Who is to blame for current economic woes of India?

Mamun Rashid writes from New Delhi, India I was not at all prepared to hear this. I like Mr. Pranab Mukherjee, the incumbent President of India, a lot. He has been an Indian Congress stalwart, an accommodative politician and, more importantly, a good friend of Bangladesh. But many Indian analysts, professionals and economic journalists consider Mr Mukherjee as one of the worst-performing finance ministers India has seen since 1991. Days are not good at all for India. Growth has slowed down significantly. Inflation has crossed 10 per cent mark. Fiscal deficit has swelled and current account is under one of its worst times. There must be someone behind all these and now many, even some people in the Congress party, tend to believe that Mr. Mukherjee, now the 13th president of the republic and the finance minister during the period between January 2009 and July 2012 is that person. Mr. Mukherjee was the finance minister during 1982-84 period and he was unfortunately shown the door by Rajiv Gandhi, the then prime minister. Though its value is now hovering around 61.50, the Indian Rupee fell to almost 69 against US Dollar in August 2013. Current account deficit has been widening and it might overshoot the projected level of USD 70 billion. Capital market has been sinking. The rating agency S&P reportedly has one-third chance of downgrading India's sovereign credit rating. Inflation has almost doubled from the pre-Mukherjee time to now and more unfortunately GDP growth rate has almost halved during the same time. Fiscal deficit also swelled during 2009-2011 period. Mr. Mukherjee after taking over the office of the finance minister in early 2009 did take some popular measures to create synergy in the economy. He was seen coming up with stimulus packages focused on reduction of duties and higher spending within a short span. But the politically astute finance minister didn't do enough justice to reforms while the going was good. Many economists felt, India needed a smooth transition to GST (goods and services tax), but Mr. Mukherjee could not handle this. While he took office, the oil price had been at USD 58 per barrel. He had a golden chance of reforming Indian oil pricing mechanism and insulate the economy from future oil crisis. Mr. Mukherjee missed the boat, the Indian economists felt. When Mr. Mukherjee was first sworn in as a union minister in 1973, the then finance minister Y.B. Chavan also had to face the first global oil disaster but he had maintained his focus on the Indian direct tax reforms. 'By delaying the withdrawal of fiscal stimulus when the going was good, finance minister Mukherjee directly contributed to the expansion of the fiscal deficit and his policies worked against RBI (Reserve Bank of India) monetary policy that primarily focused on taming inflation through higher interest rates'- said an analyst working with a global bank. Many felt the unbroken spell of high inflation for last three years or so, had led to the levying of a restrictive tax on the vulnerable group, especially the people working in the large informal sector in the country. A journalist friend added the policies formulated by Mr. Mukherjee had led to a shaky fiscal situation, fall in revenue and taxation failures. Yes, Mr. Mukherjee took office at a difficult time. The financial meltdown in the west made economic management quite challenging. Therefore stimulus did work in the interim. But by his over-dependence on the bureaucrats and advisers, a politically 'cool' Mr. Mukherjee didn't know how to pull this further into a sustainable zone. In March 2012, Mr. Mukherjee proposed tax policies including retrospective amendments that reportedly frightened the foreign investors including private equity funds. This prompted massive investment withdrawals, creating a tremendous pressure on Rupee. He unfortunately behaved like a communist or more than a member of a communist party. 'Given the speed at which India is integrating in the world economy, what it needs is a strong institutional framework to deal with volatility that could accompany increasing integration. There can't be any assessment of the Mukherjee era without reference to the mess he has left for the finance ministry'-added Sanjiv Sankaran, a leading columnist with the Business Today. Many bureaucrats in Delhi did try to pass the blames on to Mr. Mukherjee's adviser. But, many felt, an adviser can only be as powerful as the minister when the top man wants him or her to be so. I feel sorry for Mr. Mukherjee. Indian Congress might be remembering him for his contribution to its politics or for being a trusted lieutenant of Ms. Sonia Gandhi, but history may not hold Mr. Mukherjee in high esteem as a finance minister of the republic called India. Lesson for all of us could be that for a developing economy you need a driver in the finance minister who can lead from the front, pull resources whenever it is needed and take unpopular decision when it is warranted. Not necessarily he or she should be an astute politician or even an amiable person. He or she must ensure- right action at the right time to help the economy move forward. (The writer is a banker and economic analyst. E-mail:mrashid [email protected])