Drawing the link between demonetisation and GDP numbers, former Chief economic advisor Arvind Subramanian has said the puzzle thrown up by the note ban has a dual aspect – whether its impact as seen in the GDP numbers reflects a resilient economy, and if the growth figures pose questions about the official data collection process itself.

In an interation with media, Subramanian, currently teaching at Harvard Kennedy School, and here for the launch of his book “Of Counsel: The Challenges of the Modi-Jaitley Economy”, published by Penguin, referred to the chapter “The Two Puzzles of Demonetisation — Political and Economic”.

He also referred to the other “puzzle” posed in his book — that of divergence in regional economic development in India despite equalising forces like migration and economic growth — a dynamic of the states, he says, which runs against the logic of competitive federalism.

“Through my new book, I am drawing attention to the puzzle, the big puzzle of 86 per cent reduction in cash after demonetisation, and yet the impact on the economy was much less,” he said.

“The puzzles essentially spring from the fact of why the measure was politically successful, and why GDP was affected in such smaller measure… Is it because we’re not measuring GDP correctly, not measuring the informal sector, or is it the underlying resilience in the economy?” he said.

“In the six quarters before demonetisation, growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four-quarter window, the relevant numbers are 8.1 per cent before and 6.2 per cent after),” Subramanian has written in his book.

“The key to this would lie in a comprehensive understanding of both the polity and economy of India, about how people vote, for instance,” he said.

He referred to the ongoing controversy on the NITI Aayog’s presence at the release of the GDP back series data by the Central Statistics Office (CSO) with a change of the base year, lowering the country’s economic growth rate during the previous UPA rule.

“I think the calculation of GDP is a very technical task and technical experts should do the job…institutions that don’t have technical expertise should not be involved in this,” he said.

“Economists would naturally raise questions when the parameters vary so much and yet growth remains similar. It is not so much about credibility of the data as about the data generating process itself and of the institutions that carry it out,” he added.

To a query on whether he was a participant in the decision-making process on demonetisation, the former CEA said: “As I’ve said in the book, it is not a Kiss and Tell memoir…that is for gossip columnists.”

Asked about the recent tiff between the government and the Reserve Bank of India (RBI), Subramanian said the autonomy of RBI must be protected because the country will benefit by having strong institutions.

“I have myself advocated that RBI should play a pro-active role, but its surplus funds should not go towards routine financing of spending and deficit financing — that would amount to raiding the RBI,” he said

The government’s differences with the RBI centres on four issues — the former wants liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, relaxing the Prompt Corrective Action rules for banks struggling with accumulated NPAs, or bad loans, and support for micro, small and medium enterprises.

Central to the liquidity issue was the government’s demand that the RBI hand over its surplus reserves by making changes to the “economic capital framework”.

On the RBI board, which has a majority of government nominees, the former CEO said: “I think that part of maintaining a real autonomy is not to politicise the board. The board should not be politicised. Not only it must not be done, it must not be seen to be done either.”

On the other puzzle of domestic divergences in development, he said the reasons could be historical in the form of the unequal impact of British colonialism in different regions of the country.

 

 

Andhdra pradesh Chief Minister N. Chandrababu Naidu was posing as a national-level leader to hide his failures in the state and the results of assembly polls in Telangana will badly backfire on him and the Congress for any alliance at the Centre, says TRS leader K. Kavitha.

Kavitha, an MP who is daughter of Telangana Chief Minister K. Chandrasekhar Rao, told IANS in an interview that Telangana Rashtra Samithi will win the assembly polls hands down and it will then start working towards a national alternative which does not have BJP or Congress.

“Basically, Chandrababu Naidu is losing ground in Andhra Pradesh so he wants to pose as a national level leader so that there might be some advantage in Andhra Pradesh. To make sure his failures in Andhra Pradesh are not be highlighted, he is diverting people’s attention to the so-called national level alliance but it will backfire very badly both for him and Congress also,” Kavitha said.

She was asked about efforts by Naidu to bring opposition parties together to take on Prime Minister Narendra Modi and the BJP-led alliance in the 2019 Lok Sabha polls and if he could emerge as a pivot of opposition unity.

“Because in Telanagana results, you will see that this alliance has been beaten. Do you think it will be taken at the national level once it is beaten at the state level? All the effort Naidu is making is to divert the attention of people from his own administration in Andhra Pradesh,” she said.

Naidu and leaders of several other opposition parties are slated to meet in the national capital on Monday to decide the way forward to take on the BJP-led NDA.

Naidu, who was part of the National Democratic Alliance, had quit it earlier this year and allied with its traditional rival Congress in the Telangana polls.

