P Chidambaram, former finance minister, is blunt in his criticism of the Interim Budget. The FRBM Act is as good as having been thrown out of the window, he fires a salvo. Chidambaram told ETNow that interim Budgets are not supposed to make permanent changes to the Income Tax Act or direct tax laws.
What has widely been said about this Budget is this is a please-all, smartly packaged election Budget?
Well, whether it is smartly packaged or not will be known in the next few days. It will begin to unravel. It is already unravelling. Take for example, this Rs 6,000 bounty they have announced for the farmers, you break it down it works out to Rs 17 a day per family, if you take a family of four or five it works out to Rs 3-4 per person per day and on the other side, the calculations show that on fertiliser, on diesel, on electricity, on seeds, a farmer has to spend an additional about Rs 24,000 today.
How does it help that a farmer with one acre and a farmer with four acres get the same amount? A farmer with four acres will have at least twice or thrice the expenditure of a farmer with one acre. How does this kind of a uniform Rs 2,000 in three instalments help the farmer who produces the surpluses of this country? The farmer with three or four acres is the one who produces surpluses.
It will unravel more as we do the maths more carefully.
I did ask this question to Finance Minister Goyal and his response was that this is not just one income, this will be supplementing what is an added one. This is an added source of income, sort of a helping hand. Can you quarrel with the fact or the idea that agriculture needs a helping hand?
It does, but this is measly which is why Congress president said our minimum income guarantee will bring every farmer one acre, two acre, four acre farmer to a minimum level of annual income, but this does not. Please tell me how is it justified to give the same amount of money to a farmer who has one acre and a farmer who has got four acres.
There was a lot of fear and people were preparing and bracing for a lot of fiscal profligacy. Will you at least grant them the fact that they have not been fiscally irresponsible in an election year?
What else is this? They were supposed to achieve 3 per cent in 2017-18.
We were supposed to get to 3 per cent in 2008 as well?
No. We got into 3 per cent in 2008, please look at your budget numbers, in 2007-08 we achieved below 3 per cent, just a shade below 3 per cent. We slipped because of the international financial crisis. Therefore we did achieve the 3 per cent by 2007-08 their goal was 2017-18. Now, they have pushed it back by one year to 2018-19 and they did not achieve the 3.3 per cent, they have achieved 3.4 per cent and I believe it is understated by 0.3 per cent.
Why do you say that?
Because they have not provided for the amount they have spent or have to spend on liability incurred at least on one major program Ayushman Bharat, the health for all scheme. And for the next year instead of reducing the fiscal deficit, they keep it at the same 3.4 per cent. Already the bond prices have hardened because the analysts and the market is reacting that you have not kept your commitment to fiscal discipline.
As I said the FRBM (Fiscal Responsibility and Budget Management) Act is as good as having been thrown out of the window.
But is fiscal discipline a war cry at a time when agriculture is languishing? If they were not going to do anything in the Budget, then they would have been accused of having apathy towards agriculture. It is a very very tightrope walk?
Agriculture has its ups and downs, is it the first time that farmers are in distress, the point is this is an interim Budget. You had no business to make these announcements and announce these grand schemes without providing money. This should have been left to the next government. Suppose there is a new government. That new government must have the freedom and the play to devise its own programmes. You are now leaving behind a lot of mess which the new government may want to clean up and will waste a whole year cleaning up this mess.
Each government is entitled only to five years, you should have done all this last year. You slept for five years, suddenly wake up, realise that you may not come to power and in a desperate move to come back to power, you announce something which ties the next government, which is unethical, illegal and unconventional.
They believe that with this one move, they have been able to recapture imagination, capture some of the narrative back that you tried to stump them with your minimum income guarantee programme. Is the Congress Party’s big grouse a) that it is retrospective and this begins from December 2018 and the fact that it could potentially bring the BJP to recapture the narrative on elections and otherwise?
The BJP’s PM Kisan is not going to recapture any narrative, they have lost it. For four years, they did not give a proper MSP, they did not address the farm distress, they did not waive the loans in states where there was cry for loan waiver and the farmer has sunk deeper and deeper into debt and distress. The average debt of a farmer family in India is estimated to be about Rs 90,000. Now for five years, you do nothing, five years you allow kisan marches in Bombay and Maharashtra in every state.
