Across the Aisle by P Chidambaram: The speech that I might have made

Are the government and the RBI Governor on the same page? Will the government share with us its forecast on interest rates?

Across the Aisle by P Chidambaram: The speech that I might have made

Mr Chairman,

Continue reading this story with Financial Express premium subscription
Already a subscriber? Sign in

This debate should have been held several days ago. I fail to understand the difference, in substance, between a discussion under Rule 267 and any other Rule. The government was stubborn, the people attributed it to its hauteur.

Let’s debate price rise. This is not a debate on the state of the economy. If it were, we may have a hundred things to say about the economic management — rather, mis-management — of this government since the day of the infamous demonetisation.

Prices are rising. Rising prices are badly hurting the people, especially the poor and the middle class. Consumption and savings have fallen, household debt has risen and malnutrition (especially among women and children) has increased. Sadly, the government is not willing to acknowledge these facts. Yesterday, I was horrified to hear the Hon’ble Finance Minister tell the other House that the increases in the GST rates did not affect the people! That statement can be put to a simple test which I shall reveal at the end of my intervention.

Also Read| Across the Aisle by P Chidambaram: The Dragon in the Room

Causes and Course
I hope the debate in this House does not meander into by-lanes and alleys. A tu-tu main-main debate takes us nowhere. I urge the government and all Hon’ble members to accept the reality of intolerable price increase and ask the only relevant question: ‘what steps will the government take to contain inflation?’
The starting point is identifying the causes of the current inflation.

Let me begin with the Fiscal Deficit. We know that a large and growing Fiscal Deficit affects prices. I don’t have the time to explain how. In the Budget for this year, the government estimated a Fiscal Deficit of 6.4% or Rs 16,61,196 crore. In April-June, the Fiscal Deficit touched Rs 3,51,871 crore. We know the government has underestimated expenditure and has not budgeted for the same. Has the government underestimated revenues too? Will the government be able to contain the Fiscal Deficit at 6.4 per cent? We want a specific answer.

Also Read| Across the Aisle by P Chidambaram: ‘Process is the Punishment’

More Man-made Causes
Next is the Current Account Deficit (CAD). The CAD may be near USD 30 billion in April-June. The trade deficit in July was USD 31 billion. If CAD crossed USD 100 billion for the whole year, as estimated, it would have disastrous consequences. Let the government tell this House what it proposes to do about the CAD. Again, Mr Chairman, I want a specific answer.

The third red light is the Interest Rate. We know that the policy rate is set by the RBI. The government has nominated three members to the Monetary Policy Committee. The government’s Secretary is on the RBI Board. So, the government cannot plead it has no responsibility. India followed the Advanced Economies when they pursued an accommodative monetary policy and pumped liquidity into the market. They are now increasing interest rates. I doubt if the country can take a different line now. If RBI hikes the interest rate, it may contain demand and, consequently, moderate prices, but it will also affect sales, profits and, above all, employment. The trick lies in ‘calibration’. Are the government and the RBI Governor on the same page? Will the government share with us its forecast on interest rates?

The fourth is the Supply Side. Since liberal imports are ruled out for the time being, what steps will the government take to increase domestic production and supply? MSMEs are in deep distress, and they cannot help unless they are helped first. Large companies are interested in maximizing profits and hence they may keep supply artificially constrained. Trade is shackled by the GST laws and rates. My question is, what does the government intend to do to ensure abundant supply of goods and services?

Original Sin
Last on my list is the item that has troubled the people the most: the government’s Tax Policy. I charge the government with committing the original sin that fuelled inflation, namely, imposing cruel taxes and cesses on petrol and diesel. The government collected a whopping Rs 26,00,000 crore through the oil companies as taxes, cesses and dividends. This government is callous, heartless and anti-poor. Add to that, the periodic hikes in GST rates on goods and services consumed by the poor and the middle class. This government does not feel the pain of six-year old Kriti Dubey who could not understand why her mother scolded her when she asked for another pencil or the pain of the mother who cannot afford another pencil for her daughter. If this government has a head and a heart, it will immediately moderate the taxes on petrol and diesel, reduce the price of LPG, and reverse the hike in taxes on essential goods that are consumed by the poor and the middle class.

Mr Chairman, let me close with an offer of a ‘test’ that I alluded to earlier. Let the three of us — you Mr Chairman, the Hon’ble FM and I — drive in an unmarked car, without any security, to a middle-class neighborhood or a slum in Delhi. Mr Chairman, please ask the people if they are affected by the fuel prices, the price of LPG and the GST rates. I am willing to abide by their verdict. I hope the Hon’ble FM will also abide by the verdict of the aam aadmi.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.