Open Reply To Letter Of Yashwant Sinha

Following are some questions which are raised by former Finance Minister and BJP leader Mr. Yashwant Sinha. Mr. Sinha has not only questioned the performance ,potential and ability of present Finance Minister Mr. Arun Jaitley but also  indirectly hinted towards failure of Prime Minister Mr. Narendra Modi in keeping the economy in good health and becomeing victim of flattery of Mr. Arun Jaitley .

Yashwant Sinha says that even after defeat of Mr. Jaitley in election he was made Minister and given none one or two but four key portfolios . His allegations are as follows in brief and my response is submitted below . Though I am not an economist , I have tried to put my ideas gathered from my experience of politics of various periods of last four decades. I may be wrong or right , but I think it is necessary  to respond to letter of Yashwant Sinha targeted against present government because it is a national requirement .

 “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.” 

There is no doubt in it that Indian economy has seen somewhat lower growth during last two quarters. But it is not the first time that in some quarter or the other there is fall in GDP. During UPA regime too , several quarter witnessed fall in GDP.

The reason behind such fall in GDP which occurred during last quarter is not all due to wrong policy of Modi Government. 

Demonetisation was a dare devil bold step taken by Modi government in last November with a clear cut intention to reduce the impact and dimension of parallel economy run by black money , by black-marketers, by cash transaction taking place in all sectors particularly in real estate sector , by rising volume of fake money in circulation , by corruption using unaccounted money , by money laundering which help black business entity to remit fund to foreign banks etc. 

Had policies of Modi government been politically motivated or vote oriented  , they like previous governments could have avoided taking drastic step like demonetisation which not only hit rich people for a short period but had little  repercussions on poor also to some extent. There is no doubt that economy will face temporary slowdown due to demonetisation but it is undoubtedly true that it will prove far more beneficial in the long run as we move ahead and as we move towards digital economy. 

Due to some reason or the other , Modi government failed to speed up use of non-cash transaction after demonetisation. Rather it pumped up Rs.2000 currency which indirectly again  helped black money hoarders .GOI will have to slowly pull down volume of currency in circulation particularly that of high denomination.

Further Mr. Yashwant Sinha says that Private investment has shrunk as never before in two decades. Here I would like to mention that business entities which are business minded have not closed or reduced their business volume due to change in policy brought about by Modi government. Rather due to increase in ease of doing business, private investment has been growing at a greater speed. 

But it is banks in general which are avoiding disbursal of credit . As such credit growth in banks has come down from peak of 25% to 40% to 5% to 10% during last Financial year. behind all growth , banks use to play a big role by way of greater credit growth. The reason behind continuous  fall in credit growth is not due to demonetisation or any policy change introduced by current government . 

But it is due to the fact that Modi government has tightened the screw on defaulting borrowers and defaulting bankers. Majority of bank officers have now become busy in recovery of bad loans and this is a good sign for permanent and sustainable growth in economy. Even Mr. Sinha has admitted in his aforesaid controversial letter that Modi government faced the issue of legacy on the front of Non-Performing asset in banks. 

Many bank officers who were found to have evil intention in sanction and monitoring of loans were also taken to task. This gave rise to a fear complex down the line and bankers started avoiding sanction of loan . This negativity adversely affected credit growth during last two three years . As a matter of fact , the process of recovery of bad loans was firstly given a push by Mr. Raghuvir Rajan Ex-RBI Governor. 

During Modi regime, every bank chief has to submit progress report on recovery of loans to Ministry of Finance . Bank officers working in branches are devoting their major portion of working time in the task related to recovery of loans which has been struck in NPA/ Hidden Bad Debts  for last one decade and more, either declared NPA or hidden bad debts. To add fuel to fire , Bank officers and executives are busy in selling insurance products  and this culture has also adversely affected the quality of lending to a great extent. And for this entire blame goes to Congress Party led UPA government which forced PSU banks to earn commission by selling insurance , mutual fund etc. In this way , banks were forced to involve themselves in non-banking business jeopardising their core banking activities, not by Modi government by UPA government led by Doctor economist Mr. Manmohan Singh.

Yashwant Sinha former Finance Minister  says that industrial production has all but collapsed. It is not correct. IIP has been healthy during period from 2014 to 2016 . Slight adverse impact in one or two quarter due to demonetisation or due to GST is nothing but temporary phenomenon. 

In case of demonetisation , business men and industrialists were caught unawares , there was shortage of cash in all sectors, black money circulation which was backbone of corruption led economy got stuck in accounts and finally there exists a fear of getting exposed in raids carried out by Income tax in those accounts where abnormal cash deposits were made . 

