P. S. Suryanarayana

Lok Sabha poll due only in 2009; budgets are forgotten in a few months, says Chidambaram

SINGAPORE: Union Finance Minister P. Chidambaram on Wednesday asserted that “fiscal space” and not politics energised his budgetary offer of farm loan waiver. And, outlining India’s initiatives to enhance “the common good of the world” that was increasingly becoming hostage to “greed” in certain global quarters, he emphasised the need for a crude oil price band.

Addressing the Lee Kuan Yew School of Public Policy here, Mr. Chidambaram said the current trends on the crude and food fronts around the world made him “wonder what has happened to the brave declaration of the [United Nations] Millennium Development Goals.” Also lamenting the fate of “inspiring slogan: Make Poverty History,” he said, “If we are serious about ending poverty, the place to start is to make food and fuel available at reasonable prices.”

Tracing the current “global uncertainty” in the financial domain to the failures of the developed bloc, the Minister quoted a policymaker as saying “innovation was ahead of regulation” and this caused the “current turbulence.” But this “is an ingenious spin on regulatory failure” in the developed countries.

Answering questions from the audience, Mr. Chidambaram said India would be “very happy to form a cartel” among oil consuming countries to try and stabilise the global market. “At the IMF [International Monetary Fund] meeting, I offered that we work on a price band: the consuming countries will guarantee the producers that oil prices will not go below a level, and the producing countries promise the consuming countries that prices will not go above a level. [And] we allow prices to fluctuate within a band. This offer, made two years ago, was discussed by the IMF; but the OPEC and other producing countries did not agree. I think that market forces must have some room for play. I am not disputing that. But it must be within a reasonable band. Oil producing countries have struck a gold mine; ... but it is hurting the world economy. I would be very happy if the G-8 countries or the G-7 countries or the G-20 countries get together and work on a price band.”

On the farm loan waiver scheme, he said national elections were due only in 2009, and his “experience is [that] budgets are usually forgotten in a few months.” Ruling out electoral politics as a factor, he said he “could not have done it in any earlier years” when he was faced with “huge fiscal deficits.” Only in 2008-09 “I am able to bring the fiscal deficit to below three per cent ... a worldwide benchmark.” With this new “fiscal space and some comfort,” he was able to “take on a massive debt forgiveness programme.”

On climate change, Mr. Chidambaram said: “We accept the principle of common but differentiated responsibilities; we have gone a step further. If the developed countries bring down their per capita emission [of greenhouse gases], we are promising that we will remain below that level. So, that is a major forward step, which Chancellor Merkel [of Germany] has adopted as ‘a starting point,’ in her words, to find a solution to the problem of climate change. Apart from that, we have set up a National Council on Climate Change, chaired by the Prime Minister. This Council is working on a draft national policy ... we hope to be able to unveil it very shortly. [And] in this budget speech, I mentioned seven or eight areas that we should work [on] in our own self-interest. So, we are now setting up an institutional mechanism. Hopefully, this will be a public-private partnership, which would take on the role of advocacy.”

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