Businessmen live in fear and bankers are afraid to lend, the former PM wrote in The Hindu

Former Prime Minister Manmohan Singh has blasted the BJP’s handling of the economy, blaming the sharp downturn in GDP growth on the “palpable climate of fear in our society today” that has been created by the government.

The former Congress Prime Minister said many industrialists have told him they “live in fear of harassment by government authorities” and added that bankers are afraid to give out loans “for fear of retribution”.

Singh also said that “entrepreneurs are hesitant to put up fresh projects for fear of failure attributed to ulterior motives”.

Writing in The Hindu, Singh said: “There is a profound fear and distrust among people who act as agents of economic growth. When there is such distrust, it adversely impacts economic transactions in a society.”

He added: “This perilous state of fear, distrust and lack of confidence among citizens is the fundamental reason for our sharp economic slowdown.”

Singh noted that not only is nominal GDP growth riding at a 15-year low, unemployment is at a 45-year high. He also took aim at household consumption which is at a 40-year low and noted expansion in electricity generation at a 15-year low.

Singh said the economy had partly been hit because the BJP has undermined the country’s institutions like the media, judiciary and the regulatory and investigative authorities. “Aggrieved citizens find nowhere to go to air their grievances,” he said.

Singh, who was the Prime Minister for a decade to 2014, accused the government of “viewing everything through a tainted prism of suspicion and distrust”, and said it had created a situation where everything done by earlier governments was viewed negatively.

But “the root cause of this rupturing of our social fabric is the Modi government’s ‘mala fide unless proven otherwise' doctrine of governance,” Singh said. “This suspicion that every industrialist, banker, policymaker, regulator, entrepreneur and citizen is out to defraud the government has led to a complete breakdown of trust.” These factors, he said, have choked economic development with “bankers unable to lend, industrialists unable to invest and policymakers unable to act.”

He also slammed government moves like demonetisation, saying the government had “resorted to foolhardy moral-policing policies such as demonetisation, which have proved to be ill-thought-out and catastrophic.”

“The role of social trust in economic development has been well-documented, right from the times of Adam Smith,” Singh said. “The tearing of our social fabric of trust is the fountainhead of our current economic malaise,” he added.

The former Prime Minister said there was a very real danger that the current economic slowdown combined with rising inflation would lead to stagflation, from which it is very tough to exit.

He added that the government needed to take urgent steps to “restore consumption demand,” and revive “private investment through ‘social policy’.”

The country’s slowdown, Singh said, came at a time when it was well-positioned to capitalise on the deceleration of China’s economy and exports that have opened up a large trade opportunity for India to fulfil. India should aim to garner “an elephant’s share” of this trade opportunity, he said.

“India is now a $3-trillion global economic powerhouse driven largely by private enterprise. It is not a tiny command-and-control economy that can be bullied and directed at will,” he stated.

Prime Minister Narendra Modi should “cast aside his deep-rooted suspicion of industrialists and entrepreneurs,” and create trust in the society that could “revive the animal spirits” of the economy,” Singh concluded.