Similarly post GST, many business men became busy in completing various formalities pertaining to transition to newly proposed GST and then understanding the implications of GST. Due to technological problems or due to other  deficiencies in the online mechanism of GST compliance caused by unvisualised reasons, several business entities remain engaged in compliance of new guidelines under GST. They stopped their production and tried their best to clear the stock. Same story happened with retailers and whole-sellers. 

There is no doubt that as soon as the process of implementation of GST stabilises, there will be considerable rise in GDP because all industrialists who had stopped their production for some days will not give a jump in production .It is therefore crystal clear that whatever bad effects which are visible in form of fall in GST will definitely be recovered in forthcoming quarter slowly and gradually. 

Read My Views Expressed for Opponents of GST

IN the long run these two steps will undoubtedly prove more beneficial than little loss which appear to have occurred during few quarters post GST and post demonetisation. As a mater of fact these two steps taken together has caused some considerable erosion in GDP but there is no doubt that from forthcoming quarters , there will be considerable rise in GDP too. 

Yashwant Sinha further says that agriculture is in distress. But the fact is that Kharif as well as Rabi production is at its highest level ever . Due to rise in farm production , prices of various commodities has come down . Supply has increased to a great extent and as soon as supply increases, prices start coming down. If YS does not agree to this fact, I would like to ask him why inflation has remained in control or has come down during last three years. It may be due to administrative control that prices are in control. Both ways, it is success story of Modi government. 

Suppose , on the other hand , if prices start coming down more drastically, it will be painful for farmers and producers because they will not be getting their cost of production. Then again YS will have point to say that Modi government is not taking care of poor farmers. This paradox will remain always active. If farmers are given more, consumers will have to pay more and consumers start getting commodities cheaper than cost of production, manufacturer and farmers will start crying. 

Politicians who are unhappy because who are out of power or who are not given powerful post in government will always have points to comment and criticise. When YS was himself Prime Minister , he was considered as the worst Finance Minister by none other Mr. P Chidambaram who is now praising Yashwant Sinha. Even Atal Bihari Vajpayee the then PM had removed Yashwant Sinha from the post of Finance Minister and put Jaswant Singh in his place only because the government had to face considerably high criticism from opposition parties due to weakening health of the economy caused by weak FM like Y Sinha. It is worthwhile to mention that even YS had later agreed that he had failed in his task to give a boost to the then economy when he was FM.

YS says that construction industry , a big employer of workforce is in the doldrums. Here it is important to say that due to heavy rise in construction activities during Modi government , there has been a record jump in consumption of iron and steel in the country. Builders all over the country are busy in construction of affordable houses as per scheme announced by Prime Minister Mr. Narendra Modi. Construction of roads and bridges has broken all past records .Even common men can say confidently that rate of construction of highway roads per day has been doubled during Modi regime . Similarly maximum number of villages have been electrified during last three years and this activity too gave a boost to generation of employment in construction sector only.

YS says that the rest of service sector is also in the slow lane. It is worthwhile to mention that restriction in creation of post in central government department is in force since the regime of Late Indira Gandhi. It is only banking sector or insurance sector which give employment to unemployed literate youths. There is no doubt that due to liberalisation of insurance and banking and allowing of more and more private entities to do such  business, opportunity of employment in these two sectors have increased to a great extent. 

It is not surprising however that a few bank like Yes Bank or Axis bank removes some of their staff every year and recruits fresh one which is a regular exercise in all private sector entities , it may be IT sector or banking . Because unlike government sector or Public sector undertakings, private business houses cannot afford indiscipline and nonperformance in their organisation. Redeployment of  manpower form one sector to other , say from banking to insurance or IT to banks are avoidable exercise which Mr. Sinha will have to accept.

YS adds that exports have dwindled , sector after sector of the economy is in distress. As a matter of fact , volume of exports have also gone up after demonetisation. Please note that export figure have grown up by 10% in August on year to year basis. This is latest data on export.

It is proper to say here that Growth of the Indian economy hit a decade low of 5% in 2012-13.Growth in Q4 of 2012-13 rose marginally to 4.8%, compared with the previous quarter. More importantly, it snapped the steady decelerating trend witnessed in the previous three quarters. It was the period when great economist Doctor Manmohan Singh was Prime Minister of the country and Mr. P Chidambaram who is now critic of Modi and Jaitley was Finance Minister . At that time , there was neither demonetisation nor GST. Then why did GST fell down to bottom point in the decade. 

Rahul Gandhi who has made a sarcastic remarks after YS letter should also introspect why under the leadership of Doctor in Economics , GDP fell to bottom.

