In the Economic Resolution adopted at the Mumbai National Executive meeting, the BJP had emphatically stated that the Indian economy has deteriorated to a great extent, akin to the situation in 1991, and has been seriously impacted by stagflation, corruption and misgovernance. The events that have unfolded over the last four months have vindicated the stand of the BJP. The Prime Minister in his address to the nation has himself accepted the fact that today’s situation is akin to 1991. However, ironically, what the Prime Minister has failed to mention is that prior to the situation in 1991, the congress had ruled the country for nine years. Similarly, post 2004 when the economy was in the pink of its health, the congress has been governing the country for over eight years consecutively. Therefore, facts clearly point towards the complete responsibility and accountability of the Congress Party in general and the Prime Minister in particular in bringing the nation’s economic situation to such a position of crisis. TheCongress has always ruled and ruined the economy whenever they were in power.
Corruption is at the root of all problems the country is facing today. The monumental corruption unearthed in the coal block allotment has defrauded the nation to the tune of Rs. 1.86 lakh crores as per the conservative estimate of the CAG. 17 billion tons of coal reserves worth more than Rs 50 Lakh crore were handed to over 140 private companies in the most arbitrary manner. These allotments were done without any comparative appraisal and without any valid ground for selection. This is yet another example of crony capitalism and a blatant misuse of authority.
The first 11 names that have surfaced in the scam belong to the Congress and its allies. This will prove to be the worst ever scam that India has witnessed till date. The Congress has the audacity to say that the people will forget the coal scam as they have forgotten the Bofors scam. In fact, people never forgot Bofors and punished the Congress in subsequent elections. The coal scam is far more serious than Boforsand the people of India will definitely remember this exhibition of corruption that is eating into the vital foundations of democracy and hampering the economic growth of the country.
Fiscal Management and Sluggish Growth
The fiscal deficit in FY 13 will be in the region of 6% against the budgeted 5.1 %. In fact it touched 51.5% of the budget estimates for FY13 in just four months ending July-2012. This is as the UPA government has failed to adhere to the FRBM regime.
The current account deficit for FY 12 was 4.1% against a planned 3.5%. These twin deficits indicate the grim situation prevailing in the country. Exports are down by $25 billion; the IIP is down and stands at -1.2%. Import of capital goods has also declined which is a red flag for the long term health of the manufacturing sector. The shortage of power coupled with a high interest rate regime is adversely impacting industrial growth.
The country’s growth has slowed down to an average of 5.4% in the last six months and the expectations of growth for this year are perhaps be around 5%. This is a far cry from the potential growth rate of the Indian economy which can easily be in excess of 10% plus. Alarmingly, not only are we witnessing continued slow-down of the economy, but also continued high inflation rates which at the consumer end, is more than 10%. Instead of clocking 10% growth with less than 5% inflation, we are doing 5% growth with over 10% inflation.
The rupee has depreciated by more than 20% and the government’s forex reserves have fallen substantially. Consistent fiscal deficits of close to 6% of GDP over the last 4 years mean that government is borrowing heavily in the market and crowding out private investments.
This has also led to a situation where the international rating agencies are threatening to downgrade India which will mean the loss of our investment grade status and raise the borrowing costs for the country as a whole. The responsibility for this parlous state of affairs rests squarely with the UPA government of the day.
It is worthwhile to recall the state of the economy when the BJP led NDA government demitted office in 2004 and which the incumbent Congress led UPA dispensation has inherited. The Economic Survey of 2004-05 has clearly stated that “….the country has a resilient economy in terms of accelerated growth and inflation control”.
The NDA’s Contribution to the Economy
The nation still vividly recalls the economic dispensation during the period Prime Minister Vajpayee. The biggest achievement was putting the country on a high growth trajectory while keeping inflation in control. The rupee was strong, the forex reserves were increasing at breakneck speed
The NDA ensured a regime of low interest rates which directly benefitted the agricultural sector, housing, industry and consumers. Interest rates on agricultural, housing, automobiles, education loans were at acceptable low levels while the competitive edge of Indian industry and the manufacturing sector was enhanced on account of low finance costs. Shortages, queues and black-marketingbelonged to the past as India began to enjoy an age of surpluses across the board.
Connectivity became the buzzword as infrastructure development picked up momentum as a result of the progressive policy framework put in place by the AtalBihari Vajpayee government. Road connectivity, rail connectivity, air connectivity, port connectivity, digital connectivity, telecom connectivity kept pace with India’s rising aspirations.
On the agricultural front, a robust policy boosted cold storage and godown capacity. The nuclear tests of 1998 also enhanced the patriotic fervour of the citizens of the country.
By the time the BJP led NDA government demitted office in 2004, India was at the cusp of a global take off, a future ECONOMIC super-power in the making.
PM’s Ineffective Speech
In this respect the PM’s address to the nation after thirty months was lacklustre and uninspiring.
The exasperation of the PM was visible when he told the audience that, “money doesn’t grow on trees”. People know very well that money does not grow on trees. However for the Congress, money grows on the trees of CWG, 2G, Coalgate and many other scams. In his 12 minutes address, the PM did not utter a single sentence about the woes of the people reeling under inflation and did not offer any solution or offer any solace.
Failure on Price Front
The single biggest failure of the economist Prime Minister has been in managing the economy and controlling inflation. People are reeling under continuously rising prices and are suffering due to unabated inflation. Last fortnight also witnessed rising prices of sugar, edible oil, pulses, vegetables, milk and many other food and non-food items. The Consumer Price Index (CPI) has already crossed into double digits now. With the diesel price shock, CPI will surely zoom past 12% in the next two months.
