Dear Arun Jaitley, Don’t be So Economical With Facts on Economy
Jaitley wrote small loans created “employment” not just for the borrower but possibly for “one or two people more”.
I am sure people across the political divide were relieved to know that Finance Minister Arun Jaitley is back at work after a serious ailment that required hospitalisation. In even better news, he has started taking to Facebook to air his views.
That suggests he is getting back to normal health quicker than expected. As he did during the run-up to the 2014 Lok Sabha elections, he is using Facebook posts to take on the Congress Party. However, the difference this time is that we in the Opposition are far better prepared to deal with the BJP’s falsehoods and obfuscation.
In his latest post, Jaitley asks: Is Congress Becoming Ideologyless? Is Anti-Modism its only ideology? In making his argument, the finance minister focuses on what he might consider as achievements of the government.
I have no interest in dealing with the rhetorical aspects of his post. However, I am very interested in contesting those aspects that deal with the economy. While Jaitley is glib and presents selective data, we in the Opposition have a responsibility to not let the ruling party get away with deceptive commentary that misleads citizens.
Let’s get right to it.
Arun Jaitley’s “Success Story”
Arun Jaitley has this to say about the Mudra scheme:
It is a “success story” where “12.90 crore loans have been given for self-employment to various weaker sections. The total of these loans has touched Rs.6 lakh crores. This obviously has led to millions of hands generating new work for themselves and those that they employ.”
Basically, Jaitley wants us to believe that small loans (averaging Rs 46,500 or about $700) created “employment” not just for the borrower but possibly for “one or two people more”.
In this context, what does international experience suggest? Research by David Robalino at the World Bank and Mohamed Marouani at the University of Sorbonne suggests that a $10 million investment can create about 300 direct jobs.
In Tunisia’s case, they found that each job costs about $30,000 to create. Setting up a coffee shop in the United States helps create 3 to 7 direct jobs, which comes at a price tag of $25,000 to $35,000 each.
I am not suggesting only US-type job creation is acceptable. But, Tunisia’s per capita income is only about two times that of India’s. Job creation clearly requires a lot more investment.
Why then is the finance minister so economical with the facts? Is this the vision put before the electorate in 2014? Clearly, the answer is no.
Non-Performing Assets: Who Is to Blame?
On the banking sector’s non-performing assets (NPAs), the finance minister makes excuses about how the problem started during the UPA years. However, it is undeniable that this problem has grown far worse during Jaitley’s term.
Bank frauds have increased in both number and value over the last three years. Between 2014-15 and December 2017, public sector banks (PSBs) wrote off about Rs 2.7 lakh crore of bad loans. Recovery of banks’ gross NPA fell to a 12-year-low in 2016-17. It is easy for Jaitley to say that the government is not waiving loans and recovery is in progress.
According to the Reserve Bank of India, 90 percent of NPAs written off by PSBs could not be recovered in the last four years. Also, gross non-performing assets (NPAs) of listed banks have grown 44 percent in the past one year to over 10 lakh crore.
Let me ask the Finance Minister: Why did you not take decisive action to resolve the NPA problem when Narendra Modi had a political mandate to make transformative changes to the Indian economy? He could have used his oratory to explain tough decisions to the public. However, he frittered away that opportunity.
Now, it is no use complaining about the Congress because that won’t solve the country’s problems.
The Complexity of GST
The finance minister makes light of the Congress president’s desire to have a simpler GST. I think the finance minister should tone down the arrogance that appears to have afflicted all of the BJP.
Is it not true that the World Bank calls our GST “one of the most complex” in the world with the highest standard rate in Asia (2nd highest globally)? Is it not true that the compliance burden is astonishingly high?
It is not just that the government has engineered an absurdly exploitative indirect and regressive tax.
The government adds insult to injury by making GST compliance infuriatingly onerous. If you want our money, at least make it easy for us to give it to you, Mr finance minister.
Arun Jaitley adheres to an ideology that has created divisions in society and let loose a reign of terror in India in the form of vigilantism and mob justice against the weakest members of our society.
I hope he is aware that there is plenty of research that demonstrates that social strife is bad for economic development. Therefore, he should worry more about his own party’s ideology and what it is doing to India.
But, since he asked, let me share my view of what the Congress ideology is about. It is about helping improve the lives of all Indians, advancing individual freedoms, standing by those in distress, helping build a future for young Indians and, above all, helping India achieve respect and admiration in the comity of nations. This is the ideology that most Indians believe in. This is the ideology that will prevail.
(The author, formerly with the World Bank, is a member of the Indian National Congress and can be reached at @salmansoz and firstname.lastname@example.org. The views expressed are personal. The Quint neither endorses nor is responsible for them.)
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