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PM Should Throw Out RBI Chief, Other ‘American’ Advisors

This is a unique situation after 33 years — an absolute majority government which is party-wise united, and there’s no conflict between the government and the party. There are no rival centres of power. That’s a great achievement

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Prime Minister Narendra Modi’s two years in government is rich with achievements. The Opposition has not been able to raise a single issue of corruption against Modi personally, or arising out of his government actions. That is unprecedented in the last 30 years of our politics. Every government I know faced some allegations or the other. Even Morarji Desai — though he was personally very honest — had an issue concerning his son Kanti Desai.

Secondly, the Prime Minister has slowly but surely grown from a complete novice in international affairs to reach a stage within two years of office to be invited by the world’s superpower to address a Joint session of the US Congress. In substance nothing; but in terms of flavour and in essence it’s the ultimate recognition that world leaders crave for.

An important achievement for Modi has been that his party, for all its reverses in some elections, has remained united. In realpolitik too, the BJP, known for its Hindutva, has managed to have an alliance government with the most hardline Islamist party in Kashmir. For the first time in our history since 1947, ex-Jan Sangh and now BJP leaders have become deputy chief ministers and ministers in Srinagar.

In our relations with Pakistan, if one now looks at cross-border firing, it has come down to zero. That’s not because he’s been nice to Pakistan or because he had tea with Pakistan Prime Minister Nawaz Sharif. In his instructions, he has said that if one bullet is fired on you, retaliate. The military says it’s for the first time it has been given a free hand. As a consequence, one finds there is hardly any cross-border firing. This is a major achievement.

I find because he’s from a humble background, he’s been acceptable across all castes. We never had this in the past. The personal faith in the PM is now even acknowledged by pollsters — they may have a poor opinion of the party (because of the economic performance); but his personal integrity, personal acceptability seems to have grown to a new high.

And then there’s no dispute whatsoever about his leadership. His leadership is taken as granted. They may even complain about individual ministers or MPs but nobody complains about him. It’s not because they are afraid of him. He speaks openly, there are open discussions in the Parliamentary party meetings. He’s not reclusive. You see that hardly anybody can meet Sonia Gandhi, but he’s meeting people all the time.

This is a unique situation after 33 years — an absolute majority government which is party-wise united, and there’s no conflict between the government and the party. There are no rival centres of power. That’s a great achievement.

There are economic challenges though. The weakest spot of the Modi government, in fact, is the economic performance. But that is rectifiable.

I won’t say that Modi is a hesitant or incremental reformer. Let’s understand — he’s not trained as an economist; he’s a political scientist. He defers to experts. And these experts are all foreign-made! I think somebody convinced him or convinced the Finance Minister that these people who come from IMF-World Bank backgrounds should be retained. I don’t know the reason.

In my opinion, they are bureaucrats of international organisations and they have no dynamism at all.

What you need in economic policy is a political craftsmanship for hard decisions. And decisions which are in favour of the people should not have a gestation lag. So you must do things which people immediately see — yes, there’s a change. You can’t say some time in future, big railways will come from Japan. You can’t sell dreams anymore.

You have to take steps which will have immediate effects. For example, one of the biggest problems we have today is a high interest rate. Raghuram Rajan gives textbook — that too written in Chicago – prescriptions. He doesn’t understand that in their country they can raise a quarter per cent interest rate. For us, it’s life and death. The prime lending rate is already 12 per cent. And then you go on raising interest rates, and the small and medium industries are on the verge of collapse.

We forget they are the ones that give maximum employment, particularly to the semi-skilled. We have no real problem with fully skilled people. Providing unskilled and semi-skilled people employment can only come from small and medium enterprises. They are suffering from a capital crunch.

We should kick out the RBI governor. His term is ending in September. But why wait till September? He’s unfit for India. His prescription is like that of a doctor who sees a patient in high fever and says that the only way I can bring down the temperature is to kill him. The only way you can bring down inflation is to kill the industry.

I think he should be sacked. And also Chief Economic Advisor (CEA) Arvind Subramanian and others like him who have come from the US, and have green cards. One foot in America, one foot here. We can’t have such people as advisors. We have got a lot of alternative talent in our own country.

You must motivate people to save more. But with their present salaries they can’t. So it is necessary that as a politico-economic measure we abolish income tax. Who pays this tax? Only 1 per cent of the population, the professional class, which is the chattering class. They are the unhappy ones today.

Again, why was tax imposed on the jewellery makers? They were ready to pay more revenue through the VAT route. But you put an excise tax which means the excise inspector’s raj. The main problem we face in the execution of economic policy is on account of the baggage we have inherited from the UPA in terms of the personnel. This has to change; otherwise there is no hope.

(As told to Suman K. Jha)

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Subramanian Swamy

The author is Economist, BJP leader & former Union cabinet minister

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