‘The economy is out of control’

Bureaucrat-turned-politician Yashwant Sinha has been in active politics for the last three decades. He had held crucial portfolios like finance and external affairs in the previous BJP-led NDA government. Mr Sinha, 76, has had a long innings in the Indian Administrative Service as well and currently, he represents the Hazaribagh constituency of Jharkhand in the Lok Sabha. In an interview with Sri Krishna, Mr Sinha spoke on a host of national and international issues. Excerpts:

As a former finance minister, how do you look at the country’s economic situation?
The economic situation is critical. If you look at indices like growth rate, interest rate, inflation, Current Account Deficit (CAD) and fiscal deficit, they are much worse today than they were at the beginning of this century and certainly much worse than they were in 2007-08. It appears as if the government has lost control over the economy. The central issue in the economy today is the rate of inflation. If you can control inflation, you can control interest rates. I cannot blame anybody else except the government…The government was so confident that they thought nothing could go wrong.

What is your view on the new RBI Governor Raghuram Rajan?
He is a very qualified person, a competent person. However, the RBI and the government have not been able to get along very well in the past few years. I hope the situation will improve with the arrival of the new Governor.

The FM blames the international scenario for the current economic crisis and Prime Minister Manmohan Singh says the good monsoon will improve things.

This is a counsel of despair. The rain God is not going to listen to the Prime Minister. But, yes, we have been lucky that we had a good monsoon and it certainly will have some impact. But, you need a whole lot of other factors to translate demand into production.
The other is the global factor and there, I would like to refer to what former RBI Governor Subba Rao had said: that when the CAD was building up, we should have taken steps to control it, but we didn’t.

The present Finance Minister P Chidambaram seems to have blamed his predecessor (Pranab Mukherjee) for the current situation.
It is in very poor taste, especially when you go into details and discover for yourself that the present finance minister is entirely wrong in blaming his predecessor. Fiscal expansion in the name of a stimulus package was provided for when Chidambaram was Finance Minister, but was given when Pranab Mukherjee took over as Finance Minister in January 2009. The fiscal expansion had an impact on inflation.
The second point is that whatever important steps the FM takes is always done…not merely with the knowledge of the PM but also his fullest approval. The retrospective tax and the incorporation of GAAR chapter in the Finance Bill by Mr Mukherjee was clearly done with the PM&’s approval and the PM is party to it. He (the PM) cannot just sit and listen to the criticism of Pranab Mukherjee because this criticism also pertains to him.

Given that you were an external affairs minister, what do you think about the government&’s handling of relations with our neighbours?

The neighbourhood policy of this government is in a shambles. When I was the external affairs minister under Prime Minister Vajpayee, he told me I must pay greatest attention to neighbours and the first country I visited as external affairs minister was Maldives. I visited all countries in the neighbourhood before I set out to other countries. The neighbourhood is very important and your policies are tested more here than in distant lands. Now take the case of Bangladesh. We want a land boundary agreement. We want to remove all glitches. It has to be give and take. If you don’t have land to give, you give something else. Now the government has negotiated an agreement that appears to many as one-sided.
They should have taken the Opposition parties on board before the PM went (to Dhaka) to finalise the boundary agreement. It was a done deal by the time they started talking to Opposition parties and therefore we find it difficult to support it. Nepal has not been able to come up with a Constitution. The Chief Justice is also the Prime Minister. I feel the Government of India&’s policy towards Nepal has been a total failure. Their coordinates are not right and they don’t know what they are up against and are therefore making one mistake after another. Nepal is a sovereign and independent country and it must be treated as such.
But, we cannot also forget the fact that we have an open border with Nepal and what happens in Nepal has an impact on India. Nepal is a very important partner and we have messed up our Nepal policy.
With regard to Bhutan, I wonder why we stopped giving them subsidy on petroleum products. Fortunately, now a new PM has come in Bhutan and I hope these differences are now over.
Our Sri Lankan policy also has been in the doldrums for long and unfortunately we have reached a stage where the Sri Lankan government does not value us. Same is the case with Maldives, Pakistan, Myanmar, Afghanistan and Iran…we seem to have messed up our relationship with these countries.

How do you look at Sino-Indian relations in view of the increasing Chinese incursions into Indian territory?
They (the Chinese) were doing so even earlier, but not to the extent it is now. It appears as though they are challenging us. Our external affairs minister (Salman Khurshid) travels to Beijing and doesn’t raise these issues with the Chinese. The Chinese are experts at
psychological warfare. There are a number of issues that we don’t raise—we don’t put pressure on China with regard to human rights violations in Tibet, disturbance over the South China Sea and exploration of minerals on the high seas. The Chinese have realised that the Government of India is not in a position to respond to their high-handedness, so they are going about merrily with it.

What do you make of the proposed upcoming India-Pakistan summit-level talks?
Since 2004, we have had a series of summits, but where are we? Time is ripe to tell Pakistan that terror and talks cannot go hand in hand. There is enough evidence of terror training camps in Pakistan and we know what Hafeez Sayeed and Dawood Ibrahim are doing in Pakistan but they are completely unconcerned. In my considered opinion, this is not the time for a summit with Pakistan.