People are in pain and the government is not taking any effective efforts, such as adopting real austerity measures and imposing cuts on uncontrolled rising revenue expenditure.
Inflation management requires addressing the issues of demand side as well as supply side. The present government has tried to stem the rot by addressing only the demand side by squeezing liquidity and raising the interest rates 13 times. Rising interest rates are counterproductive and actually push prices further and also makes Indian exports uncompetitive.
Unjustified diesel hike and LPG capping
The massive diesel price hike which has imposed an unbearable burden of Rs 40,000 crores annually will have its cascading effect on the prices of almost every commodity. The cost of every means of transportation increases and farmers suffer as the cost of using farm implements and drawing water from the ground increases. Industry and fisherman are no exceptions to the ill effects of higher input costs. This diesel hike has come on the back of increase of Rs 12 per litre on petrol in the last one year. India has the highest taxation regime on the petroleum products.
The ceiling of subsidised LPG cylinders to 6 is an anti-people decision and is actually a price rise in disguise. An average family requires 12 to 15 cylinders per annum. In the new regime they will have to pay out Rs 400 more for each unsubsidized LPG. Thus it is an increase in expenditure on LPG cylinders in the range of Rs 3,000 – 4,000 p.a., as per the usage.
This is a stark example of the inept handling of the Food, Fuel and Fertiliser prices by the Congress led UPA government.
Woes of Agriculture
The country’s agrarian economy is being hit hard by the neglect of the agriculture sector, which is the greatest employer of the people. The agricultural sector is suffering because of tremendous rise in all input prices be it fertilizers, seeds or pesticides. Over and above this, erratic monsoon this year has already impacted the agriculture and hence put farmers in difficult situation who are facing drought and floods in different parts of the country.
Adding to the woes of the farmers is the gross ineptitude of the UPA government in controlling fertiliser prices which in some cases have increased manifold within the last three years! The government’s Nutrient Based Subsidy (NBS) policy has failed completely. The UPA government discontinued the ambitious programme launched by the NDA to ensure a minimum income guarantee to the farmers and it has refused to accept the Swaminathan Commission formula of remunerative prices by giving 50% above the cost of production. With the farmers being denied due justice, suicides are on the rise. There is an immediate need for formulating a proper fertiliser policy.
FDI in Retail under foreign pressure
Yet another anti people decision of the Government to allow FDI in multi-brand retail has been taken under foreign pressure. The government had made a solemn promise in both houses of Parliament that the government would talk to all political parties and state governments to arrive at a consensus. This promise stands broken.
Allowing FDI in multi-brand retail will have an adverse impact on our retail trade and create large scale unemployment, not only in the retail sector but also in the manufacturing sector, as multi-brand retail chains will source globally. In India, retail trade is the third largest employer and more than 10 million establishments give direct and indirect employment to over 40 million people. This employment is under threat when we look at the global experience of muti-brand retail. It is a well-known fact that for every 100,000 jobs created by the MB retail chains, 500,000 jobs are lost.
Farmers will also not benefit either. The experience of 100% FDI in food processing through the automatic route is not encouraging. More than $25 billion were expected to be invested through FDI but the ground reality after 10 years of this decision is that not even 5% of this figure has been invested. Thus creation of back end infrastructure is a myth. Let us not forget that these multi-brand retail chains are coming to India for profits and not for charity. Rural artisans will also be adversely affected.
A major falsehood or canard being spread by the government relates to the right of the states to decide whether to allow foreign MB retail chains in their respective states or not. Once allowed by the Centre, the ability of states to allow or disallow FDI in multi-brand retail may not be possible under some of our bilateral investment treaties. Second, if each state is allowed independence, what happens if state governments change? The BJP, therefore, demands rollback of the decision to allow FDI in multi-brand retail.
The need for Real Reforms
The Government was expected to carry pro people reforms like bringing back black money and taking tough actions against corruption, instead it is advertising its anti-people administrative decisions as big bang reforms. If Government de allocates all the coal blocks allotted arbitrarily, it will add Rs 2 lakh crores to government coffers through auction and can benefit the consumers by cheap power if the auction conditions are rightly determined. The 2G auction has already proved this, as the 2G auction will result in collection of Rs1,50,000crores as against Rs 15,000 crores it had collected through fraudulent allotment. The Prime Minster has fallen prey to foreign criticism and negative media coverage.
Real reforms are needed in governance bringing in efficiency and transparency. We need FDI in strategic sectors and high end technology. We should also encourage FDI in Infrastructure which is facing a huge capital crunch. The Government of the day has failed to arrange large public investments in these sectors. Infrastructure development will result in large scale job opportunities which will empower the poor.
There is no doubt that these so called reforms are meant only to divert the attention of the people from the massive scams of the government. They only mean more pain for the people already suffering from uncontrolled price rise, higher EMIs and lack of basic amenities. The government has failed on all fronts and should go lock, stock and barrel. BJP has decided to launch a massive democratic protest against the UPA government. BJP appeals to the people of our country to stand united in this protest.
The BJP demands:
- Immediate rollback of the diesel price hike and decision to cap LPG cylinders to six per annum.
- Immediate reversal of the decision to allow FDI in Multi-Brand Retail.
- The government should take immediate and effective steps to urgently bring down the prices of fertilizers.
- Cancel the scam tainted allotment of coal blocks since 2004 and initiative a transparent auction process.
- Institute an independent and impartial probe into the COALGATE Scam.
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