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Economy near collapse, being attended by incompetent doctors: Chidambaram

Initiating the debate on the Union Budget for 2020-21 in Rajya Sabha, he said rising unemployment and falling consumption was making India poorer

Indian Economy | P Chidambaram | Economic slowdown

Press Trust of India  |  New Delhi 

P Chidambaram
P Chidambaram

Former Finance Minister on Monday tore into Narendra Modi government's handling of the economy, saying it was "perilously close to a collapse" and was being attended to by "incompetent doctors".

The economy, he said, was facing twin problems of rising unemployment and falling consumption but the government continues to live in denial.

Initiating the debate on the Union Budget for 2020-21 in the Rajya Sabha, Chidambaram said more money needs to be put in hands of people and not give "extraordinary powers" to junior taxmen to unleash "tax terrorism." He offered Finance Minister Nirmala Sitharaman the same advice that Modi as BJP's prime ministerial candidate had offered him in November 2013.

On "November 2, 2013, a very distinguished political leader said and I quote: "Economy is in trouble. The youth wants jobs. Devote more time to the economy, not on petty politics. Please focus on the job at hand. Very wise advice. I can't do anything better than reading this piece of advice to the Finance Minister", he noted.

According to him, the economy was facing structural problems but the government continues to believe they were cyclical in nature.

Modi government's chief economic adviser for four years, Arvind Subramanian, has stated that the economy is in the ICU (Intensive Care Unit). But "I would say the patient has been kept out of the ICU and incompetent doctors are looking at the patient," Chidambaram said.

"It is dangerous to have a patient out of the ICU and being looked upon by incompetent doctors. What is the point standing around and chanting slogan 'Sab ka Saath, Sab ka Vishwas'," he said.

According to Chidambaram, the BJP government lives in denial, refuses to acknowledge its mistakes and has an "outdated" predisposition towards protectionism and a strong rupee, and is against bilateral as well as multilateral trade agreements.

"We have an economy which is perilously close to collapse. It has to be attended to by very competent doctors. In the last few years, we have found the doctors are not so competent," he said.

"We are living in denial and we are ignoring two big elephants in the room -- one is rising unemployment and the other is fall in consumption. Unemployment rises, consumption falls, the becomes poorer and not richer," he noted.

Chidambaram called demonetisation of old 500 and 1,000 rupee notes as well as the hurried implementation of a "flawed" Goods and Services Tax (GST) with wrong design, rates, structure and procedure and an unprepared system as "monumental blunders" that ruined the economy.

"Because of its refusal to admit mistakes, because it lives in denial, because of its predisposition, the government either does not know or if it knows is not willing to make it clear that this is the state of the economy," he said.

With an unprecedented six consecutive quarters of falling growth, the economy is facing demand constraints and is investment-starved, he said.

"When we point out the mistake of the government, the government must have an open mind to debate and if it is a mistake, admit it." "It is living in denial. It simply does not accept that the state of the economy is extremely bad," Chidambaram said as he reeled out the government's own statistics to drive home the point.

While GDP has fallen to an 11-year low of 4.5 per cent in 2019 July-September quarter, agriculture is growing by just 2 per cent, while consumer price inflation has risen from 1.9 per cent in January 2019 to 7.4 per cent in a matter of 11 months.

Also, food inflation is at 12.2 per cent. Bank credit is growing 8 per cent with non-food credit rising by 7-8 per cent and credit to the industry by just 2.7 per cent.

Credit to agriculture has declined from 18.3 per cent to 5.3 per cent and that for MSMEs from 6.7 per cent to 1.6 per cent, he said.

"Who are your doctors?, I want to know," he said, adding the government considers Congress as an untouchable and does not think of any good about the rest of the Opposition and so doesn't consult them.

Chidambaram charged that instead of putting money in the hands of people, the Modi government "puts money in hands of 200 corporates" by way of cut in corporate tax.

Stating that every competent doctor that the Modi government could ever find has left the country, he listed out former RBI governors Raghuram Rajan and Urjit Patel, former CEA Arvind Subramanian and former NITI Aayog Vice Chairman Arvind Panagariya as persons who quit during the BJP rule.

"Fear and uncertainty prevail in the country," he added. Chidambaram also attacked Sitharaman for reading out a 160-minute speech without talking about the state of the economy and its management.

"Question on my mind is what was the Finance Minister trying to say? If you take 160 minutes to read the speech and still few pages are left to read, what is the narrative, what is the story you are trying to say.

"You are living in echo chambers. You want to hear your own voice," he said.

Chidambaram said overall industrial index showed just 0.6 per cent growth with every major industry being at either near-zero or in the negative zone.

Thermal power plants are operating at just 55 per cent of the capacity as factories have either closed or are on the verge of closure, he added.

"That gives you a good picture of the state of the economy. You don't require a MRI," he said.

"You are in management for six years. How long can you blame previous managers," he added.

Further, Chidambaram said the government was burying unfavourable reports such as the labour survey that put unemployment at 45-year high of 6.1 per cent at the end of 2017-18. As also the one that talked of consumer expenditure falling to 3.7 per cent between 2011-12 and 2017-18, he noted.

Drilling holes in budget numbers, he said the 2019-20 budget projected nominal GDP growth of 12 per cent but ended with just 8.5 per cent. Fiscal deficit was targeted to be reduced to 3.3 per cent of the GDP but ended at 3.8 per cent and in the next fiscal, it is being targeted at 3.5 per cent, he added.

Revenue deficit was targeted at 2.3 per cent in the fiscal ending March 31, 2020 but ended up at 2.4 per cent and in the next, it would rise to 2.8 per cent, he said.

He also added that capital expenditure in the next fiscal would shrink to 0.7 per cent from 1.4 per cent in the current financial year.

Net tax revenue in the current fiscal was targeted at Rs 16.49 trillion but only Rs 9 trillion was collected in the first nine months till December 2019 and "you want us to believe this will rise to Rs 15 trillion by March 2020," he said.

Similarly, expenditure in 2019-20 was pegged at Rs 27.86 trillion but only Rs 11.78 trillion was spend during April-December and by March this is projected to rise to Rs 27 trillion.

"You have no money to spend... and these are masked by numbers," he said, adding that "numbers are not easily acceptable or believable".

Chidambaram also said the government is facing a shortfall in all forms of taxes -- Rs 1.56 trillion on corporate tax, Rs 10,000 crore on personal income tax, Rs 30,000 crore on customs, Rs 52,000 crore on excise and Rs 51,000 crore on GST.

This despite "the extraordinary powers" and "all kinds of power" given to lower-level tax officials, he said.

He read out a list of heads under which allocation has fallen -- food subsidy, agriculture, PM-Kisan, rural roads, mid-day meal scheme, ICDS (Integrated Child Development Services), skill development, Ayushman Bharat, rural development and MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act).

Also, states are being "cheated" as only Rs 6.56 trillion is being transferred to them this fiscal instead of the promised Rs 8.09 trillion, he said.

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First Published: Mon, February 10 2020. 13:28 IST