In Delhi even yesterday, there was a kisan march. You suddenly wake up and say I will give you Rs 17 a day, do you think the farmer is a fool to be fooled by this jumla. Our scheme is a much better scheme, it does not distinguish between farmer and non-farmer poor. There are poor farmers there are poor non-farmers, there is rural poor, there is urban poor, all the poor must be helped to come to a level and this scheme does nothing of that kind and we are not at all frightened or scared by this PM Kisan scheme. This is an insult to the farmer by giving him Rs 3.50 per person per family per day.
As a former finance minister, as somebody who has made, produced, presented Budgets, are you at least not relieved about one thing that the discussion is moving away from just blanket plane Jane loan waivers to at least looking at a more comprehensive solution and this is across the political spectrum? None of you are now just talking about loan waivers and this government has done so either.
I do not accept your argument that loan waivers are intrinsically bad. A loan waiver is contextual and state specific. It is not an answer to the problem of the farmers, it is immediate relief for the farmer who has sunk into deep debt. Please tell me how will an average Indian farmer pay back and average debt of Rs 90,000. There is no way he can pay it. Therefore the state has to step in and clean that slate.
After that and alongside that, you can announce other schemes that will address the question of infrastructure, income and the like. But I do not think the approach that you are adopting namely loan waiver is intrinsically bad is correct, it is state specific and contextual.
If you were presenting an interim budget as UPA’s finance minister this year, when there is so much farm distress, would you have opted for a loan waiver?
No, because the states have done it. Rajasthan, Madhya Pradesh, Chhattisgarh, Maharashtra and I think a couple of other states have done it. So if the states have done it, there is no reason for the central government to announce a loan waiver.
This is Modi’s offer, what is yours going to be, how are you going to better it because people have now said that are we now stepping into the realm of competitive populism and I am using that very responsibly, your minimum income guarantee versus their PM Kisan are we heading into an election period where one is going to outdo the other? How are you going to stump them further?
Do not even compare our minimum income guarantee with their measly PM Kisan. Do not even compare. This is Mr Modi’s farewell song. Five years, the government did nothing and now they want to penance for their default over the last five years. Our manifesto is for the next five years.
We are looking through the windshield, he is looking through the rear-view mirror. We are looking through the windshield to present a plan for the next five years. The MIG, Minimum Income Guarantee is one feature of the manifesto, the manifesto will have several sections, the one section about relief to the poor which springs from our belief that the poor of India have the first right to the resources of the country.
It was used yesterday as well?
A line which Goyal borrowed, he could have at least acknowledged that we had used it first, be that as it may, so we are going to announce a manifesto which covers a wide section, for example, where did this interim Budget even mention the word jobs or education in their 10-year vision. There is not a word on education. Have your read ASO report it makes for a shocking reading. We will address other issues, do not pit the measly PM Kisan Samman with our MIG and then value the two parties. Look at our whole manifesto which will come out in due course.
The Budget has enhanced the exemption limit to Rs 5 lakh from the present Rs 2.5 lakh. Can there any quarrel about the fact that the middle class that honestly pays its taxes has grinned and borne GST, demonetisation and high fuel prices?
You should have done it in five budgets. You should have waited for the…
Better late than never?
P Chidambaram: You do not have a right to do it in an interim budget, suppose the next government, forget whose government it is…
The previous governments have also tweaked direct taxes?
No, no, we have never touched the direct taxes. Listen in 2014 what did I do, I said automobile industry and capital goods deserve an immediate relief in the excise duty but I am limiting this cut to four months, it is only up to June and then the next government will come and decide whether the taxes should be tweaked one way or other. I put the industry on notice, this is not forever, this is only for four months but this is amending the Income Tax Act.
Please remember every year the Finance Bill amends the Income Tax Act. The income tax rates are only good for a year. If the same government wants to continue the rate for the next year, it has to once again propose in the Finance Bill. This has been time honoured convention and you come and in your interim budget you amend the Income Tax Act.
Now I am not quarrelling about the relief given to the middle class, you should have waited until the month of June or July and if you came back to power do it, it is the same effect. Suppose the next government wants to give relief in a different way, I am asking myself the question, suppose instead of increasing the tax rebate, they wanted to change the tax slabs.
Now first, you will have to undo this and then do it which is why interim Budgets are not supposed to make permanent changes to the Income Tax Act or direct tax laws.
So you are not in principle opposed to what they have done. You are opposed to the timing and their authority to do as they lay office?
Absolutely. They have no authority. If they wanted to do it, they should have done it in five years. Not having done it in five years. This is cheating the people. That is why I said this is not a vote on account, this is account they are giving to capture votes.
