Economic slide

IF despite a good monsoon, subdued oil prices and low inflation, growth is slowing, as the Economic Survey indicates, it means something is seriously wrong. The situation on the ground is often worse than what is officially acknowledged. Finance ministers and government functionaries tend to exaggerate achievements and downplay underperformance. They seldom admit to failures. There is no culture of open debate in India. Honest stock taking and admission of mistakes are avoided, which prevents or delays a course correction. Demonetisation was a bad idea - ill-timed, introduced without preparation and had serious consequences for farmers and the poor. The Survey admits to job losses in the unorganised sector by indirectly stating that post-demonetisation, there was a 30 per cent increase in demand for work under MGNAREGA.  Demonetisation hastened the economic decline.

This government, headed by a strong leader, seems to distrust intellectuals. At least it does not listen to its own experts. Every economist, small and big, has expressed opposition to loan waivers which have a bearing on the economy since resources get diverted from development work. In the Survey he authored, Chief Economic Adviser Arvind Subramanian has held out the Uttar Pradesh loan waiver, which the Prime Minister had promised, as an example to point out that capital expenditure in UP has got slashed by 30 per cent to accommodate the Rs 36,000 crore burden. An outspoken central banker like Raghuram Rajan was denied an extension. Under him the RBI displayed dynamism. It took a strong position against banks' bad loans. Now tackling NPAs is a work in progress. The RBI mishandling of demonetisation and interest rates and miscalculation of inflation are before everyone. 

With politics prevailing over economics, welfare taking the centre stage, loan waivers becoming common and populism of all sorts being played up to the state level, no wonder Arvind Panagariya lost interest in the job at Niti Aayog. He probably did not want to be blamed for things going wrong. The economy is sputtering. There is no regular, full-time Finance Minister. No individual, no matter how competent, can do full justice to both the Finance and Defence portfolios since each demands time, effort and understanding of issues.