“Within days of my return,” said Union finance minister P Chidambaram (aka PC) in his interim budget speech in theLok Sabha on Monday, “I had declared that our objectives were fiscal consolidation, price stability, self-sufficiency in food, reviving the growth cycle, enhancing investments, promoting manufacturing, encouraging exports, quickening the pace of implementation of projects, and finding practical solutions to certain stressed sectors such as petroleum, power, coal, highways and textiles.”
With that lengthy preface, PC offered a review of the ‘state of the economy’ to Parliament, and claimed that during the tenure of the Manmohan Singh government the Indian economy had performed better than it did during the entire tenure of the Atal Bihari Vajpayee government.
By the same token, though, it could be argued that the Indian economy performed better during the tenure of Manmohan Singh than it ever did during the tenures of Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi. But to explicitly say that would not have been politically correct! And PC is politically correct.
The UPA government has consistently claimed that it has done a good job of managing the economy, in the face of a difficult global environment. PC tweaked that claim a bit. He more or less admitted that problems of economic management had cropped up, when he had moved to the eastern side of North Block in late 2008, and that he was now confident enough to assert that the economy is “more stable today than what it was two years ago.” Circa when PC was back in the western side.
Thus, on Monday PC also stood for performance certificate. For a finance minister who is remembered for his ‘dream budget’ of the 1990s, it must have been a nightmare getting his ratios right.
PC reassured us that “the fiscal deficit is declining, the current account deficit has been contained, inflationhas moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased, and hundreds of projects have been unblocked.” Today, compared to 2012.
This was a rather interesting way of viewing the state of the economy, while rejecting the charge of ‘policy paralysis’.
The opposition could, after all, claim that each of the improvements to the economy that PC says he has ensured, and correctly so, was required because of damage inflicted by his own government, between 2008, or 2009, and 2012! Terrorism was down, inflation was up.
Compared to the period 2003-2010, when the Indian economy was chugging along at good speed, and managed to hold its own in the immediate aftermath of the trans-Atlantic financial crisis, it was in 2010-12 that most of the damage on each of the fronts mentioned above was inflicted.
To say that we messed up the economy and then we cleaned up the mess, is not really a bold assertion of good performance. But, it is certainly an honest statement. PC deserves full marks for honesty.
I believe? PC’s numbers. Whatever window dressing has been done would be the usual stuff, at worst. The fact that PC has confessed to having squeezed plan expenditure suggests he is not shying away from telling the truth.
This suggests that he chose to make the economy pay a price for past profligacy. He wants credit for that, and for ending the ‘policy paralysis’ inflicted by those who had shackled projects that he has now unblocked.
The policy legacy that both PC and the PM clearly want to leave behind through this last state of the economy report is that they have been honest in their assessment of the economic situation and their policies are aimed at addressing the many challenges facing the economy.
What has been hinted at is that the ‘populism’ of the past, of their own government, has indeed hurt fiscal management and that there were good reasons for a loss of investor confidence in India but those worries should now be of the past, given the more credible policy effort pursued in the past year.
Many analysts will give PC his due. Some even suggested in the televised discussion on Monday afternoon that PC would make a good World Bank president and should look at international job offers after stepping down as FM. True.
However, PC’s biggest problem is that no investor is today willing to trust her money with his government. Everyone is waiting for a new government.
Surely PC must know that.
Which is why he underscored his own track record so that the PLUs who read ET will say, UPA was bad, but PC was OK.
He at least prevented a sovereign ratings downgrade and held the Rupee from sliding to seventy to a dollar. He did all that while paying ritual obeisance to all the important political constituencies of UPA – as his speech listed in great detail.