Subramanian Swamy: Collapsing Economy Will Eclipse Ayodhya Gains For BJP

In an interview with HuffPost India, Rajya Sabha lawmaker Subramanian Swamy said the poor state of India’s economy would offset the boost which the Ayodhya verdict has given the ruling-Bharatiya Janata Party (BJP) and its leader, 

Prime Minister Narendra Modi , under whose term the longest-running land dispute between Hindus and Muslims ended in victory for the Hindu parties. 

Swamy, who is known to publicly rebuke his own party, the BJP, and the Narendra Modi government ,  completed his PhD in economics from Harvard University , where he was guided by two Nobel laureates Simon Kuznets and Paul Samuelson. He also taught economics at Harvard. 

The former Janata Party leader, who has served as a Union Minister under the Chandra Shekhar and Narasimha Rao governments, called out the Modi government on the economy not long after it first came to power in 2014, slamming moves like demonetisation and the Goods and Services Tax . 

The 80-year-old lawmaker, who recently authored Reset: Regaining India’s Economic Legacy, believes the economic situation is so bad that it would cost the BJP the Jharkhand and Delhi Assembly elections. 

“Unemployment will supersede every other thing including the Ram Mandir,” he said. “But Modi doesn’t listen. He listens to people who do not tell him the truth.”

Edited excerpts: 

A political science professor from Lucknow University that I spoke with said the Ayodhya verdict is “everything for the BJP.” What do you think it means for the BJP? Votes?

Votes, yes. The first principle of votes is that the voter must be mobilised. It is the RSS (Rashtriya Swayamsevak Sangh ) and the VHP (Vishva Hindu Parishad ) workers that get the votes out. The BJP is now guaranteed an election machinery in a revitalised form for the elections. All they have to do is make speeches.

The general election is still four years away. Public memory fades pretty quickly. 

I will say that people are unhappy with the economic performance and think it’s not being taken seriously. We cannot see much tangible gains in the proportion of the time that Modi spends abroad in terms of results. This economy will have to be set right. Corruption has become a big issue in Jharkhand and this is going to affect us. The most honest and prominent senior minister Saryu Rai has been denied a ticket. The public does not understand this. If your plank is fighting corruption then you should be rewarding him, not penalising him. You might see us losing in Jharkhand and in Delhi. I don’t think the Ram wave will wipe that out. The worker will not be tomtoming it. 

The advantage of the Ayodhya verdict to the BJP will be offset by the poor economy? 

Yes, because we are now getting into the serious business of building the temple. So, there is no time for getting out on the streets, putting garlands, distributing sweets, organising rallies. The economy is the main thing. If you perform very well economically, it is not necessary you will win. Why? Well, Narasimha Rao was an example. Even (Atal Bihari) Vajpayee was an example. All the party workers sat at home and said okay, you have your “India Shining,” but you have done nothing for the Ram Janmabhoomi , we are sitting at home. But if the economy is so bad that a guy doesn’t know how to pay his child’s school fees or whether his bank is going to collapse. We have reached that stage of the economy. We are on the verge of a collapse. Some miracle can change that. Good policies could change that. But I don’t see any good policies coming. I’m saying it’s very hard, I’m not saying impossible, to reverse defeat in Delhi and Jharkhand ( Assembly elections). We have some time to fix Delhi if we put a good chief minister’s candidate. If the present governor of Assam (Jagdish Mukhi) is brought in as the chief ministerial candidate then we will win for sure. 

To be clear, you are saying the advantage of the Ayodhya verdict would be offset by the poor state of the economy. 

It would be offset by the economy if it comes to mass unemployment. The consequence of banks folding up, the consequence of cutting down of shifts in a factory, all these will lead to layoffs. Lay-offs is unemployment. Unemployment will supersede every other thing including the Ram Mandir. 

You believe the BJP will see the fallout of the poor economy in Jharkhand and Delhi Assembly elections?

Yes. 

When we spoke in May, you said that you wanted to be Finance Minister in the next government. 

Yes.

You are publicly critical of your own party and PM Modi. Don’t you have to play the political game to get the position?

No. It’s not the political game. I believe the party committed in the 2014 election to three things: furthering Hindutva, fighting corruption, and developmental economics. There is no vikas taking place. I’ve been writing this since 2015, not now. We are heading for a tailspin and soon a crash. But Modi doesn’t listen. He listens to people who do not tell him the truth. All the people that he has given high positions to do not tell him the truth. 

It’s probably you saying these things that makes it hard for the PM to make you FM?

I should have been made in 2014. I wasn’t saying these things in 2014. Now, he doesn’t want me. He doesn’t want any minister to talk back to him, let alone in public, but in private cabinet meetings too. Which are the ministers that talk to him? I’m built this way. I had no problem working with Chandra Shekhar. I had no problem working with Narasimha Rao. I had no problem working with Morarji Desai, I had no problem working with Rajiv Gandhi and building a coalition government (Swamy is believed to have been instrumental in getting Rajiv Gandhi to support Chandra Shekhar for PM).  

What do you think of Nirmala Sitharaman  as Finance Minister?

