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Why Chidambaram is a disaster as finance minister

February 05, 2014 16:07 IST

'Chidambaram, lots of people argue not without justification, is all about bluff and bluster without any concrete achievement on the ground. His record in the finance ministry fully endorses that view,' argues Virendra Kapoor.

Palaniappan Chidambaram is probably right. Narendra Modi's knowledge of economics is so scanty, so sketchy, that it can all be written on the back of a postal stamp.

Clearly implied in that barb is the claim that the Union finance minister is an economic wizard. And of what sort is not hard to find.

From the top-most corporate honchos to the 'aam aadmi' in Delhi's Chandni Chowk area, there is near unanimity that Chidambaram, the great economic pundit that he is, has presided over the ruin of the national economy.

By all accounts, the economy is in the worst crisis since the start of the liberalisation process in the early 1990s. It will be a miracle if growth touches the five percent mark this year.

As for Modi, well, the people of Gujarat cannot be fools, having elected him thrice in a row on the back of a very sound management of the state's economy.

Now, if you said that economic experts like Chidamabram are dime-a-dozen, and, you may like to include in that list Prime Minister Manmohan Singh and his alter ego Montek Singh Ahluwalia as well, but non-experts who actually do an excellent job of managing the economy, for instance, Modi in Gujarat, are hard to come by, you wouldn't be entirely wrong.

Small wonder, then, there is a buzz in the country about Modi while Chidambaram is hard put to locate a safe seat for himself which will return him to Parliament.

By the way, whether he won his parliamentary seat last time around fairly and squarely is a question that is yet to be settled by the courts, though his five-year term is about to end.

Since we lay no claim to being economic experts, certainly not in the league of Chidambaram who has the unusual ability to sell 'Dream Budgets which eventually turn out to be nightmares for the health of the economy, we will stick to the reported facts.

Let us begin with the furious pace with which the finance minister is engaged in passing the burden of the election-eve goodies to the next government.

In order to earn brownie points for containing the fiscal deficit within the budgeted 4.8 percent of the GDP, he is leaving a huge burden of unpaid bills for the next government.

The under-recoveries of the oil marketing companies alone are said to be over Rs 1.4 lakh crore.

Three more LPG cylinders, granted as per the wishes of Rahul Gandhi, will add another Rs 5,000 crore to that Rs 1.4 lakh crore bill on account of LPG, diesel, kerosene subsidies, but which Chidambaram would pass on to the next government.

This business of rolling over the expenses to cook up the budget figures is akin to a man who borrows from A to pay B and then tells them to settle the issue between themselves while he himself seeks to leave the scene.

Chidambaram may not be even an MP when the next government is formed, considering media reports which said that because of the strong anti-Congress, anti-Dravida Munnetra Kazhagam mood in Tamil Nadu he may opt out of the race altogether.

But he is making sure that his successor in finance does not have an easy time clearing the mess after him.

Even on meeting the budgeted target on current account deficit, Chidambaram has indulged in underhand practices. For, the ten percent duty on gold imports only officially reduced the import of yellow metal, but unofficially it caused a huge spurt in its smuggling.

Encouragement to the hawala trade was a clear outcome of the harsh duty on gold imports. Realising his error, he now says he might reduce the duty on gold in March.

Why March? Because in February he would have exercised the boasting rights in Parliament that he had succeeded in bringing down the trade deficit to the budgeted limits.

It is the same 'After me, the deluge' syndrome at work.

Likewise, public sector units are being pressured to cough up higher dividends so that the FM can meet the fiscal targets.

Coal India Ltd, which has not developed a new mine in years, was made to pay a record interim dividend of Rs 29 per share, which enriched the national treasury richer by some Rs 18,000 crore, including the Rs 3,000 crore dividend tax.

Likewise, other agencies are under pressure to help the FM meet the 4.8 percent deficit target.

But at what cost?

Outlays across various sectors are slashed, defence purchases are on hold, social sector schemes and infrastructure projects are denied the requisite funding. Even the outlay for the Delhi Metro has been cut.

In short, the red line drawn by Chidambaram around that 4.8 percent target which he has committed not to cross has become a millstone for the growth of the economy.

Putting personal ego ahead of the national interest has virtually derailed the economy.

Meanwhile, do you recall what Chidambaram had said about the Aadhar-based cash transfer scheme? A game-changer. Yes, a game-changer. That had earned the finance minister bold headlines in the national media.

Last week, the United Progressive Alliance government of which Chidambaram is the senior-most minister, abandoned the direct cash-transfer of LPG subsidy to the targeted groups. So much then for the efficacy of the self-anointed economic expert!

Chidambaram, lots of people argue not without justification, is all about bluff and bluster without any concrete achievement on the ground. His record in the finance ministry fully endorses that view.

Look at the number of foreign companies operating in India which are facing trouble at the hands of the taxmen. Is that how you facilitate foreign investment in the country?

Why not ensure complete transparency in tax matters so that foreign companies are in no confusion as to their tax obligations?

Virendra Kapoor