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Wednesday, April 14, 2021

India faces -23.9% GDP: Why didn’t PM listen to these 10 economists?

As we know India’s economy faced a massive hit following the pandemic’s outbreak. On March 24, 2020, Prime Minister Narendra Modi imposed a nationwide lockdown that remained in effect until May 31. Unlike other countries (such as Germany, Italy and Thailand), the lockdown in India did not help in containing the spread of the coronavirus. Infection cases kept on increasing despite India being in lockdown.

The background

The abrupt nationwide lockdown imposed across India was the biggest in the world, forcing 1.3 billion Indians to stay indoors. The lockdown restrictions were imposed without any preparation or coordination with states. It was also one of the most stringent lockdowns enforced in the world. Except for some essential services and activities, the rest of India’s $2.9 trillion economy remained shuttered during the lockdown period. Economic activity came to a grinding halt in the country. The lockdown had devastating impacts on an already slowing economy and people’s livelihoods as shops, eateries, factories, transport, services and business establishments were shuttered.

As per official data released by the Ministry of Statistics and Programme Implementation, the Indian economy contracted by 23.9% in the April-June quarter of this fiscal year. This is the worst decline ever recorded since India started compiling GDP statistics on a quarterly basis in 1996. Amid such a scenario, we wonder what if India could follow the guidelines of its eminent economists who once tried to rebuild this country for a better future. However, differences in ideology, political intervention and other such reasons forced them out of the Modi core group. In this article, we shall talk about the thinkers who could have advised to move our country for a better position amid this crisis. But unfortunately, all of them left the PM’s core working team following conflicts and disappointments.

India faces -23.9% GDP: Why didn’t PM listen to these 10 economists?

1. Subhash Garg

Finance Minister Nirmala Sitharaman insisted on transferring then finance secretary Subhash Chandra Garg out of the ministry within a month of her assuming office, Garg has alleged. In a blog published recently, Garg, who took voluntary retirement from the Indian Administrative Service last year, said it became quite apparent “very early” that working with Sitharaman was going to be quite difficult and “it might not be conducive to undertaking necessary reforms for the attainment of the objective of building a $10 trillion economy of India”.

According to Garg, Sitharaman had a “different personality, knowledge endowment, skill-set and approach for economic policy issues and also for the officers working with her”. “She, for reasons not very clearly known to me, came with some preconceived notions about me. She did not seem to have confidence in me. She was not quite comfortable working with me as well,” he said.

2. Prof. Amartya Sen

NOBEL LAUREATE Amartya Sen’s nine-year-long association with the Nalanda University, first as a Chancellor and later as a member of the governing board, halted abruptly. Sen, who had criticised Prime Minister Narendra Modi, resigned as Chancellor in February 2015 and publicly lashed out at the BJP-led NDA government after stepping down. However, he continued to be a member of the governing board, as he was a part of the Nalanda Mentors Group (NMG) since 2007, which was tasked by the Manmohan Singh government with the revival of the Nalanda University.

Sen was miffed that the NDA government is no hurry to extend his tenure as Chancellor of Nalanda University (NU), a global university being set up under an act of parliament in Bihar’s Rajgir district. In a letter to the NU board, which is dominated by many international names, Sen said “it is hard for me not to conclude that the government wants me the cease being the chancellor of NU after this July, and technically it has the power to do so.” Sen also could not resist taking a potshot at the centre: “I am also sad, at a more general level, that academic governance in India remains so deeply vulnerable to the opinions of the ruling government, when it chooses to make political use of the special provisions. Even though the Nalanda University Act, passed by the Parliament, did not, I believe, envisage political interference in academic matters, it is formally the case – given the legal provisions (some of them surviving from colonial days) – that the government can turn an academic issue into a matter of political dispensation, if it feels unrestrained about interfering.”

3. Dr Raghuram Rajan

Dr Rajan decided to step down as RBI governor in September 2016, clearly lacking support for his fiscal measures from Finance Minister Arun Jaitley and Prime Minister Narendra Damodardas Modi. Dr Rajan was unpopular with the ruling regime not only for his unwillingness to cut interest rates, but also for his remarks about the nation’s mood since the Modi government took office.