Same problem. She does not know any economics. If you see the press conferences, she is handing the mic to civil servants to answer.  What is the problem in the country today? Poor demand. Supply is not the problem. But what did she do? She relaxes taxes for corporates. Corporates are flushed with supply. They will just use it to write off their debts. That is what they have done. There is no improvement. You should abolish income tax instead so people can go out and spend. People cannot buy biscuits . Go and speak to Britannia . 

Three ways for getting the economy on the road to recovery. 

First way is to bring some cheer into the middle class. Abolish income tax. There is depression and pessimism in the middle class and they are a very powerful part… they have influence even through word of mouth. You will see dancing on the streets if that happens.  Second, say that small and medium-sized industries will not have to pay more than 6% interest rates on loans. At the same time, fixed deposit rates for savings should be raised to 9% from the present 6% of the rate of interest for taking loans. Third is that you print notes and start a massive public works program like roads, turnpikes, houses, that sort of thing. 

In your book, you write that BJP should give an alternative ideological thrust to economic policy. What do you mean?

Our society was structured on the principle that the most learned and the least wealthy person should be called a Brahmin. Gyani and tyagi as they say. If you keep talking about profit maximisation, then you are back to the same one dimensional society of the United States and the western world. I would like everyone to be persuaded that money beyond their comfortable normal life should be given to philanthropy. Only then will we give you any status. But here it’s all become greed. Look at the money being spent on weddings. It’s absurd. People want to show off — my wedding was better than my neighbours. It’s in an appendix chapter where I’ve called it integral humanism. 

The small and medium-sized industries should be given the maximum assistance to stand on their feet. Low interest rates. Today, the internet rates are 14% to 15%. It’s cruel. They have already crumbled. Similarly, corporates should be told that if you build schools, hospitals, pay for the tuition of your employees children, they will be given tax exemptions. We should move away from government fixing goals to incentives. The market should function in a framework where no one can wipe others out. We should not let monopolies to develop through competition. 

In the book, you write the PM relies on friends and ministers who do not tell him the truth about the economy. Why don’t they tell him?

Because he will sack them.

Have you tried telling him?

Why should I advise him when he is not ready to listen. The best thing I do is write a letter. I’ve not asked for an appointment from him for the past three and a half years.

You said the economy is on the verge of collapse. Why do you say that?

A trigger mechanism exists in every economy, and it takes just two banks to collapse , and many of them are on the verge of collapse. Someone recently asked me is my money safe in the bank? Many people ask me this question. It’s all subjective. Now, what if everyone goes to the banks and says give me my money. The bank can’t. Every time the bank takes one rupee, they lend out eight. They create eight new accounts of one rupee each. They collapse. That’s called a run on the bank. I can’t predict when that will happen.

The other thing that worries me is that everything is negative, but the stock market is going up. So, what’s happening? People are either bringing money from abroad through that corrupt mechanism called participatory notes, or they are not putting their money in the bank and in fixed deposits. They have been cheated in ponzi schemes, so they are putting in the stock market. The stock market is flushed with funds but the country is not.  Find out what the shortfall in GST is. GST is another crazy scheme which should never have been brought. The paperwork involved is unbelievable. 

The economy is suffering, but the government is also trying to conceal it. Journalist Somesh Jha of The Business Standard, for instance, reported that the government has tried to suppress data which showed that the unemployment figures were at an all time low. 

This is not Modi doing it. It started with (Arun) Jaitely. I’ve mentioned ‘spin’ several times in my book. All spin.

Another report says consumer spending has fallen to its lowest in the last four decades. Why is the government not making this public. 

Why not? When they think spin is all that works and media people comply. How many of you media people have called me to debate with a government spokesperson. By the way, my rebellion is a sign that BJP is a democratic party. Nobody in the Congress can do it. Why don’t you send me a copy of both reports. I’ll add a covering note and send them to the PM and ask are you aware of this. 

The issue is suppression of data… 

But the prime minister knows nothing about it. He is told wonderful growth rate. Do you know what the real growth rate today is? They are saying that it is coming down to 4.8%. I’m saying it is 1.5%. I’m an expert on index number theory, which is all about the prices on which you should calculate GDP. 

Are we calculating the GDP correctly?

No. Are we calculating the index numbers correctly? No. Why? Either we are ignorant or it makes us happy to see better figures. This atmospherics problem is what is hitting. 

How should we be calculating the GDP?

It’s a technical subject. When we took over the financial base year was 2003-2004. At present, it is  2011-12. If you bring it up and start evaluating at 2017-18 prices, without your doing any work, your growth rate will also go up, but so will also the pre-2011 data. But that you don’t publish. 

No, you say this year the growth rate is 7%. If you calculate at current prices, you can get it higher again. Prime Minister said $5 trillion by 2024. That means doubling in five years. Which means what growth rate? 14.4%.  Are you growing at 14.4%? And today, if you are going to go from your present target of $2.7 trillion to 5 trillion, you are at 18% growth rate. All these numbers are known to people, they are known to our economists also, but they are under pressure to produce pleasing data. 

What did you think of Finance Minister Nirmala Sitharaman blaming millennials not buying cars for the slump in the auto industry?

It’s like a Tale of Two Cities reworked. 

But the Maruti chairman RC Bhargava said she had a point. 

He can say anything. It was a stupid thing for her to say. They must think people to be idiots that they would accept such a thing. All kinds of crazy things are being said.