Talking Economics

In a fiery panel discussion at the ongoing Kala Ghoda Festival in the city, Jaimini Bhagwati, a former IFS officer, economist and foreign policy expert and Mani Shankar Aiyar, Congress leader and former civil servant talked about the current state of the economy in the country.

Referring to the economic state of the country in a ‘cyclical depression since 2012’, Aiyar looks back at the period of 2003 to 2012 when India was able to leverage its growth rate to have a strong position in world affairs. “We could have built on that reputation if we could have succeeded in maintaining that growth rate. We could have come out of the cycle much earlier if the two self-inflicted disasters had not taken place – demonetisation, the impact of which is only now showing up in the decline of demand in rural areas, and the GST,” says Aiyar at the event held at the David Sassoon Library Garden in Kala Ghoda.

At a time when the country is hard-hit with an economic slowdown, the Home Minister Amit Shah’s proclamation to make India a five trillion dollar economy by 2024 appears far-fetched. When asked if it’s a possibility, Bhagwati responded with a clear and hard ‘No’. “It’s a pipe dream,” he says.

Further, Bhagwati illustrates a five-pointer or rather changes that the current government should consider in order to uplift the economy. The first point is to attain people’s trust by showing the right statistics. “The issue is between a honest mistake, and the tendency to hide the facts. Get your numbers right, and share the real numbers to the extent you can,” he says. The second piece of advice is to not become pessimistic about the exports. “We have systematically increased the customs tariff in the last six years. This is completely opposite to what we did post-1991 when we gradually liberalised and brought down our export tariff. We need to be open to the rest of the world, not in the naïve manner where we open all our markets all at once,” he says, adding that we need to get the foreign exchange rate right as it is overvalued. In the fourth point, Bhagwati insists on making the country from a ‘non-tax compliant society’ to a complaint one. And lastly, there is a need to have a long-term plan to make the current population of unemployable people employable.

Over the years, the political and economic moves made by the government have seen India facing a falling out with its neighbouring countries. Elaborating on the same, Aiyar says: “The country with which this establishment has ruined our relationship is Nepal. What Mr. Modi did by sending Dr. S. Jaishankar, Minister of External Affairs as his special envoy to Nepal two days before they were supposed to proclaim their Constitution, and told them you cannot do that because we don’t like it, has comprehensively wrecked our standing in Nepal.” Consequently, Nepal is now more likely to open its gate for China to replace India’s standing and also to compete with the latter.

Further, nothing substantial has been done with Sri Lanka and Pakistan. Allegations to Afghanistan for discriminating against their religious minorities have alienated the country. And, the rising deterioration of ties with Bangladesh is also visible. “The only country that Mr. Modi (Prime Minister Narendra Modi) has successfully improved our relationship is Myanmar, because he has endorsed what they have been doing to the Rohingya Muslims,” says Aiyar being critical of the government.

In conclusion, the former civil servant says that India is not on the right track in both foreign relations and the economy. “But I do believe that the economy has a resilience to show a better phase in 2024 than it is showing right now. For the opposition party, like me, to continue to hope that the economy will do badly, and therefore we will get rid of these people in the next elections is like chasing a Chimera,” concludes Aiyar.