Set aside deep-rooted suspicion of industrialists, entrepreneurs, Ex PM Manmohan Singh to Modi

In a article, Dr Singh, who is also a noted economist, said that "the state of India’s economy is deeply worrying" and added that he is not saying this as a member of the Opposition political party, but "as a citizen of this country and as a student of Economics".

"Nominal GDP growth is at a 15-year low; unemployment is at a 45-year high; household consumption is at a four-decade low; bad loans in banks are at an all-time high; growth in electricity generation is at a 15-year low — the list of highs and lows is long and distressing", Dr Singh said.

The former Prime Minister said that a nation’s state of the economy is also a function and reflection of the state of its society.

"The functioning of any economy is the result of the combined set of exchanges and social interactions among its people and institutions. Mutual trust and self-confidence are the bedrock of such social transactions among people that foster economic growth. Our social fabric of trust and confidence is now torn and ruptured," he added.

Dr Singh alleged that there is a palpable climate of fear in the society today and added that "many industrialists tell me that they live in fear of harassment by government authorities."

"Bankers are reluctant to make new loans, for fear of retribution. Entrepreneurs are hesitant to put up fresh projects, for fear of failure attributed to ulterior motives. Technology start-ups, an important new engine of economic growth and jobs, seem to live under a shadow of constant surveillance and deep suspicion. Policymakers in government and other institutions are scared to speak the truth or engage in intellectually honest policy discussions."

Stating that "there is profound fear and distrust among people who act as agents of economic growth", Dr Singh said when there is such distrust, it adversely impacts economic transactions in a society.

"When transactions among people and institutions are negatively impacted, it leads to a slowdown of economic activity, and eventually, stagnation. This perilous state of fear, distrust and lack of confidence among citizens is a fundamental reason for our sharp economic slowdown," he added.

The senior Congress leader also stated that there is an air of helplessness too in the country.

"Aggrieved citizens find nowhere to go to air their grievances. Public trust in independent institutions, such as the media, judiciary, regulatory authorities and investigative agencies, has been severely eroded. With the erosion of trust, there is a lack of a support system for people to seek refuge against unlawful tax harassment or unfair regulations", Dr Singh said and added, "this makes entrepreneurs lose their risk appetite even further for undertaking new projects and creating jobs. This toxic combination of deep distrust, pervasive fear and a sense of hopelessness in our society is stifling economic activity, and hence, economic growth."

Criticising the Modi government, the former Prime Minister said that the root cause of this rupturing of the social fabric is the Modi government’s ‘mala fide unless proven otherwise’ doctrine of governance.

"The premise of the government’s policy framework seems to be that economic participants have mala-fide intent unless they can prove otherwise. This suspicion that every industrialist, banker, policymaker, regulator, entrepreneur and citizen is out to defraud the government has led to a complete breakdown of trust in our society. This has halted economic development, with bankers unable to lend, industrialists unable to invest and policymakers unable to act," he added.

Taking on government further, Dr Singh said that the Modi government seems to view everything and everyone through a tainted prism of suspicion and distrust due to which every policy of previous governments are presumed to be of bad intent, every loan sanctioned considered undeserving and every new industrial project deemed to be crony in nature.

"And the government has positioned itself as some saviour, resorting to foolhardy moral-policing policies such as demonetisation, which have proved to be ill-thought-out and catastrophic. Wrongful evil characterisation of everyone and a ‘good-vs.-evil governance’ doctrine cannot be a recipe for healthy economic growth," he said.

Saying that the role of social trust in economic development has been well-documented, right from the times of Adam Smith to the modern-day discipline of behavioural economics, Dr Singh said that the tearing of social fabric of trust is the fountainhead of our current economic malaise.

"The real worrying trend is that the most recent retail inflation numbers have have shown a sharp increase, especially the food inflation figure. Retail inflation is expected to rise even further in the coming months. Continued increase in inflation combined with stagnant demand and high unemployment will lead to what economists term as ‘stagflation’, a dangerous territory from which it becomes very hard for large economies to recover", Dr Singh said and added that the country is not in stagflation territory yet, "it is prudent to act quickly to restore consumption demand through fiscal policy measures since the impact of monetary policy seems muted."

The former Prime Minister also said that the "self-inflicted economic wound comes at a time when there is a unique and opportune moment in the global economy for India to capitalise".

Urging Modi to 'set aside his deep-rooted suspicion of industrialists and entrepreneurs' Dr Singh said to "nurse us back to a confident and mutually trustworthy society that can revive the animal spirits and help our economy soar."