Yashwant Sinha in 2000, Image credit: Wikipedia

It is necessary to study the former Indian Finance Minister Yashwant Sinha’s views on the performance of Narendra Modi government based on what he has said in the context of current economic and political scenario, without giving any weightage for his impressive track record.

It appears that Yashwant Sinha has done great damage to India’s psyche by talking about so-called ” impending economic disaster” without his taking a holistic view of the industrial and economic policies of Modi government and the current Indian and global scenario.

Some of the criticisms made by Yashwant Sinha need to be critically analyzed.

Arun Jaitley as Minister for finance & defense at the same time :

Yashwant Sinha has criticized Prime Minister Modi for entrusting the heavyweight ministries of finance and defense along with the department of disinvestment and the ministry of corporate affairs to Arun Jaitley. According to Sinha, the overburdened Arun Jaitley has not been able to pay adequate attention to several ministries under him including the ministry of defense and ministry of finance.

Sinha further said that this was one of the principal reasons for Government of India “cut a sorry figure” in the handling of the implementation of demonetization and GST” and for the criticism of the Comptroller and Auditor General of India about the “deficiency in defense preparedness.”
Modi is not the first Prime Minister to have done this. Prime Minister Jawaharlal Nehru kept the foreign Ministry to himself for a long period. Prime Minister Manmohan Singh kept the coal ministry to himself. So many other examples can be readily pointed out.

Modi may have his compulsions and reasons for doing this, which is not known. Now, Prime Minister’s office (PMO) is large and well equipped, and with a Defence Advisor, Modi must have extended considerable support to Jaitley in managing the two difficult portfolios. In any case, Jaitley has done a reasonable job.

The criticism of CAG on a deficiency in defense preparedness cannot be simply attributed to Modi government, since this is a problem that started in Manmohan Singh government, with the then defense minister A.K. Anthony delaying decisions on many defense purchases for whatever reasons. Such problems do not arise overnight and do not happen in six months or so when Jaitley was holding two ministries.

“Sorry figure in handling demonetization & GST” :

It is a matter of opinion that demonetization & GST have been managed well or not.

Demonetisation is a difficult strategy which many politicians, bureaucrats, and economists advocated in the past but did not dare to implement. Modi did this. The element of secrecy is the most important aspect while introducing demonetization and inevitably this would upset some people for a short period and some people for very long period.

One would think whether any other Prime Minister would have handled demonetization better. In any case, the positive results of demonetization are already evident which discerning observers see. Visible positive results would be seen as the days go by since demonetization is necessary and essential strategy and is not a flawed decision.

About GST, it was implemented after extensive consultation with all states. Jaitley showed enormous patience and negotiation ability in arriving at consensus, with many opposition state governments having their agenda. He has to make some concessions which have created some element of confusion.

Industries say that they face “compliance burden” problem. With extensive computerization, this is not an insurmountable issue at all. In any case, such regulations are a necessary as many businessmen, educational institutions and government machinery continue to be steeped in corruption and they have to be closely monitored.

History will applaud Jaitley for this for implementing demonetization and GST with reasonable competence.

“Collapse of industrial production “and “loss of millions of jobs.”

About “collapse of industrial production “and “loss of millions of jobs” etc., the accusations of Sinha are based on media rumors and not facts and figures. This is not true at all.

With disturbed black money holders and deregistered shell companies and defaulters facing bankruptcy law, some upsets have taken place which is inevitable and necessary to uproot the parallel economy.

The fear that bankruptcy law will wipe out industries is unrealistic. It will lead to change in better hands and better industry performance. For example, Essar Oil which has several thousand crores of rupees of loan default has been forced to hand over the projects to the Russian company Rosneft, and the sale realization would be partly utilized to clear the debt. Such trends are likely to take place, and inefficient managements will go. This will be a very healthy trend and cleanse the system.

Fall in GDP is a temporary phenomenon :

Three months is a brief period to judge the GDP performance, and former finance minister should know this. In August 2017 production has picked up. For example, the steel production in August 2017 is 4.1% higher than steel production in August 2016. Production of several agricultural commodities has increased. The consumption in the country has been going up. Steel production is a barometer of progress.

The fundamentals of economy and industry remain strong and” millions of jobs” have not been lost. This is a wild allegation and an exaggerated fiction.
The twin problems are; fall in exports due to several interrelated factors and lack of job growth due to inadequate skill amongst a large section of the workforce in the country who are unable to match the skill to the needs of modern trends and technologies.

For example, there are more than 500 engineering colleges in Tamil Nadu with more than 1.5 lakh fresh engineers passing out every year. Several employers have told me that they are not getting suitable candidates meeting their needs. One former Vice-chancellor of Anna University has said that 40% of the passing out engineers in Tamil Nadu are unemployable.

Modi has realized this and has been taking steps to promote skill level in the country. These are all problems unattended for several years.

“Economic disaster” :

It is extremely uncharitable to say that there is “impending economic disaster.” Indian media always like negative statements and bickerings and perhaps, making such remarks is one way of getting huge publicity.

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