PM does nothing but provide free lunches

Mr Yashwant Sinha, Finance Minister between 1998 and 2002 in the Atal Bihari Vajpayee government, is now Chairman of the Parliamentary Standing Committee on Finance and convenor of the newly-formed Policy Formulation Action group of the Bharatiya Janata Party. He holds the rise in the fiscal deficit and the use of the stimulus package unveiled after the global financial crisis for revenue expenditure, as being responsible for the current bout of inflation. He has also said that the Vajpayee government cannot be blamed for the current chaos in telecom. The government had then decided to move from a regime of licence fee to that of revenue sharing.

Excerpts from the interview:

If you were Finance Minister, what would your strategy be, given the tough scenario?

The crux of my strategy would be to rein in the fiscal deficit. Mr Jaipal Reddy once described me as a fiscal terrorist. I am one. The root of our problem is the huge fiscal deficit.

So, the most important thing is to take decisions, popular or unpopular, to check the fiscal deficit. Dr Manmohan Singh said in his 1991 Budget speech that the days of free lunches are over. He comes back as Prime Minister and does nothing but provide free lunches.

Corruption has already ruined the India story; foreign investment is slowing down. All this will have a cumulative impact.

Sometimes I derive mischievous pleasure from the fact that we lost the 2009 elections. Had we won, these people (UPA), with all their sins of the past five years, would have blamed us for ruining the economy. I am very happy that it is Mr Pranab Mukherjee who is paying for the sins of Mr P. Chidambaram.

The BJP had helped the Government table the PFRDA Bill. What is your party's stand on key economic legislations in the House?

The PFRDA (Pension Fund Regulatory and Development Authority) Bill was in distress, the Government's floor management was very poor and the Left had called for a division. Had the BJP not supported the Government, the motion would have fallen. We did not take a narrow party view, as it was our piece of legislation

If there's anything worthwhile in the economic field, we will certainly support it. But the Government should not take our support for granted. There has to be two-way traffic.

Many Congress spokespersons blame Mr Atal Bihari Vajpayee for what happened in telecom. Mr Vajpayee is bed-ridden. Why talk about those who are not in a position to defend themselves. I hope the Congress restrains these young spokespersons who don't understand politics properly, only then will a two-way traffic build up.

As head of the Standing Committee on Finance, how many Bills are likely to be placed in this session?

We are discussing Bills on insurance, pensions, banking, direct taxes, Constitution amendment for GST, SBI, UID and factoring. Our effort would be submit reports on at least three Bills. One more could be added. I cannot name them, as it will reflect my views.

What about Goods and Services Tax, now that a BJP leader heads the empowered panel?

The Constitutional Amendment Bill is an enabling legislation for GST. About BJP-ruled States' opposition, let me tell you that States don't work on the basis of their political affiliations. They work on only one principle — safeguarding their financial interest. When I was Finance Minister, we had to reconcile all the views on VAT.

Now, the empowered panel is headed by Bihar's Deputy Chief Minister and a BJP functionary, Mr Sushil Kumar Modi. It will be my endeavour in the standing committee to ensure that we consult the States, the stakeholders and the empowered panel and then come to our conclusions.

What is your assessment of the current economic policy?

These tough times are largely of the Government's own making. The key issue today is the stubborn inflation…To my mind, the reason for this is the huge fiscal expansion that UPA-I allowed to take place in 2007-08 and 08-09... Fiscal expansion was allowed, wherein fiscal deficit rose from Rs 1.33 lakh crore in 2008-09 to Rs 3.33 lakh crore. This additional Government spending (stimulus package) turned out to be non-productive, by and large, because it was all on the revenue side. We created additional purchasing power without looking at the supply side, which was not matched by investment and creation of goods and services. This is the main reason for the inflation that we see today.

Do you think the Government's approach is not serious?

Personally, yes. If you look at the Economic Survey 2003-04, it clearly says that India has been able to achieve a structural decline in inflation. We achieved it because, whatever be the definition of core inflation, in India it means primary products. If you allow primary product prices to go up, then it has the tendency to spread, not only vertically but also laterally, and food inflation can soon spill over into manufacturing and fuel and lubricants — three major components of inflation.

2002 was a drought year; agriculture recorded a minus 10 per cent growth rate, foodgrain production declined by some 40 million tonnes. We started the Antyodaya and Annapurna schemes. We gave large quantities of wheat and rice to the drought-affected States. We strengthened the PDS. This had the desired impact. The rate of inflation in 2002-03, WPI inflation in the whole economy, stood at 3.4 per cent. Today, foodgrain is rotting but not reaching the poor. We did not ask the RBI to do something with regard to monetary policy.

Don't you think the way the RBI is increasing rates will hurt growth in the medium and long term?

There is no doubt about it, because if reduction of interest rate is the engine of growth, then the reverse must also be true. This is the beginning of economic slowdown. Real estate is affected, demand is affected. The auto sector is suffering. All these have multiplier effects on the economy. Contraction of fiscal expansion and other supply-side measures are what is needed today.

Do you agree that there is a policy paralysis?

100 per cent. The massive corruption charges against various Government functionaries, the arrest of some persons from the corporate world, bureaucrats, etc., has had a dampening effect. Go to any department, nobody is ready to take any risk. There is a complete lack of political will to move forward.

Do you feel there is a leadership vacuum in the Government?

Yes. Seven years ago, the UPA-I experimented with Ms Sonia Gandhi as the political leader and Dr Manmohan Singh as the governance leader. The fact is, in our democracy this will not work, because in our system a complete divorce between governance and politics is not possible. Therefore, you must have a political leader who should be Prime Minister…. Dr Manmohan Singh is not a political leader…politics is being managed by Mrs Gandhi. As a result, he does not enjoy clout in Government and because of that he is not able to provide the dynamism to leadership which is needed for governance.

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