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Mainstream, VOL LVI No 8 New Delhi February 10, 2018

The Disconcerting Economic Reality

Tuesday 13 February 2018


As the Prime Minister was reeling off in the Lok Sabha yesterday a long list of never-before achieve-ments of his government during the last three-and-a-half years (with a liberal dose of anti-Nehru venom thrown into his speech for good measure), in Mumbai Urjit Patel was spelling out the new credit policy of the RBI. He announced that the lending rates would remain unchanged at six per cent because inflation still remains a matter of concern. But a much greater cause of worry was the rising global oil prices and uncertainties on fiscal and external fronts. He was forthright in saying that “this has created significant input cost pressures in the economy, which at some stage may get passed on to retail prices”. If oil prices do, indeed, continue to rise, this will invalidate many of the a priori calculations of Finance Minister Arun Jaitley in the Budget for 2018-19. The RBI’s Executive Director, Debabrata Patra, pointed out that price pressures were “no more confined to vegetables alone, as in previous readings”.

These are dire prognostications in a pre-election year. Reminding many of the promises made by the Prime Minister before the 2014 Lok Sabha elections (like bringing back all the black money stashed away in foreign banks and putting fifteen lakh rupees into the account of every one with a bank account) that cause acute embarrassment to the BJP these days. Another promise that sounds like a cruel joke today is the creation of ten million jobs per year. Instead of creating new jobs, the two thoughtless decisions of demonetisation and introduction of the GST have taken away many jobs, particularly in the small and medium enterprises. The crisis in the farming sector has become so alarming that in the pre-election Budget, Arun Jaitley had to put the main emphasis on tackling this and ensuring a minimum support price of one-and-a-half times for crops to the farmers.

There is a growing perception that the only ones that benefited from the NDA regime were those that held 73 per cent of the country’s wealth (that is, those who constitute just one per cent our population). Congress President Rahul Gandhi has thrown dark hints that the per plane cost of the French Rafale fighter aircraft was considerably increased after the Prime Minister struck a deal personally while in Paris and that the higher price would benefit an industrialist close to the present establishment. Defence Minister Nirmala Sitharaman’s blunt answer that the price cannot be disclosed to Parliament has only helped to deepen the suspicion about the transparency of the deal. The money for acquiring the thirty Rafale aircraft will be paid out of the public exchequer. It is the people’s money. And Parliament is the highest tribune of the people. The impudent statement of Nirmala Sitharaman means only one thing—that this government has the cheek to say that it will not disclose even to the taxpayers’ representatives how it is spending the taxpayers’ money. The BJP Government will have to pay for its arrogance. And Modi will learn that demagogy can win him one election but he cannot hope to go on winning election after election by dishonest claims in public. The people have seen through him.

February 8 B.D.G.

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