The CPI and the Telangana Jana Samithi (TJS), a new party floated by M. Kodandaram, who was once Chief Minister K. Chandrasekhar Rao’s friend in the Telangana movement, are also part of the alliance.

Kavitha said an alternate political platform should be encouraged.

“We are going to anyway wins down hands down the assembly polls so the impact will be positive in the Lok Sabha in polls and we will win all the seats. We are very confident about it. We will not ally with anybody. We proposed a federal front which will have no BJP, no Congress. People have given them a lot chance. There should be an alternate politial platform in the country which should be encouraged. TRS will play a role great role in forming this political platform. After assembly polls, we will start focusing on the national agenda,” she explained.

She said the December 11 results will show that the alliance – People’s Front – has been rejected, adding the opposition parties had also come together in previous bypolls but lost.

“This alliance has been constantly working against the interest of our state. We have an oppostiion which is very irresponsible,” Kavitha said and alleged Congress had sought to stall a major irrigation project through court cases.

She said the alliance has hit credibility of both the TDP and the Congress.

“TDP was fundamentally formed to oppose Congress. It was N.T. Rama Rao’s wish. Now, the current day TDP has compromised its own core philosophy and principles. Now, if a political party has compromised its own core ideology, the people are bound not to take it seriously anymore. That is what happened to TDP allying with Congress. It will hit them hard.”

She said the party had implemented all its promises and had striven to win around 100 of the 119 seats in the assembly.

She said rallies of Prime Minister Narendra Modi and UPA Chairperson Sonia Gandhi had little impact and said BJP was not a factor in the state.

Asked about the decision to go for early polls, she said the idea was to make sure that the narrative of the election is about and around Telangana

“If we had election around the parliamentary election, the discussion would be mandir, masjid, Rafale, Bofors and which would have nothing for Telangana. The effort that TRS our leader put in for four-and-a-half years should not go waste,” Kavitha explained.

The Congress on Saturday termed the Enforcement Directorate (ED) searches at the premises of some persons linked to Congress President Rahul Gandhi’s brother-in-law Robert Vadra as “blind vendetta” to settle political scores.

Addressing a press conference at the party headquarters here, Congress Rajya Sabha MP Abhishek Manu Singhvi said: “Facing a complete rout in the Assembly elections in the five states, the Modi government is back to its dirty tricks and malicious tactics.”

Targeting the Bharatiya Janata Party (BJP)-led Central government, he said the Modi government’s mask of anti-corruption crusader lies in shambles with successive scams getting uncovered over the last 54 months and zero action against fraudsters.

“Instead, the only tool which is being employed by the Modi government to hide its massive failures are mudslinging, muckraking and hatchet jobs by the dirty tricks department i.e. CBI or ED, to smear opposition leaders,” he said.

He said the illegal raids on the premises of Vadra and his associates is another episode of these “concerted conspiracies, blind vendetta acts and web of lies” to target the Congress.

His remarks came a day after the financial probe agency on Friday carried out searches at the premises of some persons linked to the firms of Vadra in connection with alleged commissions received by some people in defence deals. The searches were also carried out at the office of Skylight Hospitality in Sukhdev Vihar area of south Delhi.

Slamming the government, the Congress leader said: “All constitutional, legal and administrative norms are being thrown into a dustbin to target and tarnish an individual for sheer and petty political reasons.

He said the Central Bureau of Investigation, ED and Income Tax departments are acting as “slaves and bonded labours” dancing to the tunes of Prime Minister Narendra Modi.

Accusing the BJP of vilifying Vadra, Singhvi said: “In last 54 months, Modi government has let loose a criminal conspiracy to vilify, denigrate and malign Vadra to settle political scores.”

“As all else failed, Modi government has unleashed all its agencies including ED, CBI and Income Tax to victimize Vadra in an utterly malafide manner,” he said.

He also alleged that the ED officers who raided the premises of Vadra’s office and people linked to him had a single line brief to “flout all norms and harass”.

“Yesterday, in a brazen affront to the rule of law and to the Constitution, on the polling day, officers of ED from Jaipur and Delhi raided the office of Vadra at Sukhdev Vihar, New Delhi,” Singhvi said, adding that it continued till Saturday 4.30 a.m.

He said the residence of his associate, his sister and her in-laws at Noida were also raided – all without any FIR or search warrant. The residence of the associate’s sister was also raided. The raids have been carried out in a completely illegal fashion with no employee or lawyer being permitted to enter the premises.

Singhvi said that four employees were also illegally detained for this entire period.

He said that Vadra through his lawyer submitted the last two sets of documents running to over 600 pages to the ED on November 26 and December 5.

Singhvi said the ED officers are being used as personal slaves and political agents of the Modi government to take political revenge against opponents.