Govt’s fiscal stimulus package hopelessly inadequate: Chidambaram

The Congress leader said the government was being ‘opportunistic’ to use the COVID-19 pandemic to push for reforms, bypassing stakeholders and parliamentary institutions.

P. Chidambaram. File.

Former Union finance minister P. Chidambaram on Monday asserted that the Centre’s ‘economic stimulus was hopelessly inadequate that added insult to injury’ and claimed that the actual economic package amounted to ₹1.86 lakh crore or 0.91% of the Gross Domestic Product.

Separately, former Congress chief Rahul Gandhi in a tweet reminded Prime Minister Narendra Modi of his ridicule of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as a symbol of the UPA’s failure but the same scheme has been given aid by his government to help the rural poor.

“The Prime Minister has approved an additional budget of ₹40,000 crore for the MNREGA scheme created during the UPA era. We express our gratitude to him for understanding the vision of MNREGA and promoting it,” Mr. Gandhi tweeted with hashtag #ModiUturnOnMNREGA and tagged a video clip of Mr. Modi’s speech in Parliament soon after coming to power in 2014.

Minuscule amount

Addressing an online press conference, Mr. Chidambaram said the government should announce a revised package of ₹10 lakh crore or 10% of the GDP as the current package has left several sections like the poor, migrants, farmers, labourers, workers, small shopkeepers and middle class high and dry.

“In our view, a fiscal stimulus of ₹1,86,650 crore amounting to barely 0.91% of the GDP will be totally inadequate given the gravity of the economic crisis and the dire situation in which people find themselves. Most analysts, rating agencies and banks have placed the size of the fiscal stimulus at between 0.8 to 1.5%,” he said, adding that many of the Finance Minister Nirmala Sitharaman’s announcements were just front loading of previously budgeted expenditures.

Mr. Chidambaram said there can be no stimulus package without additional borrowing but noted that Ms Sitharaman had acknowledged “additional expenditure must be financed by additional borrowing”.

“The true value of the fiscal stimulus package will, therefore, be known when we know what is the Additional Borrowing in 2020-21 to finance the Additional Expenditure over and above the Expenditure Budget of ₹30,42,230 crore. The truth cannot be hidden for long,” he said.

“We express our thorough disappointment and request the government to reconsider the stimulus package and announce a revised and comprehensive fiscal stimulus package of not less than ₹10 lakh crore of real additional expenditure equivalent to 10% of GDP,” Mr. Chidambaram added.

Lashing out at the Union government for the migrant worker crisis, Mr. Chidambaram said the government had ‘completely mismanaged, misjudged the situation’ that resulted in a monumental error.

On the Union government’s reluctance to listen to the Congress’ advice of transferring cash to the poor, especially those in urban areas and migrant workers, he said, “I think the government is living in an echo chamber. They listen to their own voices, their own opinion.”

Parliament sidelined

The Congress leader said the government was being ‘opportunistic’ to use the COVID-19 pandemic to push for reforms, bypassing stakeholders and parliamentary institutions.

“I think the government is deliberately sidelining Parliament. A meeting of the Parliamentary Committee should at least be held to discuss the fiscal stimulus package,” he said.

To another question about the government being worried about being downgraded by agencies if it runs up a big fiscal deficit, Mr. Chidambaram said such fears are misplaced as every country is in distress and several European nations are facing a recession.

“This is an unnecessary fear. We will have to face that situation. As long as our foreign exchange reserves are high, inflation is under control, we are on the right path, demand grows and GDP picks up, why would a rating agency downgrade us,” he asked.