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Becoming third-largest economy would not make India a rich economy: Chidambaram

Becoming third-largest economy would not make India a rich economy: Chidambaram

At BT India@100 Summit, former finance minister highlights India's low per capita income, says 16% of the population still in 'abject poverty'

Surabhi
Surabhi
  • Updated Aug 26, 2023 7:59 PM IST
Becoming third-largest economy would not make India a rich economy: ChidambaramRetail inflation hit a 15- month high of 7.44% in July with food items such as tomatoes and other vegetables registered an uptick in prices.
SUMMARY
  • Chidambaram Calls for universal basic income for the abject poor
  • Congress leader says inflation top issue, but RBI Governor and FM aren't on same page
  • Single GST rate required, current GST is 'terrible', he says

Former finance minister P Chidambaram on Saturday said that India turning into the third largest economy would not make it a rich economy given the large number of poor people in the country.

Addressing the 'BT India @100 Summit: Achieving Global Leadership' on Saturday, Chidambaram noted that India becoming the third largest economy is irrelevant to about 16% of the population, which translates into 23 crore people, that are poor according to the global multi dimensional poverty index are poor.

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His comments come in the backdrop that India, which is the fifth largest economy, is expected to turn into the third largest economy in the next few years.

He also called for a universal basic income for those who are abjectly poor, which he said is acceptable in many countries. “I have fleshed out the contours of a universal basic income in my mind,” he said, clarifying that a universal basic income would not be provided to all Indians but only to the bottom 15% or 16% of those that are poor. He clarified that this is not a part of the INDIA alliance.

The former finance minister noted that the average growth rate in the nine years of the NDA government has been 5.7% as against 8.5% growth rate in the first five years of the UPA government (2004-2009) and 7.5% in the entire 10 year term.

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Talking to India Today & Aajtak News Director Rahul Kanwal at a session titled "An Alternate View of India@100", Chidambaram spoke on the possibility about India turning into a developed country by 2047 as contended by the government. For that, India would have to grow at 7.5% to 8% to become a middle income country by 2047, he said.  

“It depends on your definition of development. A middle income country must have $10,000 -$12,000 per capita income, we are at about $2,500 per capita. By 2047, if we grow at 7.55% or 8%, we could become a middle income country,” he said, adding that if we grow at the current rate of 5.7% on average, this will not happen. He also stressed that India cannot become an economic power without sufficient growth of at least 7.5% to 8%.  

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Asked about India’s presidency of the G20, he noted that it comes every 20 years and was previously hosted by India in 2003-04 when Atal Bihari Vajpayee was the Prime Minister and Yashwant Sinha was the finance minister. “The hype about the G20 presidency is extraordinary,” he contended.

India is likely to host it again in another 20 years he noted, but stressed that “our place in the G20 would be determined by our economic strength and also by our political strength”. “We must address issues of abject poverty, unemployment, he stressed, adding that a coalition government can do as well as a single party government,” he said.

Earlier in the day, World Economic Forum President had spoken about the G3 or a new global order with China, US and India when India would be a $10- trillion economy. Chidambaram, however, contended that he would be happy in terms of India being part of the G3 in terms of high per capita income and not just GDP growth.

Price rise  

Chidambaram also highlighted the high inflation in the country and noted that there seems to be a difference of opinion amongst the Reserve Bank of India Governor Shaktikanta Das and Finance Minister Nirmala Sitharaman over the best tool to control it.

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“Today, inflation is the top issue. RBI Governor and finance minister don’t see eye to eye on it,” he said noting that while the RBI Governor has indicated that the central bank is monitoring inflation and could possibly increase rates again, the finance minister has said interest rate is not the only tool to control inflation.

Trade barriers

On India’s trade barriers and the focus on AtmaNirbhar Bharat, Chidambaram said we should not compare India with America. “America is the powerhouse of technology; they are not dependent on imported technology like we do. We are dependent on investment, which is foreign investment, imported technology and export markets….if we pull down the shutters, we are the losers. We have to open up, not close down,” he stressed.

Retail inflation hit a 15- month high of 7.44% in July with food items such as tomatoes and other vegetables registered an uptick in prices.  

When asked why he thinks it is not working, he noted that India is still not manufacturing mobile phones, it is only assembling mobile phones.

Goods and Services Tax

Chidambaram also noted that the current goods and services tax regime needs to be reviewed and a single rate GST must be introduced. “This GST is a terrible GST,” he said, adding that if the government is replaced by another government, there will be GST 2.0. “This GST would be scrapped,” he said, adding that there would be a single rate depending upon the economic situation.

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He referred to the report by former chief economic advisor to the finance ministry Arvind Subramanian, which had called for single low rate of GST with practically no exemptions.

At present, India’s GST regime has five broad rates of zero, 5%, 12%, 18% and 28% as well as a cess that is levied above the highest rate on specified luxury and demerit goods.  
 

BT India @100: Decoding the Megatrends for Mission 2047. All the updates

Published on: Aug 26, 2023 7:48 PM IST
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