India would have achieved a far better position had 2009-12 not become the lost years of economic policy.
Recently finance minister P Chidambaram admitted that certain decisions taken during 2009-11 has resulted to India’s problems today. He was right, though it was hard for Mr. Chidambaram to give a detailed view, keeping in mind the legitimacy of his office.
However, then finance minister Pranab Mukherjee, who was holding the ministry till August 2012, left the economy moderately in deep trouble. Several columns on various occasions criticized an array of Mukherjee’s policies, ranging from not taking away tax giveaways when growth had gained momentum post the 2008 crisis to creating a tax rules that terrified investors, in addition, he virtually freeze any structural development. There is no doubt that Mukherjee’s capabilities, as a problem-resolving politician, were questioned but now he has proved to be an amazingly different and dynamic President.
Though as a finance minister, his job was to uphold growth and check deficits but Mukherjee’s work record is erratic. The reason behind this maybe because he had many other duties assigned- he headed varied ministerial committees, did regular political fire fighting. Possibly the entire government made a strategic mistake- a person after being appointed as the finance minister of a $2-trillion economy should be left to do his crucial job.
It was Mukherjee’s decision to kick off wholesale staff changes in North Block. The compiled policy learning of post-reforms years was not made available to him. Sticking with populist measures for as long as one could was also Mukherjee’s political sense- undoubtedly he never came forward as a finance minister eager to get key’ reforms on the floor.
The Direct Taxes Code and the goods and services tax both lost vigour under him. Someone of his merit and with his knowledge of networking proficiency could have surely performed better. On resigning from office, Mukherjee had said he may have made a couple of mistakes. In reality, he made more than a couple of mistakes.
After taking charge, Chidambaram constantly tried to correct all these mistakes and on few occasions he succeeded, at a time when too many things went concurrently wrong with the economy. He is plausible on fiscal deficit. On the rupee, the less micro involvement the government does, the better it would be. He is right in saying that ‘there’s no need to panic’, and that the cycle will turn. But simultaneously, it is also right to say that India would have achieved a far better position had 2009-12 not become the lost years of economic policy.