Sinha vs Singh

Finance Minister Yashwant Sinha has now equalled Dr Manmohan Singh’s record of presenting five budgets in a row. Indeed, both also presented one vote on account each, Sinha in 1991 and Singh in 1996. But that, alas, is where the comparison ends. For whereas Singh rescued us from the disaster into which Sinha had pushed us as the secular socialist finance minister to Chandra Shekhar, it seems Singh will once again have to be called upon to rescue the economy from the morass into which Sinha, now a saffron capitalist, has mired the economy.

To understand that this is no hyperbole, the reader is invited to study the following statistical information gleaned from the Economic Survey, 2001-02, presented last week to Parliament on the eve of Sinha’s fifth budget. I exclude the first year of Manmohan’s stewardship because that is the year in which the economy was deliberately contracted to restore macro-economic balance. We thus have Manmohan’s four years, 1992-96, to match against Yashwant’s four years, 1998-2002.

GDP growth during Manmohan’s four years was steadily raised from 5.1 per cent to 7.5 per cent. Indeed, the momentum imparted to growth took us to over 8 per cent the following year. It has been a downslide ever since. Yashwant’s record is a slithering from 6.4 per cent in 1998-99 to 5.4 per cent in 2001-02, after touching a low of 3.9 per cent in 2000-01. Indeed, the terminal figure is something of a statistical illusion given the low growth in the previous year as the average for the two years combined amounts to only 4.6 per cent. Yet, in every budget speech, Sinha pulls out the magic figure of plus seven per cent annual growth as the road to India’s economic heaven. When Manmohan did the same, it made sense as we were actually on a plus 7 per cent growth path. To repeat the same mantra when one is down to a 4-5 per cent trajectory is to think you can fool all of the people all of the time. The fact is we were within reach of the Asian economic miracle under Manmohan Singh; we are now tottering on the brink of a reversal to the notorious ‘Hindu’ rate of growth.

The average annual rate of growth in the last two years has been lower than the annual average of the Fifth Plan (1974-79), the Sixth Plan (1980-85), the Seventh Plan (1985-90) and the Eighth Plan (1992-97). Indeed, the Economic Survey confesses that the average annual growth rate in the entire Ninth Plan period ending this March is estimated at 5.4 per cent, which was the growth rate we achieved two decades ago in the Sixth Plan. Far from taking us forward, what Yashwant Sinha has done is revert the economy to where it was twenty long years ago.

The Economic Survey pleads a large number of extenuating circumstances to explain this dreary performance: ‘‘the East Asian economic crisis, the recent world economic slowdown, the adverse security environment, natural disasters like the Orissa cyclone and Gujarat earthquake.’’ And when, pray, have we not been victim to exogenous adversity? Skill in governance consists of turning challenge into opportunity. When nation-wide drought hit the agriculture sector three years in a row in 1985-88, reducing growth from 4.3 per cent in Rajiv Gandhi’s first year in office (1985-86) to 3.4 per cent in 1987-88, a massive programme of rural regeneration based on widespread drought-proofing, massive employment assurance programmes (Rajasthan received as much for drought relief in four years as it had in the previous forty) and technology missions for such dryland crops as pulses and oil seeds bounced the economy back to the highest growth rate ever recorded, the only time Indian economic growth crossed into double figures — 10.6 per cent in 1988-89. This was followed by 6.8 per cent in 1989-90, his final year as prime minister, an average of 8.7 per cent over his last two years — the highest two-year average ever attained by the Indian economy.

Why go back to Rajiv Gandhi? Yashwant Sinha’s first innings as finance minister was marked by the Gulf War and the run on the rupee which took the economy to the brink of bankruptcy. Yet, growth in that year of exogenous disaster was the same 5.4 per cent as recorded by Sinha in 2001-02. How long will his minions go on trotting out excuses? What emboldens them to repeat that our performance last year outshone those of many others: ‘‘It will also be one of the highest growth rates in the world in the current year’’ says the Economic Survey in its very first paragraph. But higher than whom? China? Singapore? Taiwan? South Korea? Whom are we comparing with — Pakistan?

The fact is that ever since the latter years of Rajiv Gandhi’s reign, the Indian economy has been growing much faster than the world average. Not surprising — we have a lot of catching up to do. But where under Manmohan Singh we were reducing the gap between ourselves and key comparable economies, the gap has been widening, particularly between ourselves and the Chinese, ever since the economy was handed over to the tender ministrations of Yashwant Sinha. Let me just cite one figure: foreign direct investment. The whole purpose of economic reform is to make the economy attractive to the foreign inves- tor so that he does for us what he has done for east Asians from Thailand to the People’s Republic: invest, invest and invest. But how has FDI figured in the Yashwant era in comparison to the Manmohan era? Well, under Manmohan net FDI as a percentage of GDP rose from 0.05 per cent in 1991-92 to one full percentage point in 1995-96 — a twenty-fold increase. Under Yashwant Sinha, it has collapsed from 0.6 per cent to 0.4 per cent. No one trusts us any more: not the domestic investor, not the foreign investor. And as official development assistance stagnated at around 3000 million dollars a year, clearly foreign governments and international aid agencies do not trust us either.

On every parameter of real tangible growth — agricultural output, industrial production, export performance, savings and investment, above all, employment — the Economic Survey tells a tale more tragic than Romeo and Juliet. The only thing growing is the scale of former statistics minister Arun Shourie’s mendacious manipulation: poverty, he told us last year, after carefully changing the methodology of calculation to suit his nefarious purpose, is rapidly declining — even if nothing in the economy is growing. No wonder he failed to take a first in his economics honours at St Stephen’s.

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