Dismiss Yashwant Sinha as a case of sour grapes, but you can't ignore industry and data

Former finance minister and Bharatiya Janata Party leader Yashwant Sinha minced no words in an op-ed published on Wednesday. Writing in the Indian Express, Sinha said he would be “failing in my national duty if I did not speak up even now against the mess the finance minister has made of the economy”. Claiming his views were shared by many within the BJP who might be afraid to speak out, Sinha said that Finance Minister Arun Jaitley had wasted a golden opportunity and instead steered the Indian economy into crisis.

“Economies are destroyed more easily than they are built,” Sinha wrote. “The prime minister claims that he has seen poverty from close quarters. His finance minister is working over-time to make sure that all Indians also see it from equally close quarters.”

The former finance minister also pointed out that things are worse even than they seem. While the 5.7% Gross Domestic Product growth figure for the quarter ending June may have been the lowest in three years, he brought up the fact that under the previous GDP methodology, it would have been 3.7%. “A revival by the time of the next Lok Sabha election appears highly unlikely. A hard landing appears inevitable. Bluff and bluster is fine for the hustings, it evaporates in the face of reality.”

Sour grapes

This is not the first time that Sinha is speaking out against the current government, which early on decided not to include him in the Cabinet despite his experience. In January 2016, for example he said Modi and his government would be “consigned to the dust” by the people of India in the 2019 Lok Sabha elections, although he later backtracked. He has criticised the government for its handling of Pakistan and China, as well as the Kashmir issue. And in 2015, along with fellow sidelined senior BJP leaders LK Advani and Murli Manohar Joshi, Sinha issued a statement blaming the party’s Bihar loss on its top leadership, a reference to Modi and BJP President Amit Shah.

In this, Sinha echoes Arun Shourie, another former minister from the BJP who few in the current dispensation listen to. Shourie, despite his earlier support for Modi, has spent the last few years attacking the government, calling it “Congress plus cow”. While many in the Opposition latched on to these remarks, they gained little currency within the BJP or indeed, with the public at large, seen by many as sour grapes from past-their-prime leaders being sidelined by a younger administration.

Actual data

But Sinha’s comments this time might be different, even if they are also tinged with schandenfreude aimed particularly at Arun Jaitley.

For one, the former finance minister is talking about actual data, not taking a moral or political position against the government. The administration might spin its way around the following remarks, but it would be hard to actually debunk any of this.

“So, what is the picture of the Indian economy today? Private investment has shrunk as never before in two decades, industrial production has all but collapsed, agriculture is in distress, construction industry, a big employer of the work force, is in the doldrums, the rest of the service sector is also in the slow lane, exports have dwindled, sector after sector of the economy is in distress, demonetisation has proved to be an unmitigated economic disaster, a badly conceived and poorly implemented GST has played havoc with businesses and sunk many of them and countless millions have lost their jobs with hardly any new opportunities coming the way of the new entrants to the labour market.” 

Second, the government has itself acknowledged this. After six consecutive quarters of declining growth, proof from the Reserve Bank of India that demonetisation has not been worth the pain and costs it inflicted on the economy and signs of discontent from the people, Modi has assembled a set of five economists to be part of the reinstated Prime Minister’s Economic Advisory Council. By itself this is an admission of Modi and Jaitley’s failure to boost the Indian economy even at a time of benign global conditions.

Not alone

Third, it is not just Sinha saying it. Of course, many in the Opposition will happily jump on his remarks and assert that they have been saying the same all along.

But you would expect that from them. Maybe the voices that speak louder here are from industry, which tends to usually stand behind the government in power unless absolutely pushed into a corner.

L&T Group Executive Chairman Anil Manibhai Naik said that the economy is unlikely to revive for the next two years. Rural markets have yet to recover from the hit of the Goods and Services Tax, demonetisation and volatile commodity prices, said Hindustan Unilever Managing Director Sanjiv Mehta, quoting research agency Nielsen. The State Bank of India in a report said that the “free fall” of GDP numbers was not transient, as some in the BJP have sought to suggest, but structural. L&T Chief Financial Officer Shankar Raman said he does not expect to see the private sector coming back for the next couple of years.

The words “imminent crisis”, “economic collapse” and “serious downside risks” are floating around. Supporters of the government, including one that has been put on the new advisory council, have pointed out that this year’s GDP figures are unlikely to match even the bad years of the previous government. Experts point out that all four growth engines of the economy are sputtering. Others are going back to look at what went wrong.

Clearly, Sinha is not alone. In fact, he seems almost late to the game, building on all that has already been said about the economy, and simply adding both an attempt to lay blame – at Jaitley, and through him, Modi – as well as indicate that this criticism is also emerging from within the BJP, though most are afraid to say so openly. In that sense, Sinha this time is not tipping us off to something that has been an undercurrent, he’s simply putting on paper what others have been saying for a while. And that should worry the BJP.