Indicating unleashing of more measures to boost economy, Finance Minister P. Chidambaram on Monday ruled out rolling back decisions on diesel, LPG and FDI in retail and expressed confidence that the government faces no threat from allies either inside or outside.
Close on the heels of the government taking hard decisions, Mr. Chidambaram said between now and October 30 Department of Revenue, Disinvestment and SEBI would decide on steps to revitalise economy, hinting that they will be in the areas which he had talked about in his August 6 statement after he took over.
During the hour-long interaction, he touched on various issues including Vodafone tax issue, GST, Direct Taxes Code and fiscal consolidation.
“Opposition will demand a rollback. As far as I know we are not rolling back any of these decisions,” he told select journalists here.
He was asked about the demand for withdrawing the hike in the price of Rs 5.63 per litre in diesel, limiting supply of subsidised LPG to six cylinders per household in a year and allowing foreign direct investment in retail and aviation.
He said “a political government knows what is doable and what is not doable. Advisers can advise, but we have done what is doable.”
Cutting subsidies are invisibe savings
Asked about stiff opposition to the decisions from UPA constituents like Trinamool and outside allies like Samajwadi Party and BSP and whether government has risked its stability, he said, “I do not think government faces any threat. Government is stable. Our allies in the government and outside will understand and continue their support to the government. We will be able to convince our allies.”
“I think clearly, political government knows what is doable and what is not doable. We have done what is doable,” Mr. Chidambaram said.
“There will be a debate and exchange of views. There will be hot words, ultimately we will be able to convince our allies that what we have done is what is necessary and what is imperative to keep the economy going (and to protect it from) internal and external threats to the economy,” the Finance Minister said.
He referred to the West Bengal Chief Minister Mamata Banerjee’s statement that she understood the gravity of the crisis and added that nobody has questioned the soundness of the decisions.
By capping supply of subsidised LPG cylinder to six per family in a year, he said the government has altered the behaviour of others.
“People who got their 100 cylinders at subsidised rates may not go beyond 30. Behaviour would alter. And once we link LPG to Aadhar, a large number of duplication will be eliminated. These are invisible savings which are likely to come in the long run,” he said.
Mr. Chidambaram dismissed the perception that government plunged into action because of a “looming threat” of downgrading by rating agencies.
He said government does not frame policy for rating agencies. “We don’t make policies to get rating by credit rating agencies. We are making policies, what are doable and what are implementable. We make policies which have broad acceptance. We see that this is ultimately what government can do.
“What government does can prompt them (rating agencies) to rate government bonds,” he said.
More steps in the offing to boost growth
The government will take more policy steps in the next one-and-half months to revive growth, Finance Minister P. Chidambaram said while appreciating the RBI’s initiative to unlock Rs. 17,000 crore of banking funds through reduction in CRR by 0.25 per cent.
“I am very confident that between now and October 30 the government is expected to take a number of additional policy measures and also lay out a plan of fiscal consolidation. The response of RBI on October 30 will be far more supportive of growth,” Mr Chidambaram told reporters in New Delhi.
The Reserve Bank is scheduled to come out with second quarter monetary policy review on October 30.
Mr Chidambaram, said: “It (CRR cut) is a small step, but a welcome step. I am not disappointed with the RBI policy. Mid quarter review by RBI is encouraging and supportive. RBI is slated to take more decisions”.
After assuming charge of the Finance Ministry last month, the Finance Minister had said he would take steps to boost economy and revive investor confidence.