Manmohan Singh tells Modi govt to stop 'headline management' and focus on economy

Former Prime Minister Manmohan Singh has advised the Modi government to come out "of its habit of headline management" and act sensibly to fix a slowing economy.

Singh said it will take a few years to get out of the "very worrying" slowdown underway, provided Narendra Modi and the government stop living in denial mode and "carry out the next generation of structural reforms" to overcome the current "structural and cyclical" slowdown.

Singh has suggested six reforms the government can implement to revive growth.

"Government should not waste its political capital by adopting a sector-wise piecemeal approach, or on monumental blunders such as demonetisation," Singh said in an interview to The Hindu BusinessLine.

He said India is entering a different kind of crisis now, a prolonged economic slowdown that is both structural and cyclical. "We cannot afford to deny that India is facing an economic crisis," he added.

"The government must remember to address both the cyclical and structural problems. If these are addressed, we can get back on the high growth trajectory within the next three to four years," he said.

Singh also advised that government should address the issue in a transparent manner, listen to experts and all stakeholders with an open mind, and project serious intent to handle the crisis.

Highlighting the problem faced by the country, Singh said the fact that sales of Rs 5 biscuits have declined tells us that India is in the midst of a very worrying economic slowdown.

Blaming government for monumental blunders, he said demonetisation, followed by the faulty implementation of GST have triggered this slowdown.

He said the slowdown is a crisis triggered by a liquidity crunch due to the note ban. "India has a substantial informal economy that runs on cash. A large portion of this involves legitimate activities that are below the tax threshold and therefore should not be thought of as part of the “black” economy. Agriculture, for example, constitutes around 15 per cent of GDP, runs mainly on cash, and is mostly tax-exempt. The farm economy was hit by the sudden withdrawal of cash from the system during demonetisation," he said.

Singh suggested six reforms to revive country's growth, these were:
1. Simplify GST: Government must radically simplify and rationalise the GST regime, even if it means a loss of revenue in the short term

2. Revive agriculture: Government must find innovative ways to kickstart rural consumption and revive agriculture.

3. Capital creation: Government must tackle the lack of credit for capital creation. It is not only the public sector banks, but also the NBFCs that are choked.

4. Revive jobs centric sectors: Key job-intensive sectors like textiles, auto, electronics and affordable housing must be revived and assured priority lending, especially for MSMEs.

5. Boost exports: We need to find ways to address export markets that have opened up as a result of the trade wars between the United States and China.

6. Delvelop infra: there needs to be a credible roadmap for massive public infrastructure development, including through private investment.