EVEN in the grim news there was something welcoming when Finance Minister AMA Muhith finally said achieving the targeted 7 percent growth might not be possible.
Not that Muhith said anything that we had not perceived earlier. The way the economy was rolling, it was evident that not all was going well and that we would end up with a low growth scenario. Inam Ahmed writes in The Daily Star.
But till now he was steadfastly denying anything wrong in the economy. With him all the cabinet ministers including the prime minister herself jumped on the bandwagon of denial. They drew a rosy picture of the economy while wiser heads cringed.
But finally the finance minister admitted, or should we rather say recognised, that the economy is on a downslide.
This is a relief statement not because “bad news is good news”. But because we have a proper and official assessment of the situation. We are no longer acting the ostrich. This means we can now plan for a recovery and make policy decisions.
Amidst everything, he deserves thanks for admitting the reality. More so because this is not the political culture of the day to say that things are not in their right shapes. Rather political leaders fall into the Goebbelian wisdom that you deny and keep on telling lies until everyone believes them (one may well recall how the political leadership once dealt with the August 21 grenade attack or the Bangla Bhai syndrome).
The issues that the finance minister mentioned as putting pressure on the economy are well known.
Of course investment is down, no matter how much the cabinet ministers deny this. All we saw in the investment field is the inflow of machinery for power plants.
Of course subsidies are killing us. And much of this can be attributed to costly rental power projects, no matter how much the prime minister defends them as necessary.
True, inflation internationally is high, but that does not explain our situation because our figures are much higher than the international ones or even Indian figures. In fact, worldwide inflation is dropping fast. India recorded the lowest inflation in four years in December.
But in our case, we borrowed recklessly, we let credit growth go out of control. And when a lot of money chases too little goods, prices are bound to go up. When you have dollar shortage, your imports will be costly and that would mean slopping some more inflation into the basket.
And now inflation has gone up to such a level that it is going to affect the asset and liability of the financial sector.
All these warnings had been given before by economists and analyses of this newspaper. But the policymakers were found to be basking in the glory of a mirage. Just as they have been in the case of the stockmarket too. The results, as we see through the index and trading pattern of the bourses, are the same.
So one hard lesson from this whole affair is that with the economy you do not gain by misinformation or denial. Economy is not politics after all, although one affects the other. A good economy will always give a good political footing to the government.
But now that Muhith has come out straight with a realistic picture of the economy, one could expect that he will immediately embark on a corrective mode. And how much painful they may be, this statement will help him make tough political decisions.