MUMBAI (Reuters) - India's former prime minister Manmohan Singh criticized his successor Narendra Modi's government in a rare interview, saying it has failed to capitalize on lower commodity prices to propel growth and is inconsistent in its policy towards neighboring Pakistan.
Speaking to the India Today magazine, Singh said Modi's government should use improving fiscal balances to raise investment in the economy and increase the availability of credit to businesses.
"In the hands of a purposeful government, this could be an opportunity to step up investment in the economy in a big way," said Singh, who left office after a 2014 election loss.
Singh, regarded as the architect of economic reforms that led to years of rapid growth, said the government has not been able to take advantage of falling oil and commodity prices that have lowered India's import bill.
Sharp falls in import prices have reduced the trade deficit, raising hopes that it will boost economic activity. But turbo charged growth figures have been criticized by many analysts for giving too flattering a view.
The economy expanded 7.3 percent in the quarter through December, but consumer inflation inched up unexpectedly last month and capital goods production, a proxy for investments, fell nearly 20 percent in December.
Finance Minister Arun Jaitley wants to present a credible budget on Feb. 29, people involved in the process say, but the government may end up breaking its budget deficit targets to stimulate demand.
In a rebuttal on his website and social media accounts, Jaitley blamed Singh's administration for mismanaging the economy, adding that the opposition Congress has been unwilling to support reforms in parliament.
"Both the Parliamentary Affairs Minister and myself have discussed the GST with every senior Congress leader in Parliament," he said, responding to Singh's criticism that the government has not consulted the opposition.
The proposed goods and services tax (GST), India's biggest revenue shake-up since independence in 1947, has been stuck in the upper house where it needs Congress' support to make it a law.
Singh also said Modi should focus on improving relations with neighboring countries, adding that the government had not succeeded at making headway with arch-rival Pakistan, which India accuses of supporting insurgents across their shared border.
"Certainly relations with major powers have improved... But I would say that the real test of foreign policy is in the handling of your neighbors. And here I would say that the Modi government's handling of Pakistan is inconsistent," 83-year old Singh told the magazine.
"It has been one step forward, two steps back."
India and Pakistan have fought three wars since independence and partition in 1947, two over Kashmir. Their disputed frontier is one of the world's most heavily militarized regions. Border clashes and incursions pose a constant risk of escalation.
Singh, an Oxbridge-educated economist, was credited as finance minister in 1991 for reforms that opened up the economy. But his legacy is marred by his final term marked by corruption scandals, ballooning inflation and slowing economic growth.
Reporting by Himank Sharma; Editing by Michael Perry and Hugh Lawson