Monetary measures will have effect in about 6 months: FM

There was no applause for Finance Minister P Chidambaram when he spoke to Congress spokespersons summoned to Delhi by party president Sonia Gandhi to explain the economic issues of inflation management.

Not that the finance minister expected plaudits. He simplified the circumstances in which different fiscal and monetary measures had been taken and what to expect.

“We have reduced duties and taxes even after the Budget to control the inflation. Post-budget tax cuts have resulted in a loss of revenue amounting to Rs 29,665 crore. We can’t cut more taxes.”

On the issue of monetary measures, Chidambaram said “Reserve Bank of India has tightened the credit supply by hiking the CRR and the Repo rates. Credit growth is currently 24 per cent. We want to bring it down to 20 per cent.”

The finance minister also supported the RBI’s recent decisions and said, “These measures will certainly yield results but it takes time for monetary measures to have effect. It will take another six to nine months to see the effects of the monetary measures.”

He pointed out that the CRR has been revised 13 times since 2007.

The finance minister has been often criticised even within his own party for the benefits of the growth rate not trickling down to the ‘aam aadmi’.

In his explanation, Chidambaram said: “If you ask me, has the 9 per cent growth benefited the common people, my answer would be both yes and no. It’s a mixed answer. Where there is good governance, there are effects. Where there is lack of good governance, there the results haven’t shown.”

He cited the example of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to drive home his point.

Chidambaram also pointed out to the spokespersons that the states had never had a bigger share of taxes, grants and loans pie before.

“The consolidated fiscal deficit of the states has come down to just 2 per cent. During the NDA rule, the tax to GDP ratio grew from 9.1 per cent to 9.2 per cent in six years. During our period, it has grown from 9.2 per cent to 13 per cent. The states never had so much money before. Even if Congress chief ministers tell you the opposite, don’t believe them,” he told party colleagues.

There was no applause.