Even after three steroid doses being injected to rectify a possible far-fetched budget, India is still prone to a deep economic recession/crises. While UPA made sure India was the least hit in 2008, how come India is at the forefront of the global downward spiral in the given circumstances – India debates.
Would the fate of India be any different if Dr. Manmohan Singh was the present day Prime Minister?
A prolific economist and a former Prime Minister of India, Manmohan Singh, celebrates his 87th birthday today. Dr. Singh’s political profile has been more of an astute administrator than a crafty politician or maverick orator.
Speaking of Indian Economy: What would Dr. Manmohan Singh do if he was present day Prime Minister?
In a country like India, where headlines of corruption and political scandals are common than usual, Dr. Singh has never been charged guilty for any such allegation throughout his 35 years of a political career.
As we celebrate Former PM Dr. Manmohan Singh, we look back at some of his greatest achievements. He has served our country for several decades & continues to do so with his renowned intelligence, humility & dedication. #HappyBirthdayDrSingh pic.twitter.com/AmRe39fc8s— Congress (@INCIndia) September 26, 2019
Dr. Manmohan Singh’s Significant Contributions to the Economy
In 2007-08, when the whole world was suffering through the Great Recession, Dr. Singh made sure that the Indian Economy had several safe cushions to resist the adverse impacts. Even before that, in 1991, when the economy was ready to die, Dr. Manmohan Singh was the one to introduce the economy reforming policy – LPG (Liberalisation, Privatisation, and Globalisation).
The opening up of the economy was one of the biggest turning points in India’s history. The reform infused saved the day-to-day economy of the country which was on the verge of collapsing. Since then, India has been on a path of expanding FDI. Furthermore, in 1994 Dr. Singh introduced a major Indirect Tax reform in the Country – Service Tax.
Could Dr. Manmohan Singh save the day for Indian economy if he was present day Prime Minister?
Weak times ahead, reminiscent of 2008
With the GDP loitering around its lowest in a decade, and multiple signs of an economic crisis, India is not in the same position it was in 2008 when it survived the worst. The Indian economy at present is having to bear the brunt of any adverse happenings globally from an economic standpoint.
This raises a question whether the NDA government’s policies are far-sighted enough or just hit and trial in the face of short-term challenges. Moreover, recent uncertainty about India’s new statistical calculations has amounted to further lack of confidence in the economic claims of NDA.
The Economic Recession in 2009 and the Economic Condition of 2019
The best parameters to judge an economy are the times of crisis. During the great economic recession of 2008, a global turn of events spurring from the US affected the economy of the whole world.
However, through a series of positive preventive measures taken by the then Prime Minister Manmohan Singh, the economy was able to weather the storm. Consequently, India’s GDP grew at 6% in every quarter in the most difficult 12 months of the recession.
What would Dr. Manmohan Singh do differently for the Indian economy if he was present day PM.
Due to the global recession which began in December of 2007, the World Bank predicted the growth of 4% in 2009. The initial impact on India was minimal as the GDP fell down from 9% to 7.8% in April-September 2008. However, once Wall Street collapsed in September, India’s growth plunged to 5.8%, 5.8% and 6.1% in the next three quarters. This was a dropdown but the recorded growth superseded the world bank’s forecast.
Talking about the current economic condition, India experiences a constant depleting value of rupee against the dollar. The rupee value which in comparison to the US dollar was in the mid-’40s during the recession of 2008 has now plummeted to beyond 70. The demand in the market for various products was high in 2008, which now experiences a steep decline.
Planning Ahead vs No Planning
The current Prime Minister of India, Narendra Modi, in an address to the nation, in November 2017, announced a peculiar decision which sent spiral shockwaves across the country. The leading economists of the country were stunned by the announcement and were left in a frenzy. The decision was to demonetize the currency notes of 500 and 1000 denominations.
The haphazard implementation of the policy and its effects are visible even today. Millions of people had to suffer. Even the elderly and disabled had to wait in lines to even get a minimal amount in legal currency in order to keep their lives running.
The economy never seemed to successfully overcome the aforesaid fiasco. As per many economists, the downward spiral currently observed in the growth of GDP is mainly due to demonetization by the Modi Government. Though Ironically, former Prime Minister Manmohan Singh foretold the decline in growth as soon as demonetization was implemented.
The principle intentions of the Modi government while implementing demonetization might have been in the country’s best interest. However, it turned into a debacle due to lack of proper planning and incorrect assumptions.
Dr. Manmohan Singh’s vision and planning ahead
On the contrary, Manmohan Singh proclaims unsurpassed knowledge of the economy and its behavioral tendencies. Back in 2008, when the Great Recession affected the whole world, he was prepared in advance.
His ability to plan ahead of time in terms of economic development enabled him to foresee the upcoming recession. His vast knowledge of the subject enabled him to prepare exquisite preventive measures to save the country’s economy from getting affected.
In his capacity as the Prime Minister, he asked all the Indian banks and financial institutions to avoid buying the mortgage-backed securities. The credit default swaps which sustained the risk of turning toxic were also asked to be avoided. As a matter of fact, such toxic securities were the prominent reason behind the failure of western financial institutions. Albeit, the merchandise exports of the country declined, by 30%, Dr. Singh was able to steady the ship by holding up with computer software and BPO exports.
By the way of monetary policy, Dr. Singh’s government didn’t try to save rupee and allowed it to fall from Rs 40 to Rs 52 to the dollar. The lowered interest rates and expanded credit by RBI and a cut on excise duties to stock demand by Government were other steps. This combination of easy fiscal and monetary policy cushioned the shock to the economy.
BJP today tries to hide realities behind the well-constructed myth of Modi’s ability and success in establishing valuable global ties. However, the fact is that the underlying trend is due to initiatives of Dr. Manmohan Singh.
During his tenure, he was able to sign a bilateral deal with the United States to procure Nuclear fuel and technology, meanwhile challenging the Treaty on the Non-Proliferation of Nuclear Weapons. The huge camaraderie that Modi today enjoys with POTUS Donald Trump, the seeds of it is the doing of Dr. Manmohan Singh.
Manmohan Singh’s well-constructed relationships allowed Foreign Direct Investments in India to remain high at $27.3 billion in 2007-08, despite the global financial crisis. Another major reason which allowed the Indian economy to survive the recession.
Modi’s Goods and Service Tax
Narendra Modi led BJP government introduced Goods and Services Tax touted as major indirect tax reform in the country. Introduced in the middle of a financial year, GST continues to be an enigma for many. From its many effects, GST implies increased operational costs, enhanced compliance for businesses, and higher tax burden for SME’s.
Though there are several factors that Modi Govt. believes can help the economy in the long-run – short term looks hazy.
And as per facts, to introduce a complicated GST, in an economy which had not fully healed from the effects of demonetization, was not one of the wisest decisions. Besides, it further impacted the growth of business in India and brought down GDP to 5% growth in a quarter, the lowest in the last six years.
Does India miss Dr. Manmohan Singh more than ever in the present day scenario? India Debates...