Yashwant Sinha , Mr. Chidambram and even Mr. Manmohan Singh who are ridiculing now Mr. Arun Jaitley and who are now praising criticism made by BJP leader Yashwant Sinha should tell the country why GDP touched its bottom in the year 2012-13 . 

Why several scams worth lacs of crores of rupees were allowed to take place under the leadership of world famous economist Mr. Manmohan Singh? 

Why global rating agencies at that time had threatened to downgrade sovereign rating of the country.? 

Why was there almost policy paralysis during UPA regime and only unfolding of one after other scams use to take place during UPA?

Yashwant Sinha further alleges  that GST was put in action by Modi government without adequate  preparation for it or put in effect in haste . Here I would like to remind him that it was Yashwant Singh led GST committee which had submitted report long ago , in the year 2012 and had said at that time that they do not want that somebody should put blame on GST panel for non-implementation of GST or delay in implementation of GST.

Following was his message

"We are targetting Monsoon Session (beginning July). I don't want the committee to take the blame that we are standing in the way of progressive legislation reforms," Sinha told reporters after the first meeting of the panel on the legislation. "We can be working harder than we do. We will try to submit our report by Monsoon Session of the Parliament," 

What do these lines  mean to say? 

It shows that as per committee headed by clever Mr. Yashwant Sinha , it was concluded five years ago that implementation of GST should not be delayed any more. As such to blame Modi for implementation of GST in haste is not acceptable to anyone who is well versed with chain of developments which has taken place during last almost two decades on the subject of GST.

It is fortunate that Mr. Narendra Modi spent three years in creating consensus on GST to avoid resentment in any sector . Modi government carried out marathon meeting 19 times with chiefs and financial experts of each state. Due to his concerted , consistent and devoted effort that GST got successfully implemented in July this year. Almost all states endorsed the idea and contents of GST. Even now government appears to be  ready to consider all proposals to improve left out shortcomings. 

Mr. Chidambram who has now become friend of Yashwant Sinha also put stress on implementation of GST in the year 2013 , last year of UPA government. Mr. Chidambram is now critique of GST as because it has been put in force by BJP led by Mr. Modi. His stand and attitude on GST was entirely different when he was FM of this country. Below is his message of the year 2013 .What he said at that time was as follows

“Finance minister P. Chidambaram held out hope for the implementation of the two much-delayed tax reforms—the goods and services tax (GST) and the direct taxes code (DTC). On GST, an indirect tax reform that will economically unify the country, he expressed hope that the consensus reached over the past month between the centre and the states on contentious issues will be carried forward. To this effect, the finance minister announced a budgetary provision of Rs.9,000 crore towards payment of central sales tax compensation to states.”

YS who is speaking nowadays in tune with Mr. Chidambram had sarcastically commented against Mr. Chidambram in following language. 

 Mr. Yashwant Sinha had declared Mr. Yashwant Sinha as the worst FM India had ever seen. Senior Bharatiya Janata Party (BJP) leader Yashwant Sinha – in a retort to criticism by Finance Minister P Chidambaram that the BJP veteran had the poorest record as the finance minister in the post-liberalisation India – said he might have been the country’s worst finance minister since 1991 but did not commit any fraud.

Prior to this what Mr. Chidambram had said about Mr. Yashwant Sinha was as follows

Finance minister P Chidambaram  launched a scathing attack on BJP leader Yashwant Sinha, describing the latter’s tenure as FM as the worst years for the Indian economy since 1991.

“On July 1, 2002, Sinha demitted office as Finance Minister. I may point out 2000-2001 and 2002-2003 were the worst years since liberalisation in terms of growth and Prime Minister (Atal Behari) Vajpayee was forced to replace the Finance Minister,”.

Mr. Yashwant Sinha may criticise Modi as because he has not been powerful post in Modi government . It is easy to criticise others but very difficult to do a task when it comes to self. I just recall the mind of Mr. Sinha on his admission which he made in the year 2004 .

Former Finance Minister Yashwant Sinha "sometimes" believes he was largely responsible for NDA's electoral debacle in 2004 was his reply to a question like put my interviewer : “Who was responsible for the 2004 rout of A B Vajpayee-led NDA government? 

YS is an old, experienced ,well educated and talented politician associated with Bhartiya Janta Party BJP since long . He has served the country as FM and defence Minister too. He was earlier an IAS officer. He should know the minimum Standards of discipline required for a member of an organisation. He could have several differences with policies of government . He is part of BJP government not as a minister but as a loyal soldier of the party. Instead of making mockery of the party , he could have placed his opinion in party forum instead of making laughing stock of his own party.  By ridiculing Jaitley and Modi , he has given a shot in the arm to opposition parties. By this way he can neither serve the nation nor his party.

