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Two days before Budget, Manmohan releases Cong report on economy. It's bad news

Akash Bisht | Updated on: 11 February 2017, 5:44 IST

Two days before the government is set to present the Union Budget in Parliament, former Prime Minister Dr Manmohan Singh on Monday released a 85-page document that highlights the state of the Indian economy.

While releasing the document, Singh claimed it was obvious that the 'Indian economy is not in good shape' and criticised the policies of the Narendra Modi-led BJP government for not doing enough to push the growth rate in the country.

While unveiling the report, titled 'The Real State of the Economy 2017', Dr Singh said: "The Indian economy is not in good shape. Even the IMF has projected that the growth rate of India in this fiscal year will not be 7.6% but less than 6.6% Several other rating agencies have made similar predictions."

Singh, a noted economist, called the report a 'contribution to the ongoing debate' in the country about where India's economy is, where it is going, and what needs to be done to set it on the right path.

"Tomorrow is the day when the government will present its economic survey. We thought it is a good idea that we should also bring out a document which sets out in what we consider as the real dose of realism," the former PM said.

Chidambaram lambasts govt too

Even former Finance Minister P Chidambaram briefed the media on the report, and lambasted the government for its failed economic policies.

"There are no jobs, capital formation has declined, and credit growth is the lowest in several decades, yet the government is painting a rosy picture of the economy. Every government must be optimistic, but optimism must stem from a realistic assessment of the situation," Chidambaram said.

He went on to claim that the present government was hiding behind the dazzle of "a number called the GDP", which has been questioned time and again since the base year has been changed.

"The people of India are not dazzled by that number. The people of India are asking hard questions. The first and foremost question is, where are the jobs? The second question is, where is new capital investment? And the third question, is how are businesses being helped to grow, expand and employ more people?" he asked.

No job creation

Curated by the Congress party's Research and Coordination Committee, headed by MP Rajeev Gowda, the report is critical of the government's failure to fulfil its promise of creating one crore jobs in the country during its tenure.

"Going by the promise of one crore jobs during this government's tenure, it would mean that there should roughly be 20 lakh new jobs created every year. There are nearly 10 lakh youth looking for a job every month in India. Amid such a staggering need and a tall promise, there were less than 1.5 lakh new jobs created in all of FY 2016, for which the latest data is available," read the report.

According to the report, the job growth in the country has been constantly declining, and the government needs to be mindful of its fiscal deficit target of 3%. It goes on to add that to keep the current account deficit within a manageable range, the government must overcome the one crore job deficit, which is the real economic target for India.

Impact of demonetisation

The report also focusses on various aspects of demonetisation, and how the government's decision to scrap high value currency notes has further contributed to the sluggish investment environment in the country.

"A slowly recovering economy found itself stunned when the Modi government jammed the brakes on India's growth. In terms of the impact of demonetisation, a range of experts have produced an array of estimates about the extent of the slowdown: from 1% to more than 2%, over six months to over five years. Every percentage point drop in Gross Domestic Point (GDP) growth costs the country 1.5 lakhs of crores of rupees," claimed the report.

It points out that sectors like agriculture, fishing, and the voluminous informal economy, which thrive on cash, came to a grinding halt after demonetisation, which also led to a fall in labour force which shunted people out of the labour force. The report claimed, "Clearly, demonetisation has devastated India's labour market, leaving workers discouraged and dispirited, leading to their dropping out of the labour market."

According to the report, new investments proposals and exports have been hit the hardest by the note ban exercise. Citing data of the dip in monthly automobile sales in India post demonetisation, the report claims that the growth in this sector dropped to a 16-year low.

"Total vehicle sales slid 18.66%, and two-wheeler sales fell 8% plus, the steepest decline since SIAM began to record data in 1997," read the report. Even the tractor sales in the countryside witnessed a sharp decline, which, according to the report, provides a measure of the slowdown in agricultural activity.

Calling the note ban the "worst betrayal of people's hopes and aspirations", the report concludes that when the economy needed to be nursed back to health, it received a hammer blow in the form of demonetisation.

"While most analysts have only made predictions for the short-term, CMIE has projected post-demonetisation growth over the next five years. The outlook is very grim. The jobs lost, both real and notional, would reach an astronomical figure if we remain hovering around 6% growth rates. At a time when India needed to nurture the 'demographic dividend', this is the worst betrayal of people's hopes and aspirations," says the report.

Edited by Shreyas Sharma

First published: 30 January 2017, 10:26 IST