Former disinvestment minister Arun Shourie describes the current economic situation as the result of policy paralysis and says the food security bill “must be stopped” to restore investor confidence and bring the economy back on track.
“It should start with fiscal discipline,” the former NDA minister told The Indian Express today in response to queries. “There should be clear signals for fiscal responsibility. That means no new announcement either by the prime minister or by the finance minister because their words are not being believed. The food security bill must be stopped forthwith, if you want investors to believe you are serious on this [fiscal discipline] count.”
Asked about opposition parties (including the BJP) supporting the bill with suggestions for more food guarantees, he said: “I am strongly opposed to going along [with the government] like this on reservations, NREGA and food security.”
About the economic situation, he said, “It is an economic consequence of political paralysis. For the last five years there has been no competence at all. The core competence of Dr Singh [the Prime Minister] has been to pass the blame to others, whether it is the 2G scam or the coal block allocations. Now, in the current situation, the world crisis is being blamed.”
He called it an outcome of domestic policies and said it will take four to five years before the economy can be brought back on track.
“The untrammelled fiscal deficit since 2008 is the reason. Budgetary deficits sustained over years are now getting reflected in the current account deficit.,” he said. “When [BJP leader] Yashwant Sinha and I pointed this out then, they justified it as stimulus. Now, we have landed in a predicted cycle where the rupee’s devaluation is leading to higher inflation, which means higher interests that lead to sacrificing growth.”
He stressed that expecting the RBI to control the situation would be too much and suggested a two-pronged approach to instil fiscal discipline and restore investor confidence.
“When the dam has burst, the RBI cannot do much. Monetary policy cannot fight these challenges because any attempt to hold the rupee will be beaten in its tracks by speculators. There is no instant remedy. It will take four to five years to get it back on track,”