The NDA Government at 4: Mr. Yashwant Sinha at Ashoka

Vinayak Sahi, Class of 2020

The Ashoka University Economics Society (AUES) invited Mr. Yashwant Sinha to give a lecture on 3rd April 2018 for the last talk of its “Indian Economy at 70” series. The talk, in my opinion, was a depressing, but accurate picture of the Indian economy as the NDA edges towards the 2019 elections. The NDA, in essence, has failed to tackle any of the problems it inherited from its predecessor, UPA-2, and instead has made the situation worse by mismanaging the economy.

Yashwant Sinha is no light-weight in Indian politics. He was a career officer in the IAS from 1960 to 1984. He then switched tracks to politics by joining the Janata Dal, and then the BJP. Later, he became the Minister of Finance for a year, in the 1990 Chandra Shekar cabinet, and for five years in the Vajpayee government from 1998 till 2002. He is seasoned in dealing with the Indian economy, so when he speaks against the present management of the economy, his views need to be taken seriously.

During the talk, the former Finance Minister delved largely into three areas of concern — the agrarian distress, the swelling Non-Performing Assets (NPA) of the banking sector, and unemployment among the youth.

He said that the agrarian distress is the issue that may come to hurt the ruling BJP the most in the coming general elections. The farming sector of the nation is in peril. Today, the farmer, not being able to generate even half the cost of production as revenue, goes to the bank and secures a loan with his land as collateral for the next season of production, only to realize that the supply glut has continued, and this time, too, he cannot generate enough revenue to pay back the loan or invest in the next season of production. Naturally, the politician seeing this problem as an opportunity, promises loan waiver to the farmer and the farmer (which constitutes over 25% of the Indian population) votes for this agenda, hoping to get out of the mess. The politician, however, after entering office realizes that he cannot fulfill his promise due to another problem in the economy — the NPA issue.

The banking sector today is in the doldrums due to the massive NPA burden that it carries on itself. NPAs are those loans given by a bank to institutions or individuals that aren’t repaid, keeping in mind that these loans are essentially just a transformed version of the common man’s banking deposit. Willful defaulters (those who, at the time of taking the loan, have an intention to default) constitute 14% of the total NPAs, and corporate defaulters are over 35% of the total. This means that banks cannot take the further stress of a loan waiver. Governments are formed by politicians who promise loan waivers, but after they get into office, they realize that banks are already stressed. Since they don’t want to default on their promise, they waive loans and guarantee the same from government coffers, which is essentially the tax-payers’ money. The obvious opportunity cost, which was highlighted by the former finance minister, was that as a result of this, the already strained budget sees a further increase in the non-productive expenditure of the budget, which opens another Pandora’s box. With smaller part of the budget going towards capital expenditure (productive expenditure), the economy becomes less productive, and with the added problem of a credit crunch, jobs take a hit. Youth unemployment is on the rise, and though it might be invisible due to the lack of statistical data, the former minister pointed out that the government will “hear the people talk” in the coming elections.

Yashwant Sinha has been at odds with the current government for the better part of last year and has opposed many of its policies. Yet, the BJP has accommodated him. The question that most begs an answer is why? A simple plausible answer is that as a senior leader like Mr. Sinha has traction among the people, and removing him officially could come to underline more boldly the mismanagement of the Indian economy, which is no secret, as can be seen with the Goods and Services Tax (GST) , to which amends are made on almost a daily basis. To summarize, the BJP would prefer Mr. Yashwant Sinha inside the tent attacking outwards, and not outside the tent attacking inwards.