“Criticism of our handling of inflation is not welcome if it is not accompanied by concrete advice”
NEW DELHI: Union Finance Minister P. Chidambaram on Friday locked horns with the Bharatiya Janata Party over its resolution on prices and other economic issues such as the fuel price hike. Criticism of the UPA government’s handling of inflation was not welcome if it was not accompanied by concrete advice on ways of holding the price spiral, he said.
In a point-by-point rebuttal, Mr. Chidambaram said: “I regret to point out that the resolution [by the BJP National Executive] is an exercise in self-deception and is aimed at spreading disinformation.”
Expressing confidence that the UPA government, with the support of the people, would succeed in getting a hold over the inflationary spiral, he dubbed the BJP’s claims false, while pitting them against the UPA government’s achievements. “The party [BJP] claims that the NDA inherited an economy that was on the verge of bankruptcy and that in 2004 it left behind a legacy of a strong economy. It is difficult to believe that the BJP is talking about the Indian economy!”
“In the three years between 1994 and 1997, the economy had recorded an average growth rate of 7.5 per cent and, despite the severe Asian crisis, the economy grew at 4.8 per cent in 1997-98. That is when the BJP assumed office. What is the record of the BJP/NDA in the subsequent six years? The average for those six years was only 5.8 per cent and, in two of those years, the growth rate was abysmally low at 4.4 per cent (2000-01) and 3.8 per cent (2002-03).”
As for the BJP’s fiscal management, Mr. Chidambaram went on to show that it was poor. “The legacy of the BJP/NDA was not only a low growth rate. At the end of 1997-98, the fiscal deficit was 4.8 per cent and when the NDA left office after six years, the fiscal deficit was reduced marginally to 4.5 per cent. The revenue deficit at the end of 1997-98 was 3 per cent and the NDA left an inglorious legacy of a revenue deficit of 3.6 per cent. Need anything more be said about BJP/NDA’s fiscal management?”
The Minister pointed out that the UPA government had to overcome the BJP/NDA legacy such as liquidity overhang at the end of 2003-04, which spilled over into 2004-05, and the inflationary pressures as a result of a sharp rise in global petroleum prices.
High growth rate
However, the current regime succeeded in transforming the economic situation. “Thanks to the UPA government’s management, the economy has recorded an unprecedented high rate of growth, the average for the four years being 8.9 per cent. This is a good 300 basis points more than the average for the NDA’s six-year period. The UPA government has overhauled the moribund manufacturing sector the NDA left behind and the increased business confidence is reflected in the investments made by both domestic and foreign investors. Even in the agriculture sector, the average growth rate in the four years of the UPA government has been 3.55 per cent.”
Alongside, there was a robust growth of the economy and the savings to GDP (Gross Domestic Product) ratio increased from 29.8 per cent in 2003-04 to 34 per cent in 2006-07. Likewise, the investment to GDP ratio increased from 28.2 to 35.9 per cent.
Better tax collection
“The sound management of the economy is also reflected in better collection of taxes and curtailment of wasteful expenditure. In the six-year period of the BJP/NDA, the tax to GDP ratio crawled from 9.1 to 9.2 per cent. Starting with 9.2 per cent at the end of 2003-04, the UPA government raised it to 12.5 per cent in 2007-08, and the ratio is expected to reach 13 per cent this financial year.”
Turning to the burning issue of runaway inflation, Mr. Chidambaram said: “It was a problem under the BJP/NDA government too. In 2000-01, in 48 out of 52 weeks, the WPI was over 6 per cent; in 22 of those weeks, it was over 7 per cent; and in 12 of those weeks, it was over 8 per cent. These are facts that cannot be wished away. During the entire six-year rule of the BJP/NDA, crude oil prices per barrel ranged from $22 to $28. How I wish that the UPA government had enjoyed such benign crude oil prices? We have not been fortunate.”
Rising crude prices
Noting that the current inflation was almost entirely due to the relentless rise in crude prices which also triggered the rise in commodity prices, he pointed out that the BJP was critical of the government’s handling of the situation because it was in the Opposition.
“The BJP/NDA is, of course, in the Opposition, but that does not mean its duty to the people is only to oppose the government. I may point out that we have not heard of any concrete suggestion made by the BJP/NDA that, if implemented, would help in moderating inflation.”