The Opposition parties on Wednesday grilled the Government in the Rajya Sabha over the poor state of the economy, saying the country is heading towards a deep crisis even as Finance Minister Nirmala Sitharman asserted the current situation is only a cyclical slowdown and will bottom out by March.
Replying to a discussion on the economic situation in the country in the Upper House, Sitharaman reeled out numbers comparing between five years under the Congress-led UPA-II regime from 2009 to 2014 and BJP’s first term from 2014 to 2019 to say that inflation is lower and growth higher under the Modi Government.
“FDI inflows in 2009-14 were $189.5 billion and the same were $283.9 billion under the BJP rule in the following five years. Foreign exchange reserves rose to $412.6 billion under the BJP from $304.2 billion in UPA-II. Economic growth may have slowed but there is no recession, there can be no recession,” she said.
Initiating a short-term discussion on the economic situation, Congress member Anand Sharma said the slowdown could not be labelled as a cyclical phenomenon. “In the last few years, the economy has suffered. Industry has gone down and people do not even have money to buy day-to-day articles. Situation in the rural regions is even worse,” he said.
He said the gap between the rich and poor has widened in the country in the past few years and wrong decisions of the Government like demonetisation and hasty implementation of GST have led to the present slowdown.
“It cannot be said as a cyclical slowdown. We are staring at deep economic crisis which is India specific,” Sharma said. He added that all four engines of economic activity — investments, industrial production, credit off-take and exports — were shutting down. The numbers are frightening. GDP growth has fallen and is lowest in seven years, investment rates have come down by seven percentage points, IIP has fallen, manufacturing sector has contracted,” he said.
Allaying concerns over revenue position, Sitharaman said direct tax and GST collections have seen an increase in the first seven months of the current fiscal when compared to the same period of the last year.
India’s growth outlook has weakened sharply this year, with a crunch that started with the non-banking finance institutions spreading to retail businesses, car-makers, home sales and heavy industries.
Sitharaman blamed the fall in GDP growth in the last two financial years to the lagged effect of twin balance sheet crisis of stress on banks due to non-performing assets (NPAs) or bad loans on the one hand and heavily indebted corporates on the other, resulting from the UPA regime lending.
Rejecting criticism that her maiden Budget on July 5 had failed to address concerns of a slowing economy and so had to resort to announcing measures within a month of the passing of the Budget by Parliament, she said the Economic Survey had recognised the need for recapitalisation of bank and reforms in her Budget speech.
Sharma said demonetisation wrecked the unorganised sector and the government’s hasty implementation of the “complex GST” wreaked havoc on the unorganised segment.
He said the Government has so far (April-September) has been able to collect only Rs 9.2 lakh crore as revenue while the target is Rs 24.6 crore. “From where will the rest of Rs 15.2 lakh crore come in the remaining part of the financial year,” Sharma questioned. The Government is staring at a fiscal deficit of 7-8 per cent, he added.
Sharma said rural economy is in shambles and growth was not possible without putting money in the hands of farmers. He said not much would be achieved by reducing the corporate tax as the business houses would use the capital to retire their debts and not invest leading to generation of jobs.
TMC member Derek O’ Brien said crores of jobs have been lost in the country in various sectors including auto and textiles.
Nominated member KTS Tulsi blamed demonetisation for the present state of economy. Congress leader Digvijay Singh said the Prime Minister is responsible for sluggishness in the economy because he takes decisions first and thinks about them later.
He said there are many shortcomings in GST and States are not getting their share of revenues. He also wondered how would businessmen in Kashmir would file GST returns in the absence of internet facilities. He said the Government is selling profit making PSUs which were called temples of modern India.
Former Commerce Minister and BJP leader Suresh Prabhu defended the Government saying the present dispensation is taking lot of steps to boost growth. He said Indian economy cannot remain insulated from global slowdown because it is interconnected. Countering Opposition charges, Aswini Vaishnaw (BJP) termed the current situation a cyclical slowdown. “It is not a structural thing and will bottom out by March and it will be followed by strong growth,” he said.
He said the Government was taking various steps to bring back growth in the Indian economy. He cited impact of schemes like Jan Dhan and Mudra in driving economic activity, especially in the rural areas.
TKS Elangovan (DMK) also accused the Government for the present state of economy and said it is selling profit-making PSUs. He said the Government’s priority is not development rather selling profit making PSUs. He also quoted NITI Aayog’s forecast that economic growth will slow down further in second quarter of this fiscal.
Elamram Kareem (CPM) suggested that a large dose of public investment is required for boosting economic growth.