YS should suggest alternative option to improve health of the economy instead of criticising all policies just like Modi haters in opposition camp.By making  open criticism, Sinha may attract media coverage  for come time and may receive  sympathetic comments  from Modi haters, but lastly it is none other than Modi who will win the race and will lead the country  not only in all world forums but also  lift the country  to unprecedented  height. 

In my view, Modi  has immense potential and he will prove to be better than all past prime  minister's. He is incarnation of God , It is not an exaggeration. 

Some facts collected from various newspapers are as follows to substantiate what I have submitted above:

Business Standard: 28th September 2017:- The Renewable Energy Sector  in India has witnessed a spike in Private Equity (PE) flows in 2017, despite facing challenges like plunging tariffs and policy modifications. PE flows into wind and solar power jumped 47 per cent to $920 million — involving nine deals — during January 1-September 25 this year, compared to $630 million across 10 deals during the corresponding period last year, according to Venture Intelligence data. This is the second-best year in terms of PE flows into the sector after 2015, when it attracted $979 million across 14 deals. 

Money Control 18th September 2017:-  Private equity investment in India's real estate sector is estimated to rise by 30 percent to USD 4 billion (about Rs 25,665 crore) this year on the back of DLF-GIC joint venture in a rental arm, says realty consultant Knight Frank.

PE investment in real estate was USD 3.1 billion last year.

"Private equity investment in 2017 is estimated to exceed USD 4 billion this year, well past the 2015 mark," Knight Frank said. In 2015, PE investment stood at USD 3.5 billion.

Direct tax collections jumped 19 per cent in the first four months of the current fiscal as demonetisation of higher denomination currency brought in more number of individuals in tax net. 


Collections of direct taxes, which are made up of personal and corporate taxes, soared to Rs 1.90 lakh crore in April-July, an official statement said here.

NITI AAYOG ON GSTThe government's highest planning body Niti Aayog recently said that due to an efficient tax system post-GST, tax revenue is expected to grow (in a baseline scenario) to Rs 26.48 lakh crore by 2019-20 from Rs 17.03 lakh crore in 2016-17. It predicts a 14 per cent growth in 2017-18, followed by 16 per cent and 17 per cent in the next two financial years. It further predicts the indirect tax buoyancy to grow from 1.06 per cent in 2017-18 to 1.11 per cent in 2018-19 and 1.17 per cent in 2019-20.

India’s merchandise exports grew 10.3% year-on-year to $23.8 billion in August, reversing a declining trend witnessed for five straight months, data released by the Commerce Ministry on Friday showed. The jump in shipments was driven mainly by engineering goods, petroleum products and chemicals as well as an improvement in demand in overseas markets.

Foreign Direct Investment  has accelerated from $36 billion in FY2014 to $60 billion in FY2017

India is well on course to achieve 100% village electrification by 2018 with the number of villages remaining to be electrified having decreased to only 4,941 villages by 2017 from 18,452 in 2014. Rural roads are now being constructed at a record rate of 133km per day, almost double the rate of 69km per day in 2014. The number of affordable houses approved for construction increased from 13.8 crore in 2004-14 to over 17.7 crore in just three years of NDA government. 

Read more at:

Link To Economic Times

Lastly 

I submit a link to an article published today in NDTV

If a former Finance Minister, that too from within the BJP, finds fault with the state of the economy, normally, it should be treated as a matter of concern. But when one remembers that Yashwant Sinha has been a routine critic of Narendra Modi and his radical political moves to transform India, it in fact creates hope, not despair.

Link To NDTV

Dr R. Balashankar has enlightened elaborately on intention and potential of Mr. Yashwant Sinha. I simply quote one paragraph of his article .

Yashwant Sinha is not an economist. His tenure as Finance Minister was disastrous and shook the faith of the middle class who voted whole-heartedly for the BJP in the 1998 and 1999 elections. The BJP had to pay a heavy price for the UTI scam that affected and shook the faith of the small investor. This along with falling returns on fixed deposits, financial instruments, pension schemes and Provident Funds shattered the faith of the common man in the reform process and that put the BJP on the backfoot for two successive general elections. 

Farmer distress allowed the Congress to head for the elections with a promise to waive loans, which the UPA famously executed in the fourth year of its first term, leading to a big win in the 2009 election. 

Yashwant Sinha had become so unpopular with the BJP cadre that finally Atal Behari Vajpayee replaced him with Jaswant Singh, who, as Finance Minister, then retrieved the economy, leading to the "India Shining" slogan of 2004. Perhaps Vajpayee lost because he advanced the polls by over six months, before the fruits of India Shining could percolate to the masses.