Govt wasted huge opportunity to address key issues in the Budget : Chidambaram

'It is like a car that is running on two wheels. At least two wheels, the private investment and exports wheels are flat, perhaps punctured,' he said about Budget 2016

Government has wasted massive opportunity in addressing issues pertaining to rural and farm distress, declining exports and private investment and getting the fiscal figures right, former Union Finance Minister P Chidambaram said. 

He said the government could have come out with dramatic measures in Union Budget 2016 equal to a loan waiver to save the country from rural distress. 

Addressing the students of Loyola Institute of Business Administration (LIBA) in an analysis on the Budget 2016-17, he said considering this is the third budget ahead only one more budget, the government could have taken bolder steps to address important issues. 

 

"It is like a car that is running on two wheels. At least two wheels - the private investment and exports wheels - are flat, perhaps there is puncture. But this car is supposed to be running at a speed of 7.5% a year, even with two wheels are completely flat," he said on the claimed growth rate of 7.5%.

The government has also had a big bonanza in terms of lower oil prices where it saved $40 billion (Rs 2,33,000 crore) in 2015-16 on the imports bill. While this goes to three stake holders - government, private sector and the consumer, the government's share is Rs 1,40,000 crore.

"If they spent this into investment, agriculture, roads and railways, they could have changed the face of India's economy in the current year and they would not have had to sweat it out in doing it in the next two years," Chidambaram said. 

However, this did not happen, considering Rs 37,000 crore decline from the estimates of non-tax revenue, Rs 44,000 crore declines in the estimates of disinvestment, Rs 20,000 crore to adjust the fiscal deficit because the nominal growth rate is lower than expected and additional interest expenditure of around Rs 8,000 crore. 

Even Rs1,00,000 crore was saved from this and used as additional investment in 2015-16, that would have changed the face of the economy, he said.

Commenting on the budget announcement in terms of allocation to agriculture, he said that if the interest subsidy to farmers under the head of the Department of Financial Services is not included and if the inflation rate also factored in, the allocation in the sector is lesser than that of the 2014-15 budget.

"I am afraid that the allocation made for agriculture and farmer's welfare is totally inadequate. It is not a fraction of what we did in 2008, when we simply wrote off Rs 60,000 crore worth of loans," he said. “What the rural economy required this year is an equally dramatic effort, an effort as dramatic as a loan waiver.”
 

"The loan waiver has been criticised for a number of reasons and maybe there is some validity in that criticism. But please remember, that it is the loan waiver that pulled India from acute rural distress and saved millions of farmers. Something equally dramatic was required, but I am afraid the government has not done that and I am afraid the acute rural distress in India may continue to remain if god-forbid, there is a third year of rainfall," said Chidambaram.

He added that while the fiscal deficit is targeted to be at 3.5%, as per the budget, the Railways has to raise around Rs 40,000 crore and the Road Transport department to raise Rs 59,000 crore by borrowing, instead of government borrowing the funds and allocating it to these departments. 

Thus, this Rs 99,000 crore of borrowings technically will not come into the fiscal deficit, though the foreign analyst would add this when it comes to analysing the fiscal deficit.