Demonetisation declined growth rate by 1.5% just as I predicted: Chidambaram

Mon, 11 Jun 2018

Demonetisation declined growth rate by 1.5% just as I predicted: Chidambaram

Former Finance Minister P Chidambaram addressed the press and the people of the country on the state of India’s economy.

1.       The RBI consumer confidence survey conducted in May 2018, found that 48% felt that economic conditions worsened in the last twelve months. The survey is unlikely to have included the most backward parts of the country or the most deprived people which would imply that the figure would actually be higher than 48%.

2.       The despondency of farmers is visible and they have come to the streets to protest. The reasons for these protests are uneconomical prices for farm produce and stagnant wages for farm labour. The few crops that have MSP it is not adequate and the annual increases have been niggardly.

3.       There is widespread anger over the artificially fixed prices of petrol, diesel, and LPG. There is no reason for the prices to be higher than they were in 2014, it is just a way to fleece the consumer.

4.       Joblessness is rampant. The only reliable data is a quarterly by the Labour Bureau reveals that just a few thousand jobs are added every quarter, a far cry from the 2 crore jobs promised per year. The quarterly survey from the Labour Bureau for October-December 2017 not yet been released. So far no one has bought the innovative idea that frying pakoras is a job.

5.       Three of the four tyres on which the economy rides have been punctured – growth rate of exports in the last four years has been negative; private investment is nearly dead, gross fixed capital formation has been stuck at 28.5% for the last three years; private consumption has been slow, it is picking up but slowly. The only tyre that is working is government expenditure but the pressure on the current account and fiscal deficit have limited their options.

6.       Adverse effects of demonetisation have been established without doubt. The growth rate declined from 8.2% in 2015-16 to 6.7% in 2017-18, exactly 1.5% as Mr. Chidambaram had predicted.

7.       A flawed GST continues to haunt trade and business. GSTR Form 2 for input tax credit and GSTR form 3 for net tax liability have not been notified so far. Tax liability is being calculated on the temporary GSTR form 3b which is illegal.

8.       Gross NPAs have risen in the last two years from Rs. 2.63 lakh crore to Rs. 10.30 lakh crore and will increase further. The government has not been able to find the additional money to recapitalise banks.

9.       Inflation is on the rise, the hike in the repo rate is proof that interests rates will rise increasing the burden on consumers.

10.   Social security laws and programmes have been neglected – the Food Security Act has not been implemented, MGNREGA is no longer demand driven, wage arrears have mounted, crop insurance covers barely 30% of farmers.

He added that the state of the world economy was not affecting India, it was a result of our own policies and reckless decisions, administrative incompetence.