The National Executive of the Bharatiya Janata Party expresses grave concern over the ever-deteriorating state of the Indian economy. The Congress has once again put the nation in peril. Sadly, those who do not learn lessons from history are condemned to repeat it. The country has been plunged into a deep economic crisis that reminds of the grim days of 1991. The economic free fall represents the total paralysis of governance that has become the defining hallmark of the Congress-led UPA government. A few days ago, the UPA presented its report card to the nation that glossed over the harsh realities and made hollow claims to camouflage the actual state of affairs.
The UPA government’s gift to India is stagflation, corruption, and misgovernance. The country is now paying a heavy price for the poor performance of the UPA government and it will take years to turn the situation around. It is worthwhile to note that the National Democratic Alliance (NDA) converted a sagging economy into a fast-growing one. Unfortunately, the UPA, under an economist Prime Minister, has achieved the exact opposite by converting a prosperous economy into one in crisis.
The economic facts are gloomy. GDP growth has plunged below seven per cent, while consumer inflation continues in double digits. Exports are down six per cent. Forex reserves are declining fast and are down $14 billion. The fiscal deficit has touched alarming proportions. Having surpassed the target of 4.6 per cent, it has touched six per cent of the GDP. A revenue deficit at 3.4 per cent of GDP, coupled with a current account deficit of 4.3 per cent, by itself provides a complete picture of the sorry state of affairs of the Indian economy. Even more worrisome is the fact that 70 per cent of the current account deficit is financed by short-term debt. The Index of Industrial Production has declined sharply to -3.5 per cent from 8.5 per cent last year. External debt has risen to 20 per cent of GDP. Capital outflows in 2011 have gone up to $44 billion as against $20 billion in 2009. Interest rates are high and liquidity remains tight. Capital investments, too, are trending down, portending a grim performance forthe future. Three leading banks have been downgraded in their ratings. Each of the parameters only confirms the worst of our worries: The Indian economy is in dire straits on account of total mismanagement by the UPA over the past eight years, in particular, since 2009.
The rupee has inexplicably depreciated against the dollar by an astounding 25 per cent in a single year and has crossed the psychological barrier of 56 to a dollar, with the decline continuing. As a result, imports will become costly, the crude and fertiliser import bill will increase and the balance sheets of corporate India will be adversely impacted. Even the aspirations of young Indians studying abroad will be shattered on account of increased education costs. The government owes the nation an explanation as to why the rupee is witnessing a free fall when other currencies are showing no such movement.
The BJP condemns the unacceptable price hike of petrol by an astounding Rs 7.50 a litre. The already over-burdened monthly budget of the aam aadmi will shoot up further. Instead, the government should have reduced the high taxation on petroleum products, from which it is collecting more than Rs 1,50,000 crore annually. Consumers are being forced to pay virtually the highest price for petrol in Asia. The BJP demands an immediate and complete rollback of petrol prices, failing which the government should prepare itself to face a nationwide and strong democratic protest. The NDA has declared a Bharat Bandh on May 31.
Most alarmingly, these economic indicators signal grim underlying economic trends that may take years to reverse. First, the economy has been captured by crony capitalists willing to use all manner of foul means to grow their profits. The various scams that have tumbled out in the last few years — 2G spectrum, KG, CWG, Adarsh, Tatra-Vectra, coal allocations — have shown us the government is handing out contracts and licenses and allocating valuable natural resources to those willing to pay under the table. Given these circumstances, ethical businesses will lose out, investments will decline and capital flows will stop. That is exactly what is happening. Rebuilding investor and business confidence is going to be an arduous task. Second, we are rapidly heading into a debt trap. The debt-to-GDP ratio is now running at 67 per cent and would be much higher if same trend continues. Internal debt represents 82 per cent of total public debt, crowding out private sector borrowing. Short-term external debt has shot up to 40 per cent of the total external debt, leading to the vulnerability of the ‘balance of payments’ situation. There is a pressing need to manage debt levels better, which calls for fiscal prudence.
Finally, the government has launched a number of entitlement programmes that would be difficult to fund. These include MGNREGA, Right To Food Security, Right to Education, etc. Clearly, the expectation was that high growth would provide the funds for these programmes. With the economy teetering, fiscal deficit at historically high levels, and tax-to-GDP rates still rather low, there is no room for fiscal maneuver left.
At this juncture, the government was expected to present a growth-oriented budget. Instead, it turned out to be an opportunity lost. Far from boosting growth, the government has resorted to a high dose of indirect taxation by raising excise duties sharply. It has also increased the service tax rates by 20 per cent and widened its net to cover practically all services. The very poorly drafted GAAR provisions and the ill-conceived excise duty on jewellery had to be withdrawn in the face of stiff opposition from all sections. The abrupt and dramatic rise in petrol prices shows the government is lurching from one crisis to another. The finance minister has announced austerity measures just as tokenism.
Excerpts from the economic resolution passed by the Bharatiya Janata Party at its national executive meeting in Mumbai on May 25