A Failed Finance Minister Rewarded With The President's Post

Pranab Mukherjee has been the Finance Minister of India from 2009 till date. Not only has he completely failed to revive the sagging economy, in fact, his performance has been so bad that he can be looked upon as an ideal candidate to win the award of ‘The Destroyer of the Indian Economy’. Notwithstanding this, the ruling party has rewarded him with the highest position of the President of India. Surprisingly, our Prime Minister, who has not taken any positive decisions for the betterment of the country, seemed to be the happiest person on this flawed elevation of the Finance Minister. Is it because he felt that it was good riddance?

The grapevine in South Block has it that the Prime Minister was very unhappy over the budget presented by him for 2012-13, especially on his retrospective tax amendment proposal. This is because what the Finance Minister announced in the budget was contrary to whatever the PM had assured foreign governments, and was one of the main reasons for the downgrade in the economic perception of India, which in turn affected the inflow of foreign investments. As Finance Minister, Mukherjee derailed our economy in all respects, leaving it in a deep crisis, and he is now going to head the country as its President.

Most of the economic indicators are at levels worse than where they were in 1991, except for the foreign exchange reserves. The growth rate has come down drastically, the fiscal, revenue and current account deficits are out of control, and the rupee has depreciated by almost 30 per cent over the last one year. The only saving grace is that we have large reserves of foreign exchange, but these cannot be used to fuel GDP growth. Inflation has been at the highest levels during his tenure, and everyone is feeling depressed and unhappy about it.

Despite knowing his own failure as a Finance Minister fullywell, he believes that the situation is not as bad as is being projected. In fact, he has been trying to convince people that the situation is improving. Such false statements by him have been supported by the PM as well as the Chairman of the Planning Commission, who misguided people all throughout that inflation would come down to five-six per cent and GDP growth would be at around 7.5 to 8 per cent. Of course, they were exposed when Moody’s, Fitch and Standard & Poor’s downgraded our country’s credit rating badly.

Currently, the Finance portfolio is with the Prime Minister, and hence, he cannot blame anyone else for any failure that may happen. This is probably the last chance for the government to take immediate action and introduce reforms, as suggested in the open letter addressed to the Prime Minister in our issue dated 17th June, 2012. The Prime Minister has only six months to take corrective, conclusive and quick decisions.

The Finance Minister had said that he would announce certain measures to boost the economy in consultation with the RBI. However, the announcements made by the RBI to hike foreign investments in the form of debts and bonds have failed to enthuse foreign investors. Thus, the government’s action has totally disappointed the investors at large.

There are two simple questions to be asked. First, does the economy need a governmental plan to revive investments? The answer to this is “Yes”. Secondly, are changes in the overseas borrowing limits and the foreign investment limit in government securities desirable? The answer is “NO”! Thus, the main issue is to revive investments. Our cover story for this issue is titled ‘Silver Lining to the Dark Clouds’. The story intends to present the brighter points obscured by the darker clouds of pessimism that are currently surrounding the economy and the markets. We sincerely hope the insights that the story provides calms down nervous investors, who would be glad to know why all is not that bad.