Economy

Arun Jaitley May Be the Fall Guy, But Modi Is Truly to Blame for India's Economic Slowdown

Many BJP leaders are attacking the finance minister every day, but there is a convenient silence around the prime minister's role in the economic decisions that brought us here.

It is a pity that poor Arun Jaitley is being savaged by the BJP for the disastrous handling of the economy. It’s quite unfair since Jaitley ostensibly drives economic policy but key economic decisions, such as demonetisation, have been the remit of Prime Minister Narendra Modi.

Former finance minister Yashwant Sinha, in a well-reasoned piece in the Indian Express, has attacked Jaitley but stopped well short of naming the main culprit, Modi. Demonetisation was a body blow to the economy and a Modi-made disaster. Authoritative sources have confirmed to me that Jaitley and Reserve Bank of India (RBI) governor Urijit Patel were told of the decision as a formality and asked to sign on the dotted line.

In one fell swoop, Modi destroyed both the autonomy that the RBI had zealously guarded for 70 years,  and its global reputation. This came after the globally-renowned economist, Raghuram Rajan, was forced to exit as RBI governor in the wake of daily attacks on him from BJP MP Subramanian Swamy, who even said Rajan was “not mentally fully Indian”.

Interestingly, Swamy, who has a large dedicated “Swamy Army” on Twitter, is now launching daily attacks on the hapless Jaitley’s handling of the economy. Is Jaitley, who has no base of his own after losing the Amritsar election even during the Modi wave, a soft target to ensure that the economic blowback now hurting every citizen bounces off of the teflon-coated ‘pradhan sevak’? Are Swamy and Sinha upping the ante to ensure that Modi is shielded as the growth rate collapses?


Also read: Modi’s Promise of a ‘New India’ Looks Shaky Amid Economic Chaos


Significantly, the last time Sinha had attacked the government he had gone all out against Modi. He had said after the Bihar assembly elections result that Modi would be “consigned to dust”. The only person consigned anywhere was his son Jayant Sinha, who was forced to give up his plum assignment as junior minister of finance for a parking slot at the civil aviation ministry. This time around, the senior Sinha has been careful. He has not even mentioned Modi. Just made Jaitley the fall guy.

The constitution of the five-member Economic Advisory Counsel headed by Bibek Debroy is also an attempt at window dressing to create more fall guys to spread the blame for the economic mess and provide protection to Modi. If the NITI Aayog is any example, it’s just a clueless advisory body which Modi prefers to ignore. And what of the RBI’s monetary policy committee, whose remit is macroeconomic policy? Will it be asked to go on holiday as a new set of toothless advisors take over?

Prime Minister Narendra Modi talks to Union finance minster Arun Jaitley at the Delhi Economics Conclave 2015. Credit: PTI/Shirish Shete/Files

Prime Minister Narendra Modi talks to Union finance minster Arun Jaitley at the Delhi Economics Conclave 2015. Credit: PTI/Shirish Shete/Files

Ideally, Jaitley, who is trying to steer the complex goods and services tax, which has added innumerable layers of procedures to the taxation process and made it more complex, virtually destroying small and medium businesses, would have preferred demonetisation to follow the implementation of the GST. However, just like in most things, he was not given a choice by Modi.

Jaitley is now carrying the can for the twin blows to the economy. Says a senior BJP leader, “Jaitley’s only constituency is the media. He’s called ‘bureau chief’ even within the BJP and is hated by rivals for getting them bad press. He’s the easiest target to blame. He can only hit back with media plants as he has zero base. Even Hasmukh Adhia, a Gujarat cadre IAS official and the incumbent revenue secretary, has a direct line to the PMO and barely listens to Jaitley.” A senior leader revealed that even in Jaitley’s first full budget in 2015, nearly 70% of the input came from the PMO and Modi’s trusted officials.

What is now being seen as a cruel joke – the loan waiver promised by Modi to win the Uttar Pradesh elections – was also not something that Jaitley had much to do with. It’s a different story that farmers in Uttar Pradesh facing huge agrarian distress are getting relief of Re 1, in some cases with a photograph of Modi and UP chief minister Adityanath affixed to the letter giving them this good news . It is debatable how much Modi is given to seeking and listening to advice. In any case, he prefers inputs from trusted officials rather than members of his extremely silent and decorative cabinet. Take the case of the Mudra bank, which both Modi and Amit Shah perceive as an electoral asset. Sources confirm that it was neither Jaitley’s idea nor is he being trusted with implementation.

With Jaitley’s health difficulties and the fact that he was in charge of multiple ministries including defence till recently, one wonders how much focus he can give the onerous finance ministry.

Swamy, who launches daily attacks on Jaitley via his tweets, had told me earlier in an interview that his name had been finalised to contest the New Delhi seat and he was even told about it by the then Delhi BJP chief Harsh Vardhan – only to have been struck off at Jaitley’s behest. He also holds Jaitley responsible for his lack of a cabinet berth. Last week, Swamy said in a video interview to a news website that Jaitley’s knowledge of economics can be accommodated on the back of a postage stamp. That’s the same comment P. Chidambaram had made  in early 2014 about Modi’s knowledge of economics.


Also read: With Prices Rising Post GST, Has the Government Taken the Public for a Ride?


Is it a coincidence that when the PMO wanted Rajan out, the chosen weapon was Swamy, who is now conveniently targeting Jaitley? Even earlier, former BJP leader Arun Shourie had pulled no punches in his  attack on Jaitley’s handling of the economy, although Shourie has also criticised Modi for the same reasons. Lately even S. Gurumurthy, who advises the prime minister on key economic policy, said the economy was sinking and business was unable to absorb the combined shock of demonetisation and the GST.

So as the economy sinks, Modi sails above the fray. A story in Business Standard said that “if there are any regulatory hurdles the market players concerned prefer to approach the PMO rather then knock on the doors of the finance ministry as they would have done earlier.” The story cited a figure of “20 instances in the past six months where the PMO has stepped in”.

Even as Modi projects welfare schemes in order to manage perception in a sea of terrible economic growth data, it seems that Man Friday Jaitley is the designated fall guy. Jaitley can be blamed for many things, but to hold him solely responsible for the transformation of India from the fastest growing economy in the world to just another slow-growth data point seems a little unfair.

Swati Chaturvedi is a journalist and author based in Delhi. She tweets at @bainjal.

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