Former finance minister and Bharatiya Janata Party leader Yashwant Sinha tells Gyan Verma the government must take responsibility for bad economic management and bow out. Edited excerpts:
India Inc is treating Wednesday’s Reserve Bank of India (RBI) measures as capital control, while the government is denying it. Do you think we have gone back to the pre-1991 capital control era?
Yes, quite clearly. The mismanagement of the economy by the Congress-led United Progressive Alliance is similar to the 1991 crisis. The measures taken by the government are also similar.
Were the recent measures of the RBI the only option for the government or was there something better? How serious is the rupee reaching the 62-a-dollar mark? The markets saw a bloodbath on Friday. How serious is the situation in your opinion?
The situation is grim. The markets are only reflecting the loss of mood in the India story. The government and the RBI took certain steps recently, but they are only treating the symptoms and not the disease. The fiscal deficit, current account deficit, state of the economy, rupee devaluation — everything is out of control. The markets have realised it. The market is now trying to find its own level, whether with the rupee or with the stocks. The government cannot control the situation by making cosmetic changes. What is needed is fundamental changes in the formulation of policies. The government cannot afford to splurge and the Food Security Bill is also seen as splurging, so the markets are reacting to it. We cannot expect anything from the government.
We should not prolong the agony of the economy because the government seems to have lost control. The prime minister must resign and call for fresh polls. It is in the best interest of the country that polls happen at the earliest and this government goes at the earliest.
How realistic do you find the finance minister’s projection of a current account deficit to 3.7 per cent of gross domestic product in 2013-2014?
Finance Minister P Chidambaram has made some cosmetic changes but they are not enough.
I have been saying some fundamental changes are needed.
One of the major reasons for the high current account deficit is the import of coal and we are sitting on huge coal deposits.
The finance minister has said containing the fiscal deficit to 4.8 per cent of GDP is a red line. Do you think he would be able to meet the target?
It is unacceptable. It was under the same finance minister that the fiscal deficit was at 2.7 per cent in 2007-2008. It was only before the general election that they allowed things to let go; 4.8 per cent is not good enough.