Modi Government ‘Clueless’ About Managing Covid-19 Hit To Economy: P Chidambaram
The Narendra Modi-led government is “completely clueless” on how to manage the Indian economy in the face of a coronavirus-induced recession.
That’s according to P Chidambaram, former Finance Minister of India under a Congress-led government, who said firstly the government doesn’t know how to manage a micro-economy and secondly, it’s afraid of the repercussions of its actions. However, “if you do nothing, worse will happen,” he said in an interview to BloombergQuint.
“Before coronavirus, we had eight quarters of declining growth. That has got nothing to do coronavirus, it has only got to do with Mr. Modi,” he said. “Corona has made it worse, it will take us to negative,” citing predictions as low as -5 percent.
India’s economy is possibly facing its deepest recession yet. Goldman Sachs forecast a 45 percent drop in GDP in the quarter ended June as consumption drops, incomes diminish and business comes to a standstill amid a continued lockdown.
Finance Minister Nirmala Sitharaman, last week, announced details of a Rs 20 lakh crore fiscal relief package. However, analysts and experts have said the actual upfront spending by the government is much lower.
Where is the Rs 20 lakh crore. It’s a hoax. The correct number—and I’ve given a breakup of the correct number—is Rs 1,86,650 crore. I asked the government to take my table and tell me where I’m wrong.P Chidambaram, Former Finance Minister
Speaking about the government’s defence around the package, including liquidity and reform measures, Chidamabaram questioned the need to call it a fiscal stimulus then. “It (fiscal stimulus) means whatever you are spending over and above the budget. The budget is Rs 30 lakh crore,” he said. “Question is how much will you spend over Rs 30 lakh crore.”
On the possible defence that the government is trying to avoid a rating downgrade by Moody’s, he said, “Rating downgrade is a bogey. Every country is going into a recession, India will not be the only country. If they downgrade India, they have to downgrade 100 countries in the world.”
He questioned the government’s plan to provide 10 kg of grains to all migrant workers over two months, saying that with the assumption that each kg was worth Rs 40, the government will spend only Rs 400 on a migrant who has walked 400 kilometers. “They’re treating him as if they’re not a human being.”
Chidambaram warned against the government’s publication of plans around inviting companies to shift manufacturing from China to India.
The year 2020-21 has been completely washed out, he said. However, if the government listens to “wise advice” and takes the correct steps, there might be some recovery of growth in 2021-22, he added.
The ‘Wise Advice’
“The answer today is to borrow more and spend more,” the former finance minister of India said, adding that while many politicians, economists and others have written to the government, their advice has gone unacknowledged.
If the extra borrowing leads to uncomfortable fiscal deficit, he suggested the government should monetise it. “It’s a completely legitimate thing to do. The sovereign has the right to print notes. Only the sovereign has that right. If you don’t want to use that right, why do you have it?”
When asked about ideas around land monetisation or that of gold available with households or religious does, he thwarted them as “crazy”. “Gold and land monetisation won’t work in the short run. The entire process will take a year,” he said. As for the people suggesting monetisation of gold available with religious institutions, they “don’t have any understanding of the law, customs or what the believers will do when presented with this plan,” he said.
Watch the full conversation here: