“Over the next six months, there would be a big economic crisis in India as institutions are falling apart without any real efforts to hold them in place or to rectify the lingering issues. However, India has the potential and capabilities to overcome the crisis, if and when it strikes. What we need is a comprehensive macro model that will make every sector grow,” says Dr Subramanian Swamy, senior leader of Bharatiya Janata Party (BJP) and current member of the Rajya Sabha. He was speaking in Mumbai at the publication of his latest book organised by Moneylife Foundation at the BSE.
Earlier this week, Dr Swamy, a former Union minister for law and commerce, launched his latest book “RESET — Regaining India’s Economic Legacy” in the presence of several dignitaries, including Chinese Consul General Tang Guocai, Prof R Vaidyanathan, BSE’s managing director (MD) Ashish Chauhan, many share brokers and traders, and several activists, among others.
Elaborating about the upcoming crisis, Dr Swamy referred to two big crises that India had faced, one in 1960 on food and other in 1990 on depleting foreign exchange. “From both these crises, India has come out shining. Post the economic reforms in 1991, our GDP rate started growing. During PV Narsimha Rao’s tenure as prime Minister (PM), it was steady at 8%. However, after Mr Narsimha Rao, almost all governments adopted ad hoc economic policies. Dr Manmohan Singh was a good finance minister (FM) but a bad PM. This was because as FM, he had full support from Mr Rao.”
“Even today, I have no doubt that India will rise again from the upcoming crisis like we did in the past. India has enough talent to rise in case of crisis. What we need is to encourage innovation and adopt a comprehensive model for growth,” he added.
With the book, Dr Swamy, the brilliant economist, who often get relegated due to his political activities, has made a return to his core. Dr Swamy studied mathematics at Delhi University and did his masters from the Indian Statistical Institute in Kolkata. His PhD in Economics was from Harvard University in 1965, under the guidance of Nobel Laureate Simon Kuznets.
Had he continued in academics, Dr Swamy could perhaps been a candidate for the Nobel Prize. After all, he was among the four favourite students of Paul Samuelson and three of them have won the Nobel.
How GDP Can Grow 10%
In his new book, Dr Swamy has detailed a blueprint for India, which he hopes can help the country grow at 10% per year, achieve self-reliance and full employment, among other economic benefits. The book also undertakes a nuanced analysis of the manner in which the highly prosperous Indian economy witnessed a long, accelerated decline due to persistent British imperialist aggression.
He says, “During the Congress party’s 56 year rule, we have the socialist economic model. Problems is the Soviet socialist economic model that we tried to adopt never worked anywhere in the world. In fact, even the Soviet Union or Union of Soviet Socialist Republics (USSR) broke into separate countries after using the socialist economic model.”
“India is the only country that is predicted to fall apart but has never fallen apart. All other civilisations, like the Egypt, Greece, and Babylon among others disappeared because these were single-dimensional materialistic societies. India survived with built in balance in all our systems, society and culture. What we need today is to balance material prosperity with spiritual advancement,” he added.
Empower Middle Class for Savings
Speaking about the book, Dr Swamy says, “We need a new reset for our economy. We did not perform at macro growth level. India’s middle class contribute significantly in our total savings. But these savings were not being used efficiently. We need to empower and encourage the middle class to take their contribution in India’s total savings to 80%.”
“Our growth rate has been declining. During 2011, when Dr Singh was the PM, we achieved our peak GDP growth rate. Today it is at around 5%. The country needs 10% growth for 10 years if we have to eliminate unemployment,” Dr Swamy says, adding “Today there is a big demand for Indian agriculture products from several countries, but we cannot take its advantage due to lack of a policy that encourage exports. Similarly, since labour cost is becoming expensive in China and India certainly can take advantage from this, like what Bangla Desh is doing. But again, there should have been a comprehensive policy to take advantage of such situations that is not there.”
