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Darkest year in four decades: Chidambaram on economy

New Delhi: Former finance minister and senior Congress leader P Chidambaram on Tuesday slammed the Union government for its handling of the country’s finances and urged it to borrow or print money and spend it aggressively without worrying about the fiscal deficit
PUBLISHED ON JUN 02, 2021 01:02 AM IST

New Delhi: Former finance minister and senior Congress leader P Chidambaram on Tuesday slammed the Union government for its handling of the country’s finances and urged it to borrow or print money and spend it aggressively without worrying about the fiscal deficit.

He was reacting at a virtual press conference to India’s gross domestic product (GDP) figures showing a negative growth of 7.3% in the 2020-21 fiscal and called it “the darkest year of the economy in four decades” that left “most Indians poorer than they were two years ago”.

“This is not the time to worry about the fiscal deficit. We can’t lose another year like we lost the last year. But the way the government is reacting, we are going to lose another year. My advice to the government is (to) act boldly and spend. Borrow or print money and spend,” he said at the press conference, adding that India has the sovereign right to print money.

Chidambaram said in his opening remarks that finance minister Nirmala Sitharaman and chief economic adviser K Subramanian “began to sell the story of a recovery” after the first wave of Covid-19 seemed to ebb. “They saw ‘green shoots’ when no one else did. They predicted a V-shaped recovery. It was a false story,” he said, accusing the government of misleading the people.

To be sure, the economy did recover sharply -- from a contraction of 24.4 in the first quarter of the fiscal to a growth of 1.6% in the last. But the second wave of the pandemic has roiled the economy again in April and May.

The former finance minister also said that the per capita GDP falling below 1 lakh to 99,694 has been “the most worrying” development. “In percentage terms it is a decline of (-) 8.2% over the previous year. It is lower than the level achieved in 2018-19 (and maybe even 2017-18). The deeply worrying conclusion is that most Indians are poorer than they were two years ago,” Chidambaram said.

In multiple interviews last week, CMIE chief Mahesh Vyas has said that the household income of 97% of India’s households have declined on account of the pandemic.

The Congress leader also shared his apprehension that the fiscal pinch felt by the states due to the Centre not paying them their GST revenue share will impact the vaccination programme, while the overall economic situation has pushed millions of people back to below the poverty line.

He also pitched for direct cash transfers and said, “The PM said, we give free ration. It translates to 32 per head. More and more economists are supporting cash transfers to the needy.”

Chidambaram also criticised Sitharaman for not doing enough to stop the downward slide of the economy. “Unless you take steps now, how can you tackle the third or fourth wave? The finance minister said budget proposals will kick in. The budget was placed on February 1. Today is June 1. How long will it take for the budget proposals to kick in?”

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