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Common chord in split opinion

New Delhi, Jan. 30: Finance minister P. Chidambaram today started a slugfest with fellow Supreme Court lawyer and BJP leader Arun Jaitley over Modinomics.

Chidambaram has three questions: Why did Madhya Pradesh and Gujarat oppose GST and thwart a consensus? Why did Narendra Modi write to the Prime Minister opposing the Food Security Act? If Indian-owned multi-brand retail doesn’t destroy jobs, how will foreign money in retail harm jobs?

Though the BJP has opposed GST, its resistance has less to do with concrete economic logic and more aimed at scuttling a move that can give the Congress political brownie points.

The BJP-ruled states of Gujarat, Chhattisgarh and Madhya Pradesh have been resisting the goods and services tax (GST) that aims to scrap a large number of state levies in favour of a single market with a common tax on a produce. Such an all-India tax can add 1-2 per cent to the country’s GDP growth.

In fact, BJP leaders such as Yashwant Sinha were involved in the framing of VAT, a precursor to GST.

Moreover, an alternative suggested by yoga guru Ramdev and supported by Modi to replace all taxes with a banking transaction tax has been rejected by BJP leaders such as Sinha and Jaitley.

These leaders know that if the BJP comes to power, it will have to follow many, if not most, of the reforms tabled by the Congress.

Similarly, many BJP-ruled states have been working on food security. Yet, the BJP leaders admitted that they were opposed to the bill as they felt the Congress was trying to win votes through the move.

Earlier, Jaitley had taken on Chidambaram for his comment that Narendra Modi’s knowledge of economics could be written on the “backside of a postal stamp”. Jaitley had said this statement came from a “keen student of economics who can be credited with pushing India’s GDP (gross domestic product) growth to below 5 per cent”.

Foreign direct investment in retail is perhaps the only issue on which the BJP has serious opposition.

Retail traders are believed to form a large chunk of the BJP’s traditional urban base and upsetting them by allowing foreign retailers to set up shop in India could be politically disastrous for the party.

Consequently, it has adopted a policy, which Chidambaram has been trying to pick on: turn a Nelson’s eye to local big businesses setting up retail chains that can also affect small retailers, while oppose the more emotionally charged issue of allowing FDI in retail trade.

In the battle over growth numbers (see chart), neither party has anything exceptional to flaunt. Last year, Chidambaram tried to show that the UPA government had performed better than the NDA: “The average for the six-year period (of NDA rule from 1998-99 to 2003-04) was 6 per cent. In contrast, the average for UPA-I was 8.4 per cent. For the first four years of UPA-II, the average has been 7.3 per cent.”

Modi had earlier said that the NDA signed off 2004 with a GDP growth rate of 8.4 per cent, while the UPA will end this year with growth of less than 5 per cent.

Of course, in politics leaders choose to bandy about the figures they like.

Economists point out that very often action taken in one period shows its results in the next. Consequently, despite a burst of reforms during the Congress rule of 1991-96, when Manmohan Singh stewarded the economy, the average GDP growth was 5.2 per cent. Without doing much, the United Front government under Deve Gowda posted a GDP growth rate of 8 per cent in 1996-97.

Similarly, the impact of the infrastructure projects cleared by the NDA was felt during the first term of the UPA.