Former finance minister P Chidambaram on Tuesday urged the Union government to borrow money or print bank notes and to spend it aggressively without worrying about fiscal deficit, a day after GDP shrunk by 7.3% in FY20-21.
He also apprehended that the financial crisis of the states arising out of non-payment of their share of GST revenues will impact the vaccination programme even as the overall economic situation has pushed millions of people below the poverty line.
“This is not the time to worry about the fiscal deficit. So what if the deficit widens to 6.5%? We can’t lose another year like we lost the last year. But the way the government is reacting, we are going to lose another year. My advice to the government is to act boldly and spend. Borrow or print money and spend,” he said in a virtual press conference.
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Criticising finance minister Nirmala Sitharaman, the Congress leader said, “Unless you take steps now, how will you tackle the third or fourth wave? The finance minister said budget proposals will kick in. The budget was placed on February 1. Today is June 1. How long it will take for the budget proposals to kick in?”
Advocating the option of printing money, the former finance minister said India has space and sovereign right to print money. He also pitched for direct cash transfer [to beneficiaries] and said, “The PM said, ‘We give free ration.’ It translates to ₹32 per head. More and more economists are supporting cash transfer to the needy.”
In his opening statement, Chidambaram also said, “When the first wave of the pandemic appeared to subside last year, the finance minister and her chief economic adviser began to sell the story of a recovery. They saw “green shoots” when no one else did. They predicted a V-shaped recovery. It was a false story.”
“What is most worrying is that the per capita GDP has fallen below ₹1 lakh, to ₹99,694. In percentage terms, it is a decline of (-) 8.2 per cent over the previous year. It is lower than the level achieved in 2018-19 (and maybe even 2017-18). The deeply worrying conclusion is that most Indians are poorer than they were two years ago,” he said.