Kochi: Finance Minister Thomas Isaac on Thursday warned of an impending recession that is far worse than the one in 2008 and flayed the Union Budget for not being expansionary, which could have salvaged the situation for the country’s economy.
Noted economist and former Planning Board Vice Chairman Prabhat Patnaik echoed the same sentiments and maintained that the only way out of the imbroglio would be to delink the Indian economy from globalised finance. They were both speaking at a seminar on ‘Union Budget and the Youth’ organised as part of the DYFI’s national meeting under way in the city.
Dr. Isaac outlined the ill-effects of demonetisation on the economy and maintained that the growth rate had nosedived, leaving the country in the clutches of a recession.
“But the Union Finance Minister has chosen to simplistically approach the crisis, saying remonetisation by March-end will set things right. But, is that going to change the investment climate in the country? Is it going to resurrect all small establishments that were forced to down the shutters for want to liquidity in the wake of demonetisation? The Finance Minister has just wished away the crisis in simplistic terms,” he said.
An expansionary budget, with the government increasing its expenditure, in social sectors, education, and health would have triggered economic activity and salvaged the situation, but instead of providing fiscal stimulus, the budget did just the opposite by cutting down on expenditure, he said.
“If you see the revised budget estimate of 2016-17, the total government expenditure as percentage of GDP has actually come down from 13.4% in 2016-17 to 12.7% in 2017-18. The Finance Minister has done this so as not to disrupt Narendra Modi’s narrative of demonetisation,” Dr. Isaac said.
Dr. Patnaik said demonetisation was a complete fiasco as it could not do anything to put a check on black money. “While the people were divested of their purchasing power, the vaults of banks had been filled with idling cash. This would lead to banks making losses and the government, through the RBI, would now bear the loss to save the banks. There was an opportunity in the budget to assuage, to some extent, the wounds inflicted by demonetisation on ordinary people, but that has been squandered away. If the government had borrowed money from banks and spent it on social sector, it would have helped it save the situation,” he added.
DYFI national president M.B. Rajesh, MP, presided.
