Why India is facing problems today

On Tuesday, P Chidambaram talked of certain decisions taken during 2009-11 that contributed to India's problems today. He's right, although it is admittedly difficult for the finance minister to elaborate this, given the proprieties of his office. The fact is PranabMukherjee, who was finance minister in UPA-II till August 2012, left an economy fairly deeply in trouble. These columns had on many occasions critiqued many of Mukherjee's policies, which ranged from not taking away tax giveaways when growth had picked up post the 2008 crisis to creating a tax regime that frightened investors. Plus, he pretty much halted any structural reform. There is no doubting Mukherjee's abilities as a problem-solving politician, and he has already proved to be an interestingly different and active President. But as finance minister whose job was to maintain growth and check deficits, Mukherjee's record is patchy. Perhaps he had too much on his plate: he headed assorted ministerial committees, did constant political firefighting. Perhaps the entire government leadership made a tactical error: the finance minister of a $2-trillion economy should be left to do his critical job.

It was Mukherjee's decision, however, to initiate wholesale personnel changes in North Block. The accumulated policy learning of post-reforms years were not available to him. It was also Mukherjee's political instinct to stick with populist measures for as long as one could - he certainly never came across as a finance minister itching to get major reforms through. The Direct Taxes Code and the goods and services tax both lost steam under him. Someone of his stature and with his networking skills could surely have done better. On demitting office, Mukherjee had said he may have made a couple of mistakes. More than a couple of mistakes, actually.

Chidambaram has tried, tried consistently and occasionally successfully, and during a period when too many things went simultaneously wrong with the economy. He is credible on fiscal deficit. On the rupee, frankly, the less micro interventions the government does, the better. He's right in saying there's no need to panic, and that the cycle will turn. It's also right to say India would have been in a far better position had 2009-12 had not become the lost years of economic policy.