Government Doesn't Have The Bench Strength To Handle The Economy

The Indian economy is going through one of its longest spells of slowdown — six quarters and counting. Even as government and independent commentators are groping in the dark for possible ways to turn around a decelerating economy, Business Today’s Dipak Mondal and Joe C. Mathew caught up with P. Chidambaram, who has presented eight Budgets as finance minister. Excerpts from his analysis of the crisis:

- Dipak Mondal and Joe C. Mathew

What is your diagnosis of the problems the Indian economy is facing?

My overall assessment of the Indian economy is on the same lines as (former Chief Economic Adviser) Arvind Subramanian’s paper jointly with (IMF’s former India head) Josh Felman, which was published in December 2019. The economy faces serious problems, both structural as well as cyclical. The structural problems are deeper and more serious. This government believes that the problems are entirely cyclical and therefore they come up with what they consider solutions to the cyclical nature of the problems. As a result, the crisis has worsened.

Let me just tick off a few heads where the crisis has deepened — non-food credit, exports, NPAs, stalled projects, fiscal deficit, revenue collection, and expenditure constraints. In each of these heads, the crisis is deeper today than what it was three-four months ago. There is simply no improvement.

How many of these can be attributed to global factors and how many to domestic factors?

Exports can be attributed to global factors. (But) even in this scenario, there are countries with export surpluses. We are not even touching the level of exports we had in 2013/14 or 2017/18. Of the other indicators that are pointing southwards, you can attribute FDI to global factors to some extent, though it has been reasonably good this year. But apart from exports and FDI, I can’t think of any other indicators that are affected by global factors. These are all caused by domestic factors and developments, and domestic policy failures.

What are these domestic policy failures?