Congress leader Chidambaram finds faults with Budget in Rajya Sabha

Chidambaram termed it a "politically-driven budget" with the income tax cut being the "main thrust" of the Budget with an eye on the Delhi Assembly polls

Congress leader P Chidambaram on Monday said he was sceptical that the entire Rs 1 trillion of revenue foregone, as the Union Budget 2025-26 has estimated, because of the income tax exemptions, would go into the consumption of domestic goods and services, and boost the economy.

 

Initiating the discussion on the Union Budget in the Rajya Sabha, Chidambaram said it was difficult to believe that Rs 1 trillion, which is 0.3 per cent of the Rs 324 trillion GDP (gross domestic product), will boost the economy. He asked whether part of this would not go to repay old household debts, educating children abroad or buying imported goods. He also doubted the Budget estimate that the net tax revenue to the Centre will grow by 11.1 per cent in 2025-26, as it was in 2024-25, after foregoing of this Rs 1 trillion. “This is pure magic, not mathematics. I will reserve (my comment on) how this magic unfolds and I will comment on it later,” he said. Chidambaram requested Finance Minister Nirmala Sitharaman, who was present in the House, that other engines of growth, such as exports and capital investment “must be revved up” rather than relying on consumption as the sole engine of growth.

 

 

Chidambaram termed it a “politically driven Budget” with the income tax cut being the “main thrust” with an eye to the Delhi Assembly polls. He said the FM has “forgotten” the poor and bottom half of the population when food, education, and health inflation in the 12-year period from 2012 to 2024 have “crippled” Indian households. Household savings have fallen from 25.2 per cent to 18.4 per cent, and according to the household consumption survey in 2023, the average monthly per capita expenditure of a rural family is only Rs 4,226, and in urban areas it is only Rs 6,996, he said.

 

Chidambaram said the FM could have, apart from slashing income tax, also reduced the goods and services tax (GST), which everyone pays, cut tax on petrol and diesel, increased national rural employment guarantee Act (MGNREGA) wages, and hiked the statutory limit of minimum wages. “She (Sitharaman) did nothing. But, she was focussed on the income tax and she was focussed on the Delhi elections,” Chidambaram said, describing the cut in income tax as her “trump card, no pun intended”.

 

The Congress leader bemoaned that the Budget lacked both a philosophy and policy. He berated the government for not heeding the advice in the Economic Survey that it should “get out of the way” and “deregulate”. He said in 1991, Manmohan Singh, as the country’s finance minister, had an economic philosophy and sound grasp of policy, along with wisdom and farsightedness. He urged the FM to “recapture” the wisdom and farsightedness that the former PM had shown then, and also asked the government why it had not yet conferred the Bharat Ratna on Manmohan Singh.

 

Chidambaram said the FM’s claim of keeping the fiscal deficit below 4.9 per cent, that is at 4.8 per cent, of the GDP has been achieved by slashing the Centre's capital expenditure and grants-in-aid to the states to the tune of Rs 1.83 trillion. “By cutting capital expenditure by such a humongous amount, she saved on the fiscal deficit Rs 43,785 crore,” Chidambaram said, adding that “after cutting Rs 1,83,000-odd crore, she saved about Rs 44,000 crore. Is it a good policy? I don't know. Is it good economics? I say no. It is not good economics.” He flagged that the wage of a salaried male worker has fallen in the last seven years from Rs 12,665 per month to Rs 11,858 per month. The wage of a self-employed male worker has fallen from Rs 9,454 per month to Rs 8,591 per month.

 

The former Union FM said the government’s Production Linked Incentive, or PLI, scheme, and “Make in India” are "spectacular" failures, which have neither been able to meet targets nor been able to generate employment. He said “the gravest challenge facing the country is unemployment”. The former FM said the July Budget (2024-25) allocated Rs 28,318 crore for the PLI scheme, but the government by March could spend only Rs 20,035 crore.

 

Chidambaram said the Budget has slashed allocations for education, social welfare, agriculture, rural development, health, and also for the Ministry of External Affairs (MEA). He said the MEA in 2023-24 was allocated Rs 28,915 crore, while the revised estimate is Rs 25,277 crore for the current year and it is Rs 20,517 crore for the next year. “I suspect that, and I hope not, I suspect that the finance minister is doing an 'Elon Musk' on the external affairs minister,” he said in jest. He wondered if India was planning to shrink its global presence by closing down its missions. He also asked the government why it didn’t send its own aircraft to the US to bring back the deportees.

 

In the Lok Sabha, Dravida Munnetra Kazhagam’s (DMK’s) Dayanidhi Maran said the income tax relief was akin to an “economic sugar rush”, which was untenable in the long run. Congress MP Manish Tewari claimed that in the past one decade, government debts have soared, which has created problems for future generations, terming it as “inter-generational debt”.

 

Bharatiya Janata Party’s (BJP’s) Anurag Thakur hailed the Budget as a “force multiplier”. “Rahul Gandhi is calling the Budget a ‘band-aid Budget’. I want to tell him that this is not a band-aid Budget but a 'booster shot' Budget. It is a force multiplier...,” Thakur said.