But can any government now roll this back, if you were to come back…
Well I do not know, I have not looked at the numbers but technically another government can recast the slabs and give the same relief. Technically, that is possible.
And do you believe that is a cleaner, better way to do it?
That is a question you should put to the next finance minister.
For, all you I may be speaking to one?
Well, I can assure you that the next finance minister will be a smarter chap.
The principle is to stoke consumption and it is not just with this government but governments in the past where you had a very important role and position and authority as well. Somehow, policy making is always geared towards stoking consumption and this is exactly is being done with either the farm relief that they are trying to bring about or the fact that they are trying to give these income tax sops. In some sense do you fear this could be inflationary, in some sense do you fear this is not targeted at investment but at consumption once again?
See, there is nothing wrong in promoting consumption, I have always maintained consumption drives production, production drives investment. Nothing wrong in stoking consumption, but at the same time you must provide enough for capital investment. There must be public investment as well as private investment.
Today look at their capital expenditure, their capital expenditure in 2018-19 was about Rs 3 lakh crore and their capital expenditure in 2019-20 is expected to be about Rs 3,40,000 crore but this is not enough for a country that requires massive amounts of investment. Worse is private investment is in doldrums today. What have you done to promote private investment? I speak to a large number of people, including business persons, nobody wants to invest another pie, he says we will wait and see. They are prepared to invest abroad, in their plants abroad or businesses abroad but nobody wants to invest here, we will wait and see. You have done nothing to investment, you are stoking consumption.
But does not ease of doing business that has been undertaken pave the way for private investment?
This ease of doing business is a joke. You do a survey in two cities and on two parameters like electricity and building application or something you are reducing the time by a few days and that immediately jumps your rank, what kind of a gimmickry is all this? I mean ease of doing business, you test it by going to Gorakhpur, by going to say a small town like Karaikudi and asking the young man there how easy is it to start a business.
Life is not easy there. I come from that part of the world I can tell you. I know you are no a fan of demonetisation neither am I and I think…
No, no, I have become a big fan of demonetisation. I will tell you why?
Yes. Demonetisation year 2016-17 according to this government blessed by the NITI Aayog showed the highest growth rate of 8.2 per cent. Therefore I am advocating to Modi and his government please do another round of demonetisation immediately, demonetise the Rs 100 note this time, you know growth will go up to 9 per cent.
Even as a detractor of demonetisation if I look at two numbers and I think it is only fair that you answer this question. Are tax collection jumping from Rs 6.38 lakh crore in FY14 to Rs 12 lakh crore now?
Whether you can blame demonetisation for its ills, you can blame GST for its glitches, but have not this at least expanded our tax base, are not we collecting more direct taxes than we ever did?
Every year we collect more direct taxes from the previous year, it is like Goyal said defence budget is the highest ever, next year it will be higher, it will be the highest ever, the year after it will higher, it will be highest ever. So it is like saying I have reached the highest age I have in my life, next year you will reach an even higher age, what kind of an argument is this? Tell me which year have you collected direct taxes less than the previous year?
But it’s almost doubling of direct taxes over five years.
In five years, so what is wrong with that? You look at the previous five years, I think between 2004 and 2009 also, we doubled. I mean these are all…
So you do not think it is demonetisation…
These are all playing with numbers. Anybody who understands numbers will know that these will only grow, expenditure will grow. Then he should have said the highest expenditure ever. It will always be so. The next year will be an even higher expenditure.
One of the important things and that is jobs and you are right the Budget is very quiet and very silent on jobs.
Nothing, nothing on jobs, not silent.
… but I think people will turn around and ask that you may criticise them and you are rightfully on some of the issues, but what is your alternative road map as far as alleviating farm stress or even jobs creation is concerned and is you minimum income guarantee support scheme not also a tacit admission that we will not be able to create the jobs that the economy needs and which is why this sort of a support is required?
No, no, on the contrary, today families are trapped in poverty and their members are unable to get out of that trap of poverty and go and try this and try that. Once you assure a family that your income will be brought up to a minimum level, that will encourage younger family members to go out and try new things.
Actually, they will become more creative, more entrepreneurial, more enterprising. I am not saying it will happen in every family but a large number of families will say well now that may family’s minimum income is guaranteed let me go and try this, let me go and try that. Be that as it may, we will have a plan for creation of jobs and you will see that in our manifesto.