Dubbing the Union Budget as a “damp squib”, former Finance Minister P Chidambaram today said the government has wasted an opportunity to push through bold reforms, revive growth and devise strategies for job creation.
He, however, complimented Finance Minister Arun Jaitley for being moderate and not doing anything “reckless and disruptive” after demonetisation and welcomed some of the positives like putting a limit on cash transactions, cleansing political funding and some other proposals in the budget.
“Our conclusion on reading all the budget documents was that the elaborate exercise has turned out to be a damp squib. It is a wasted opportunity… Altogether, I am disappointed that the government has not used the opportunity to push through bold reforms, revive aggregate demand and growth, and devise new strategies for job creation,” he told reporters.
Chidambaram said the government has done nothing in the budget by way of new strategy or policy measures to revive investment and growth, which was badly affected after demonetisation.
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He said there are, however, a few positives, which “we are happy with. The most important positive is that the government seems chastened after the debacle of demonetisation and has not done anything reckless or disruptive.”
“I compliment the finance minister for adopting a tone of moderation. It is obvious that demonetisation and its inevitable consequences have demoralised the government. They have retreated from reforms and have no answers to the severe challenges faced by the economy,” he said.
Striking a cautious note, he said the spill-over effect of note ban decision would be felt in the next fiscal as well as in 2018-19.
“It is now widely accepted that growth rate of the Indian GDP has taken a hit. It will be worse. This period of lower growth will extend to 2017-18 and 2018-19,” he said.
Chidambaram noted that there is nothing in the budget that points to measures to revive flagging growth or reviving investment and the country will pay a “heavy price” in terms of poor demand, lower sales, fewer jobs and closures of MSMEs.
Making a case for cut in indirect taxes to help boost growth, the former finance minister said this cut would have given relief to millions of people.
He said the indirect taxes like excise duty could have been reduced claiming there is still eight months time for rolling out of GST which he felt was not possible before October 1.
He also made a case for early introduction of Direct Tax Code, saying, “It is imperative that that the Draft Direct Taxes code be updated and enacted.”
Chidambaram attacked Jaitley for giving an average relief of only Rs 5,000 to tax payers in personal income tax and termed it as “mere tokenism”.
“We welcome this relief. But, it’s small mercy for a person who stood in queue for weeks to withdraw small amounts of money. The tax cuts announced are at best tokenism. He has given 1.98 crore tax payers a relief of, on average Rs 5000 per tax payer,” he said.
Chidambaram accused the government of cheating the farming community as they along with farm workers, labourers, self employed and those in the MSME sector were “hardest hit by demonetisation” and expected some sops for them.
“There is acute distress in the farm sector. Government seems oblivious to the plight of the farming community.
“The farming community has been totally cheated by the Budget. The Finance Minister has not even uttered the word MSP in his speech,” Chidambaram said.
He said there is nothing in the budget for various sections of people who have suffered badly due to demonetisation.
“Key sections of the people feel cheated and let down. They lost crores of rupees by ways of wages, capital and income. We had demanded the that Govt offer them compensation in some form. But, government has cruelly neglected them,” he said.
Chidambaram also accused the government of discarding fiscal prudence and of violating Fiscal Responsibility and Budget Management (FRBM).
“The government has discarded fiscal prudence. The fiscal deficit has been kept 3.2 pc, when it should have been 3 pc,” he said.
“It is strange that the Govt refuses to do what is wise and right and persists in doing what is unwise and wrong,” he noted.
He also said the Gross Fixed Capital Formation has declined since NDA took office as it was 4.9 pc in financial year 2015, 3.9 pc in 2015-16 and minus-0.2 pc in the year 2016-17.
He also accused the government of not doing anything to generate jobs and their best performance was 1.5 lakh jobs in 2015-16.
“There is nothing in budget pointing to a strategy to generate jobs. The most vocal demand of the people is, ‘Where are the jobs?’ NDA promised to create 2 crore jobs per year,” he said.
To a question on how he as Finance Minister would have reacted to demonetisation, Chidambaram said, “I would have resigned on November 8”.
Prime Minister Narendra Modi had announced demonetisation of high-value currency notes of Rs 500 and Rs 1,000 in an address to the nation on the night of November 8.
To a question on whether demonetisation will have a positive effect on the BJP’s prospects in elections to five states, Chidambaram said, “People have already stopped talking about the budget, 24 hours after it was presented… People are wise. I don’t think this will have any impact on state elections.”
Terming demonetisation as “reckless” and ill-conceived decision, he said, “I don’t know what more disruptive and reckless measures are there in the armoury. Wish government meets our growth rates of 8.5 per cent in UPA-1 and 7.5 per cent overall. All the best to them, but they are not in a position to do so.”