Demonetisation, GST Were Hasty Decisions
The senior leader also held the demonetisation and the hasty introduction of the goods and services tax (GST) responsible for the present economic crisis while saying that the government has not understood the policies required for higher growth.
He says, “When the new notes of Rs2,000 were brought in circulation during the demonetisation period, those we designed did not take into consideration the then existing slots in automated teller machines (ATMs). Only if they would have kept the size of the new notes similar to now demonetised Rs1000 note, we would have been successful in avoiding hardship to people.”
Even, when GST started, it was managed by GST Network (GSTN) that had several private companies as partners.
On 18 June 2017, Dr Swamy had demanded that the Government nationalise GSTN and sack the GSTN chairman for what he termed as a ‘monumental fiasco’ of being unable to activate GST by 1 July 2017. Earlier, in a letter to PM Narendra Modi in September 2016, Dr Swamy had requested a stay on operations of GSTN due to ‘foreign control’ in its shareholding.
Finally, in May last year, the GST Council decided to convert GSTN into a government-owned company by acquiring entire 51% of non-governmental institutions, like HDFC Bank, HDFC Ltd, ICICI Bank, NSE Strategic Investment Corp (10% each) and LIC Housing Finance Ltd (11%).
Economists Are Afraid To Tell the Truth to the PM
Later, responding to a question on economic issues as being handled by the present government, Dr Swamy says, the advisers and economists in the government “tell the prime minister only what he wants to hear,” leading to decisions like demonetisation, but he still has a “rapport with the public.”
He says, “Today we need a system where we can have a policy for the short-run, medium-term and for the long-term. But it is not happening. I am afraid the economists that the government has recruited seem so frightened to tell the truth to the PM, while the PM himself is focused only on the micro-projects, like the Ujjwala scheme for distributing cooking gas to the poor women. Economy needs a multilateral approach for comprehensive growth across segments.”
“The way Mr Modi runs the government is that very few people can step out of the line. He should encourage people to tell him the facts or if something cannot be done. But I think he has not yet developed that temper,” Dr Swamy added.
Abolishing Income-tax is the Way to Go
Earlier, during his speech, Dr Swamy also reiterated his demand for abolishing Income-tax (I-T) instead of lowering tax rates. According to him, taxpayers are often frightened of the tax officials and once you abolish this system, we can start on a clean slate where common people would save more without worrying about tax issues or the taxmen.
“Abolishing I-T had been a very salutary (step); the middle class would have been very happy and they would have saved the money. The problem with corporate sector is that demand is low, so demand can only come when you empower the people, the people means income tax and that should have been abolished. Reducing corporate tax is of no use. Because they can only increase more supply but if there are no buyers, then there is no result in increasing supply,” he added.
Significant Role in 1991 Economic Reforms
Claiming a significant role in the 1991 economic reforms, Dr Swamy said he had drawn up their blueprint for economic reforms, while serving in the short-lived government of prime minister Chandra Shekhar before it collapsed and a general election saw the return of the Congress to power.
“Ninety-five per cent of the credit should go to (PV) Narasimha Rao (who became the PM after the 1991 elections); the execution was by Dr Manmohan Singh (the then finance minister) and Montek Singh Ahluwalia (part of the team under Manmohan Singh) but in terms of conception, it was mine,” Dr Swamy said during a panel discussion following the release of his book.
“It started with Chandra Shekhar and he was very much part of that,” maintained Dr Swamy, who served in the government as the commerce minister. He said he was approached in March 1991 for a copy of his blueprint which he agreed to hand over. He was then asked if he would join the Cabinet.
“I said that I can’t do because it would meaning joining the Congress, a house owned by the Nehru-Gandhi family. I told Narasimha Rao that you too are just a tenant in this ‘house’,” Dr Swamy said, reiterating that it was Narasimha Rao’s ‘political leadership’ that saw the reforms through as they broke new ground.
For playing an important role and providing stable support on the upcoming Republic Day, PV Narasimha Rao should get a Bharat Ratna, Dr Swamy demanded.