Rahul Gandhi tweeted a video message
on 17th July explaining the reasons why Chinese chose to violate Line of Actual Control (LAC) at this moment. Media has extensively reported Rahul Gandhi’s statements without checking its veracity. In the video, Rahul Gandhi says that “China has chosen to violate LAC with India at this particular time” and “act in an aggressive manner” because India’s economy is “disturbed and disrupted”. He has also accused India’s Foreign Policy failures and strained relations with its neighbours and other countries for China’s aggression. It is important to undertake critical review of this statement and understand whether his claims make sense or not.
Blaming PM Modi and BJP Government for a weakened economy is a flawed statement. There is no doubt that the economy is facing challenges. However, this is not an absolute truth. Economic performance of the BJP Government is a mixed bag. While the Indian economy has strengthen and grown from where Congress led UPA Government left it in 2014, the country also carries a baggage of the mistakes of the UPA Government.
Lies about Economy
International Monetary Fund published Associate Editor and Chief Economics Commentator of Financial Times – Martin Wolf’s review of Montek Singh Ahluwalia’s book
“Backstage: The Story Behind India’s High Growth Years” for IMF, and writes: Why has growth decelerated? Two complementary explanations emerge from the book. One is that the growth was in part a result of an unsustainable credit boom in the private sector. That left a legacy of bankrupt companies and weakened financial institutions — the “twin-balance-sheet problem.” Another is that the initial reforms, predominantly liberalization following the dismantling of the “License Raj,” had by then done all they could do. India needed second-generation reforms, notably of its institutions. But, as Ahluwalia writes, “we did not pay enough attention to the need to build institutions that would promote good governance.” Former RBI Governor Dr. Raghuram Rajan in his Note to the Parliamentary Estimates Committee slammed Congress led UPA Government for NPA crisis
and castigated Congress for blaming PM Modi
on this issue, calling Congress’ accusations bunkum.
Thanks to NPA laden banks and borrowers diverting bank loans, the BJP Government inherited a weak financial system. This restricted the Government to ignite economic growth by funding private sector and infrastructure projects and thereby kick starting investment cycle. To resolve this issue and recover monies from willful defaulters BJP Government legislated Insolvency and Bankruptcy Code (IBC). In the aforementioned note, Dr. Rajan appreciated PM Modi for enacting IBC stating that “Until the Bankruptcy Code was enacted, promoters never believed they were under serious threat of losing their firms. Even after it was enacted, some still are playing the process, hoping to regain control though a proxy bidder, at a much lower price.” Dr. Rajan goes on to state
that “The Bankruptcy Code is being tested by the large promoters, with continuous and sometimes frivolous appeals. It is very important that the integrity of the process be maintained, and bankruptcy resolution be speedy, without the promoter inserting a bid by an associate at the auction, and acquiring the firm at a bargain-basement price.” The author has reviewed how IBC is a revolutionary reform and explained how the BJP Government has tried to block all loopholes to make the law effective in his commentary.
So Rahul Gandhi blaming the current Government for economic crisis it inherited due to acts of omission and commission by Congress led UPA Government headed by an Economist Prime Minister is outright sinister. This is because, despite all these challenges, BJP Government has managed to usher economic growth. India ranked 10th largest economy in PPP terms in 2014, when Dr. Singh’s Government demitted office. In 2019, India ranked 3rd largest economy in PPP terms, displacing developed economies like Japan, Germany, the United Kingdon, France, Brazil, Italy, and Russia. During this period, India’s ranking on per capita income improved from 169th
in global ranking to 126th
in 2019. As per World Bank database, India’s per capital GDP grew from US$ 1,574 in 2014 to US$ 2,104
in 2019. It is surprising that Rahul Gandhi has chosen to ignore these performance indicators that prove economic growth of India under PM Modi’s leadership. This is despite all baggage of bad economic management during Congress led UPA tenure that Modi inherited, and India is still struggling to resolve those legacy issues.
BJP Government is accused of hurting economy by hasty and unplanned introduction of Goods and Service Tax (GST). This is partially correct, and India’s Principal Economic Advisor Mr. Sanjeev Sanyal is on record stating that we had to introduce it instead of delaying the introduction, and then continuously work on improvising the same. It was taunted that introduction of GST would be inflationary and hurt the economy. Historically, all countries that introduced GST faced inflationary pressures on implementation of GST. On the contrary, India did not face inflationary pressures after introduction of GST. Prices of 50% of the goods in Consumer Price Index (CPI) basket remained unchanged, 30% of the CPI basket saw a reduction in prices, and 20% of the CPI basket saw an increase
. CII Survey observed
that GST led to improved efficiency and moderated retail inflation.
If, according to Rahul Gandhi, economy was hurt due to introduction of GST, how did Indian economy continue to grow, becoming the 3rd largest economy? If, according to Rahul Gandhi, GST was a disaster, why did people of the country reelect Modi Government with a resounding majority?
This is just a brief summary of economic performance of BJP Government under PM Modi’s leadership. It helps us debunk misinformation spread and false accusations leveled by Rahul Gandhi on PM Modi that China chose this time to violate LAC because India is economically weaker due to 6 years of PM Modi’s economic mismanagement.
Lies about Defence and Security
In a democracy, it is natural for political parties to acts as rivals in the political arena. However, in all matured democracies, there is a bipartisan consensus on issues relating to national security. All parties sink their rivalries and differences in such a situation. Unfortunately, Congress has taken a very adversarial stand on this issue, and instead of criticizing China Congress is targeting BJP to win political brownie points.
Again if we have to undertake a fact check of Rahul Gandhi’s logic that China violates LAC because India’s economy has weakened, then it raises questions on economic performance of Congress led UPA Government under an Economist Prime Minister. As per the damning report submitted by the National Security Advisory Board to the Prime Minister Dr. Manmohan Singh's Office on 12th August, 2013, China had occupied 640 sq kms of Indian Territory
in Depsang, Chumar, and Pangong Tso Sectors in Ladakh. Atleast India did not cede territory or and control to China, be it in Doklam Sector in 2017 or now in Ladakh Sector.
May be Rahul Gandhi would be able to explain why and how India ceded 640 sq kms of its territory to China in 2013, if Congress was managing the economy very well, as per their own claims.
(Sumeet Mehta is a Chartered Accountant and Financial Consultant, author of “Diagnosing GST for Doctors” published by CNBC Books18 and commentator on economic and financial matters. He tweets from @sumeetnmehta)