Act, don't debate on brink of recession

One of the prerequisites of delivering a good public talk is the confidence of the speaker. If the speaker is confident, one half of her aims are achieved. A majority of people tend to believe the speaker even if she was reeling off lies or half-truths. Union finance minister Nirmala Sitharaman’s reply to the short discussion on the economic slowdown in the Rajya Sabha is no less than the bravado exhibited by the sailor of a ship caught in a massive storm.

Ms Sitharaman’s contention that economic growth has slowed but the economy is not in recession is valid to an extent, but not wholly correct — because there is no universally accepted definition for recession. The United Kingdom believes negative economic growth in two successive quarters along with higher unemployment would be called recession, while the United States uses different metrics such as decline in industrial production, employment, real income and wholesale-retail trade to declare the onset of the recession.

If we use the British definition, India isn’t in recession yet. Going by the US method of general decline in activity of key indicators, India is staring at a recession. But when there is no official definition of recession, the entire discussion on the subject is academic only. All that one should look at is the suffering of people in wake of higher unemployment and stunted wage growth.

Though Ms Sitharaman claims fiscal discipline to be one of the stellar achievements of the BJP-led government, she skipped the issue of general trust deficit in the economy. People have slashed their spending and companies are not committing fresh capital to expand their businesses. The production of capital goods — which indicates the capital expenditure of companies — had shrunk 21 per cent in August and September 2019. The fact that consumer durables production also shrunk by nearly 10 per cent in September and August and that automobile sales slumped for several months proves people are postponing their purchases. In fact, five straight quarters of slowing economic growth mark the longest slump since 2012.

Another credit that Ms Sitharaman sought to give to NDA rule was for low inflation compared to higher inflation during UPA government. During UPA rule, the government had increased minimum support prices to farmers, despite the Reserve Bank of India cautioning about its spillover effect on other prices. This led to higher food inflation, which resulted into higher factory wages. Higher crude oil prices added fuel to the fire which brunt pockets of most Indians. The BJP’s solution to this is simple: Suppress the food prices. This along with lower global crude oil prices brought inflation under control. But on the flip side, it resulted in lower income growth in rural areas, which led to farmer indebtedness and general economic slowdown in rural areas. And this cannot be a solution. India needs a solution wherein the farmer, manufacturer and consumer — can all be happy. It cannot be a zero-sum game.

The BJP may be the master in the art of perception management. But as Abraham Lincoln famously said, “You can fool all people some of the time and some people all of the time, but you cannot fool all people all the time.” It is time to accept reality and work towards resolving all outstanding issues.