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Former Union Finance Minister P Chidambaram, on Wednesday, 3 February, tore into Union Budget 2021 and described the government’s roadmap of managing the country’s worrying fiscal deficit of 9.5 percent as “wonky economics” and cautioned that “this is a budget by the rich, for the rich and of the rich.”
Speaking to The Quint on a wide range of issues related to Union Budget 2021, Chidambaram slammed the government for “misguiding” the people with inflated numbers on expenditure, “bluffing” on GDP growth, lack of data transparency, “catastrophic” economic policies, and explained why he feels the handing of public sector banks and insurance companies to select private players has already been decided.
“To say that what matters is debt to GDP ratio and the fiscal deficit doesn’t matter is completely wrong. It is wonky economics and the country will pay a price for this misguided economics,” Chidambaram told The Quint.
‘Budget for the 1%’: Chidambaram
On the issue of the government claiming that the budget has shunned populism, Chidambaram asked if taking care of those who have been affected over the last 36 months, have lost their livelihoods during the pandemic and are in the bottom 30 percent can be called “populism.”
“Very well, let my critics continue to say that neglect 85-90 percent of India and take care the 10 percent,” Chidambaram said, adding “Unfortunately, in this budget not even 10 percent has been taken care of. This budget is addressed to one percent of India. The cream of the cream. This is why we say this is a budget by the rich, for the rich and of the rich.”
Highlighting the fall in GDP growth over the last two years, the former finance minister said that context around the budget is that for 24 months and over eight quarters the GDP growth came down from 8 percent to 4 percent.
“That is the contribution of the Narendra Modi government. Declining GDP growth rate for eight successive quarters,” he told The Quint.
"“So, 36 months the people have suffered and you are telling me go and tell the people ‘wait, wait nothing will happen. Wait for another two, three, four years, jobs will come.’ Is that the way an elected government in a democracy should function? I don’t share the view.”" - P Chidambaram, Former Union Finance Minister
‘What Large Borrowing?’: Chidambaram
On the issue of borrowing, Chidambaram said his analysis of the latest budget has shown that the large borrowing “is not because of large expenditure but because of lower revenues.”
In her budget presentation, Finance Minister Nirmala Sitharaman had said, "It was our effort that in spite of resource crunch we should spend more on capital expenditure and we are likely to end this year at around Rs 4.39 lakh crore which we have provided in RE (revised estimate) of 2020-21,” Sitharaman said in her 2021-22 Budget speech.
For the next fiscal, the minister proposed sharp increase in capital expenditure and provided Rs 5.54 lakh crore.
“They have borrowed an additional Rs 10.5 lakh crore. But that Rs 10.5 lakh crore is really accounted for with the fact that they lost nearly Rs 5 crore in revenue.” Chidambaram said adding “Therefore, it is to fill that gap they have to borrow. That doesn’t mean there is additional expenditure.”
“Out of 10 lakh crore if you borrow 4.5 lakh crore, what is left? Another 5.5 lakh crore,” he said, explaining that the 5.5 lakh crore hasn’t gone entirely to capital expenditure as the finance minister has stated.
“My rough calculations show 1.5 lakh crore is additional expenditure in a whole year when they said we are going aatmanirbhar stimulus. Will that create jobs? Will that get back the jobs we have lost?” he added.
‘Wonky Economics’ on Fiscal Deficit Management: Chidambaram
Finance Minister Nirmala Sitharaman has pegged fiscal deficit for the coming year 2021-22 at 6.8 percent of the GDP and aims to bring it back below the 4.5 percent mark by 2025-26.
The original fiscal deficit target for 2020-21 was 3.5 percent. However, in reality, the deficit shot up to a high of 9.5 percent of GDP due to the double impact of the COVID-19 pandemic — low revenue flows due to the lockdown and negative economic growth clubbed with high government spending to provide essential relief to vulnerable sections of society, as well as a stimulus package aimed at reviving domestic demand.
Chidambaram said the Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, “has been buried”. The FRBM set a target of 3 percent of fiscal deficit.
“I brought it down to about 4.5 percent and left it to them. Since then they seem to have completely forgotten the 3 percent goal,” he told The Quint. He added that because of the fiscal deficit handling, “two credit rating agencies have said we are seriously considering downgrading India’s credit rating.”
When asked if he thought the government has decided not to worry about credit rating agencies, Chidambaram said “To say that what matters is debt to GDP ratio and the fiscal deficit doesn’t matter is completely wrong. It is wonky economics and the country will pay a price for this misguided economics.”
Govt Believes in ‘Fireworks’ to Win Elections, Not Economic Performance: Chidambaram
When asked why the Union government would present a budget like this given every government wants to win elections, Chidambaram responded saying “They think, just before the elections they can do some fireworks. Like last time they had Pulwama and Balakot two-and-a-half months before the election was notified.”
“They think that before the next elections they will have the Ram Temple, the Central Vista, they will do some fireworks. They are not concerned about the poor of this country,” he added.
When asked what the Opposition and the Congress party have done “I have called the bluff, I have said the numbers are wonky. I was the first to point out that the health number Rs 2,23,846 crore was a complete bluff. Then I pointed out the defence budget has not been increased at all.”
Chidambaram added that he pointed out that “capital expenditure is a bluff. There is no capital expenditure increase at all.”
Questioning the secrecy of the budget documents, the former finance minister also claimed that before Sitharaman read paragraph 141 of her budget speech, which contains the fiscal deficit and revenue deficit figure at 12:10 pm, Bloomberg had already tweeted the numbers at 11:32 am.
"“I want to ask the finance minister and government through your channel how did Bloomberg tweet the exact number? It is not an estimate. I can understand if they had said .1 more or .1 less. The exact number at 11.32 am when she read paragraph 141 at 12.10 pm... I’m only asking the government to tell me what kind of a government secret you maintain.”" - P Chidambaram, Former Union Finance Minister
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