Chidambaram rates Modi govt's Budget 2020 'zero'; raises questions over $5 trillion economy target

Former finance minister P Chidambaram, during an interview with India Today on Thursday, rated Modi government's Budget 2020 as "zero". He said the compelling need of the hour was to arrest the six-quarter decline and revive growth, but the budget offered nothing. "Therefore, I would not hesitate to rate it zero," he said.

On Finance Minister Nirmala Sitharaman's claim that the announcements made in the Union Budget 2020 will trigger growth, Chidambaram said: "Current year nominal growth was estimated at 12 per cent, and we ended up with 8.5 (per cent). For the next year, if you are projecting nominal growth at 10 per cent, that's not a revival. And if nominal is going to be 10 per cent, how do you (the Centre) say that the growth will be 6-6.5 per cent?"

The Congress leader said that historically, it had been seen that the difference between nominal growth and real growth was between 4 or 5 per cent. He said the Centre claimed inflation was under control. "But, is it?" he said, adding the CPI (consumer price index) inflation had crossed 7 per cent. "WPI is high, and food inflation is over 10 per cent. Therefore, every number (the Centre puts out) can be contested," he said.

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Chidambaram said during the Budget 2020 announcement, the Finance Minister claimed the economic growth slide would be arrested and that economic growth would kick-start from now. "I can't see how that'll happen," he added.

On the issue of infusion of Rs 100 lakh crore in infrastructure, Chidambaram said: "This Rs 100 lakh crore is all puffery. We have to look at real numbers. In the current year, they planned to spend (total expenditure) Rs 27,86,000 crore. They ended up spending Rs 26,98,000 crore, roughly Rs 1 lakh crore less."

He said the Centre must tell it'll raise the revenue to spend. "Even though evidence shows it's not even able to spend the money allocated, either because of lack of funds or the government does not know how to spend," he said.

On the issue of disinvestment and partial stake sale of state-owned Life Insurance Corporation of India (LIC), Chidambaram hinted the Centre's divestment target was highly exaggerated.

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"There are two issues, in the current year they planned to raise Rs 1,05,000 crore. On Budget Day, they raised Rs 18,000 crore. The revised estimate says Rs 65,000 crore. Let's assume they will raise Rs 47,000 crore in the remaining two months. Next year, they have pitched they're at Rs 2,10,000 crore," he said, adding these numbers were unrealistic.

Chidambaram said the Centre needed to tell people why it wanted to sell the LIC? "LIC is no longer a monopoly. LIC is competing with the largest insurance companies in the world. LIC is profitable, well-managed and has increased its market share last year," he said, adding that it must explain why the government puts LIC and Air India in the same boat.

On the issue of $5 trillion economy and the Centre's claim of doubling agriculture income by 2022, Chidambaram said Chief Economic Advisor KV Subramanian, in the Economic Survey 2020, shifted the $5 trillion economy goal to 2030 from 2024. "So why has he shifted the goalpost? And why hasn't the government acknowledged that?"

He said the Centre needed to first tell if the $5 trillion economy goal was nominal or real GDP? "What have you assumed dollar value of rupee? That assumption is very important before you come to the conclusion of $5 trillion economy," he said.

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Edited by Manoj Sharma