Caught between a rock and a hard place, Prime Minister Manmohan Singh on Saturday said the country was investing in a lot of unproductive assets.
He shared this thoughts with a fellow economic wonks and banking sector honchos, including all the six former Governors of RBI, at a small gathering at his official residence here.
Singh was not pointing to the mammoth Food Security agenda staring at his face, or the direct benefit (cash) transfer scheme that his party has forced upon his government amidst an economic recession.
He was, however, referring to the 545 tonne gold import in 2013-14 that is said to have depleted the country’s foreign currency reserves, heightening the current account deficit (CAD).
He is a Prime Minister, who has to balance his account -- economic and political -- between ‘Indian hunger for gold’ on one hand and what his party calls ‘hungry mouths’ on the other. Especially when his legacy of economic reform is at stake.
Singh doesn’t dare to take on the Congress before the elections, as he is caught between a two-term Prime Ministership and a clutch of what appears to be better performing Chief Ministers, said an economic analyst who attended the function. He added that the Congress was not giving the Prime Minister or his Finance Minister a free hand that would enable them to address the market forces.
The Congress, the economic analyst lamented, was forcing the Prime Minister to pursue measures that he and his Finance Minister, P Chidambaram, might not want at this juncture. “It is an election versus economy situation, where the Prime Minister and the Finance Minister are being pitted against younger chief ministers, who either head their own parties, like Jayalalithaa in Tamil Nadu and Naveen Patnaik in Odisha, or who have complete hold over their parties, like Gujarat’s Narendra Modi. Even Bihar’s Nitish Kumar and West Bengal’s Mamata Banerjee, who have to struggle backwardness, have bigger political clout,” he said.
Even though surrounded by assertive chief ministers and an unyielding Congress party, which wants to reclaim Indira Gandhi-style socialism to win the elections, Singh on Saturday spoke on the economy to an audience comprising the likes of Y B Reddy, Bimal Jalan, Rakesh Mohan, Raghuram Rajan, Subbarao, Montek Singh Ahluwalia and Sudhir Gokhran.
It was the CAD scare and rupee/sensex tumble which made him break his now famous silence. He assured that the RBI’s gold reserves do not have to be shipped out yet again, like in 1991. “We have reserves for another six to seven months. In 1991, there were reserves for another 15 days only,” Singh said.
Ironically, he said this while releasing a book on the ‘History of RBI’. He also commented on the change of guard at the apex bank, from the outgoing Governor Subbarao to Raghuram Rajan.
As the rupee tumbled and the lending rates could not be rescued from Subbarao’s tight fists, the RBI, in recent months, had nearly brought tears to the eyes of the Union Finance Minister and India Inc. A bit of that got reflected in his short speech.
The Prime Minister recounted how he had appointed a committee to look into the functioning, goals, means and measures of monetary policy, when he was the Governor of the Reserve Bank and said that the report was pretty influential for a period of time.
He further said that for fresh thinking in terms of macro-economic policy-making, targets and instruments, another such committee needs to be set up to look into the limitations of monetary policy in a globalised and fiscally constrained economy.
In other words, he was asking for less interference from the RBI -- a little loosening of regulatory bottlenecks, even though it was the RBI, which had to step in to impose restrictions on import of gold to stop the rupee from sliding further against the dollar.
Despite all this economic profligacy that is being forced upon the government, in the final run, it would be the regional satraps who might call the shots in the next Parliament. By all indications, the Congress and the BJP war in the twitter-world and in Parliament -- the main Opposition is being blamed for indirectly not allowing the reform Bills through so as to not give relief to the ruling dispensation -- might in the end run be out-performed by the regional satraps.
Little wonder then that Narendra Modi is courting Jayalalithaa, Mamata Banerjee, Naveen Patnaik and Chandrababu Naidu, even as the Congress is courting Mulayam Singh Yadav and Akhilesh Yadav, Mayawati, Nitish Kumar and Omar Abdullah, to somehow get the magic figure of 272 in the Lok Sabha. Meanwhile, there’s only a lonely Prime Minister with doing all the worrying about the country’s economy and his legacy -- both already in tatters.