Note ban organised loot, real offenders escaped: Manmohan Singh in Gujarat

Former prime minister and Congress party leader Manmohan Singh prepares to deliver a speech on the current economic situation in the country as part of an election campaign in Ahmadabad. (AP Photo)

Former Prime Minister Manmohan Singh on Tuesday hit out at Prime Minister Narendra Modi over his government’s economic policies as he termed demonetisation and poor implementation of the Goods and Services Tax (GST) two blows that pushed millions of Indians back into poverty, adding that leaders wishing only to be praised is “not a recipe for vikas (development)”.

Pointing out that demonetisation was not a solution for eradication of black money and curbing tax evasion, the noted economist reiterated his earlier remark that the government’s decision to scrap Rs 500 and Rs 1,000 notes on November 8 last year was an “organised loot and legalised plunder’’, drawing a loud applause from traders and businessmen whom he addressed here as part of Congress campaign ahead of the Assembly elections in the state.

“Demonetisation has proved to be mere bluster to reap political dividends, while the real offenders have escaped. I repeat, this was organised loot and legalised plunder,” said Singh, as he described November 8 as the “Black Day” for “our economy, and our democracy’’.

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At a press conference earlier in the day, he described demonetisation as “an example of ill thought out action with negative effects”. “I have spent a lot of time on demonetisation because it worries me, that in a world where economic policy is becoming increasingly complex, we are not developing a culture where policy options are critically assessed, and criticisms offered are listened, to take corrective action. If leaders only want to be praised, they will hear nothing but praise. This is not a recipe for vikas (development).”

“99 per cent of the cash with the public was deposited with banks, and can now be withdrawn as legitimate new money. No money has been distributed to the poor… It is obvious that those who had unaccounted cash have managed to get it deposited in banks, perhaps under benami names,” he said, and asked if farmers, people connected with informal sector, traders in mandis who work on “cash-basis” will be investigated by tax officials.

Terming the demonetisation decision as “monumental blunder”, Singh said that Modi did not think its impact on poor people when he forced the RBI Governor to sign on the dotted line or when he implemented the “badly designed’’ GST in haste. “If the Prime Minister had taken inspiration from Sardar Vallabhai Patel, while taking the decision of ‘one nation, one tax’, the outcome today would have been very different’’, said Singh and directly attacked Prime Minister Modi, saying that “bravado and drama are poor substitutes for courage with conviction and ability to execute’’.

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He said that while 21,000 youths lost their jobs in textile sector in Surat due to demonetisation, the impact was equally bad in the rest of the country. As our domestic manufacturing sector got hit by demonetisation and now GST in Morbi, Rajkot, Vapi and other places, China benefited the most, he said.

The senior Congress leader said that GST, capped at 18 per cent, was envisioned as a single tax across the country by the Congress-led UPA government, but the BJP government changed it into a complicated mess, with multiple slabs, and the highest rate fixed at 28 per cent apart from additional cesses, he said.

“The GST has created a fear of tax terrorism among the business community. The fear of tax terrorism has eroded the confidence of businesses to invest… The result was that the growth in private investment was at a 25 year low. This is terrible for India’s democracy,” he said.

He pointed out how demonetisation and GST have impacted small businesses. Singh said he feared that demonetisation, poor implementation of GST and the rise of tax terrorism under the guise of controlling corruption, have seriously damaged the investment climate facing small businesses.

“We have a number of nice sounding slogans such as Start-up India, Stand-up India and Skill India. But they are not backed up by effective policies on the ground… Slogans come first and efforts to define policies come much later. This is not helpful,” said the 85-year-old Congress leader, who as Finance Minister ushered the economic reforms in early 1990s.

‘Modi tends to exaggerate what he will do’

On UPA vs NDA performance

* Former PM Manmohan Singh compared the economic performance of the UPA and NDA governments as he launched a frontal attack on Narendra Modi. Reacting to Modi’s claims that his government has achieved what previous Congress-led governments had failed to achieve in the last 70 years, Singh said, “I realise that many things are said in election times, but when they are gross distortions, they need to be rebutted.

“In the 10 years of UPA-I and II, when I was the Prime Minister, we produced 7.8 per cent GDP growth, on average. This includes the slowdown in the last two years of our government. When the present government took over, they said they would take growth to 8-10 per cent. Modiji so far has produced an average of only 7.3 per cent in the first three years… Even if the growth picks up to 6.7 per cent in the fourth year as per the RBI’s forecast, Modiji’s four year average growth rate will be only 7.1 per cent… To equal the UPA’s 10-year average, the economy will have to grow at 10.6 per cent in the fifth year. I would be happy if this were to happen, but frankly, I do not think it will,” Singh quipped.

On 2022 target

* Stating that PM Modi “tends to exaggerate what he will do in future”, Singh said that India targeting to become a developed nation by 2022 will require voluminous amount of growth. “To increase our income five fold in five years, we would have to achieve a growth rate of 35 per cent per year. No country has even done this. Is Modji promising he will do that,” Singh asked. “I hope the Prime Minister will take a good look at the reality on the ground and identify the critical constraints that are depressing the investor sentiment and tackle them. This requires a frank admission of problems and getting out of the culture of constant self-praise,” Singh said.

On state government

* He also came down heavily on the Gujarat government for not settling the claims of the tribals on forest land. He said that while the title deeds of tribals had been cleared at a rate of 87 per cent across India, it was only 44 per cent in Gujarat. Regarding performance of the successive BJP govenrments in Gujarat, Singh said “the recent agitations by youths indicates deep dissatisfaction with the performance of the state BJP government”.