Given the sluggish economy, slow growth of exports, widespread agrarian distress and the poor pace of jobs creation, it is easy to criticise the government for mismanaging the economy, as the Congress party has just done in its economic resolution. This situation, the party says, is despite ‘a near perfect alignment of stars’ including a global economic upswing and low oil prices. The problem, however, is that beyond this, there is little in the party’s economic resolution to suggest the Congress has a reasonable alternate strategy; indeed, some of the facts it cites appear at variance with the reality.
So it talks of the paralysis of the banking sector since the BJP came to power, a threefold increase in NPAs in this period and allowing cronies to defraud the banking sector. Given that the current crisis has its origins in the UPA period—though the issue of whether banks were directed to lend to certain firms is difficult to prove—it is amazing to hear such a charge even being leveled; and while it is true that Nirav Modi fled during the BJP’s tenure, there are many more instances of banking fraud during the UPA tenure. And given it was the Supreme Court that cancelled telecom and coal licenses issued prior to the BJP government coming in, it is difficult to see how the Congress can argue “the starting point of the banking crisis was the unwarranted criticism of the telecom, coal and power sector policies of the UPA government that was trumpeted by the BJP”. Indeed, a large swathe of NPAs are due to the UPA’s failure to provide fuel linkages and various other critical clearances in time. Similarly, given the sharp collapse in inflation since the BJP came to power, the charge of “rising inflation expectations of households” makes little sense. And is not clear how the Congress can cite a fall in central government expenditure on health and education; a slowing can be argued, but that has to be seen in the light of the dramatic increase in the shares of central government taxes that the states got after the finance commission award.
If there is a valid criticism of the Modi government, it is that it has not dismantled most of the bad policies of the UPA and of previous Congress governments—the retrospective tax, the land acquisition act (he tried and failed), the food security act, bank nationalisation, disinvestment as opposed to privatisation, etc. Certainly, the Congress is right in saying the farm sector did better under it, but that was primarily the result of a favourable commodity cycle. The UPA did little to free agriculture markets or to move away from wasteful subsidies towards productive investment; it is to Modi’s discredit that he too has not been able to do this either. Though he did deregulate some mandis, he never created alternative markets; and he continued the Congress practice of banning farm-exports the moment domestic prices rose. It is nice to hear the Congress talking of the need to revive exports, but how can this be done till the root causes—rigid labour policies are one of them—are tackled? Indeed, even the limited labour reforms in a few BJP states has been criticised by the Congress economic resolution as resulting “in an atmosphere of uncertainty, insecurity, rampant exploitation and large scale siphoning of (sic) the employee’s wages into the pocket of the BJP