Two months after he left the RBI, on November 8, 2016, demonetisation was sprung on India, a measure which Dr Rajan has been critical about. Dr Rajan, a former chief economist at the International Monetary Fund, returned to teaching at the Booth School of Business in Chicago.

4. Dr Urjit Patel

It was on his watch at the RBI that Prime Minister Modi announced demonetisation — Dr Patel has not so far revealed if he or the central bank were on board before the decision to outlaw Rs 500 and Rs 1,000 currency notes was made. The RBI was accused of lax oversight when the Punjab National Bank scam, worth Rs 12,600 crore/Rs 126 billion, was unearthed.

What further brought matters to a head was Rashtriya Swayamsevak Sangh ideologue Swaminathan Gurumurthy’s appointment to the RBI board in August 2018. On October 3, 2018, reports stated that the government would invoke Section 7 of the Reserve Bank of India Act which empowers it to issue directions to the RBI. While Section 7 wasn’t invoked, the mild-mannered Dr Patel probably decided that enough was enough and resigned ‘with immediate effect’ on December 10, 2018, citing personal reasons, nine months ahead of the end of his term as RBI governor.

5. Dr Arvind Subramanian

On June 20, 2018, Dr Subramanian, the government’s chief economic advisor resigned, citing his desire to return to the United States due to family commitments. Dr Subramanian commenced his 3-year term as CEA on October 16, 2014, and on completion of three years was asked to continue for a year more.After he returned to the States, Dr Subramanian published Of Counsel: The Challenges Of The Modi-Jaitley Economy in which he noted that demonetisation was a draconian move.He also questioned the Goods and Service Tax later, saying it had slowed down the economy.Earlier this month, he rattled the Modi government when he stated in a paper at Harvard University that India’s GDP growth rate between 2011-2012 and 2016-2017 should be about 4.5% instead of the official estimate of close to 7%.’The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer,’ Dr Subramanian said in the paper.

6. Dr Arvind Panagariya

The first vice-chairman of the NITI Aayog, Dr Panagariya resigned on August 31, 2017, stating that Columbia University had not extended his leave beyond August 2017. A native of Rajasthan, Dr Panagariya has a PhD degree in economics from Princeton University and is the professor of Indian Political Economy at Columbia University.He was one of the first economists to endorse then chief minister Modi’s Gujarat model of development. During his tenure at the NITI Aayog, Dr Panagariya came under constant fire from the Swadeshi Jagran Manch, one of the Rashtriya Swayamsevak Sangh’s units.

7. Dr Surjit Bhalla

Dr Bhalla, an early cheerleader for the Modi government, resigned from the prime minister’s Economic Advisory Council in December 2018. Dr Bhalla did not cite the reason for his departure, but reiterated that the four years of the Modi government were the best years for the Indian economy, adding that he was only concerned about the bad loans for which he squarely placed the blame on the RBI’s monetary policies.

8 & 9. PC Mohanan and Dr JV Meenakshi

PC Mohanan resigned as acting chairman of the National Statistical Commission along with member DR JV Meenakshi in February 2019 to protest against the non-publication of the Periodic Labour Force Survey. Their term was to end in June 2020. In television interviews, Mohanan said the delay in the release of the National Sample Survey Office’s report on employment was among the reasons for him and Dr Meenakshi to quit the National Statistical Commission. Mohanan said the data must be released whether the government likes the data or not.It was later revealed in the report that India’s unemployment rate in 2017 rose to 6.1%, its highest level in 45 years.

10. Dr Viral Acharya

On June 24, 2019, Dr Acharya resigned as RBI deputy governor six months before the scheduled end of his term.’A few weeks ago, Dr Acharya submitted a letter to the RBI informing that due to unavoidable personal circumstances, he is unable to continue his term as a deputy governor of the RBI beyond July 23, 2019,’ the RBI said in a short statement. In October 2018, Dr Acharya first alerted the nation to the RBI-government tussle in a speech where he warned about the ‘great risk to nations from undermining the independence of the central bank’.
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