make some facile and factually wrong arguments over paneer and crematorium taxes.

The quality of discourse in a democracy shapes its future direction. Indias economic future will be shaped by the quality of political discussion on economic issues. Parliament is the appropriate forum to raise such issues in the larger spirit of finding solutions to Indias woes and not for shallow, tit-for-tat political rhetoric. Both the government and the Opposition must share equal responsibility for this. Indias state of the economy is far too important to be left just to technocrats or social media memes.

The writer is chairman of the data analytics department of the Congress Party

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