Finance Minister is whistling in the dark: Chidambaram over near-zero growth remark

Sitharaman hopes that positive growth in the third and fourth quarters of FY21 would negate the massive 23.9% contraction in GDP seen during the first quarter; Chidambaram however believes that FY21 might rather record massive negative growth of -10%.

Business Desk, ETV Bharat: Making quite an optimistic estimate on economic recovery, Union finance minister Nirmala Sitharaman on Tuesday said that gross domestic product (GDP) growth in the current fiscal year may remain near zero levels after seeing a massive 23.9% contraction in the first quarter ending June 2020.

“There were visible signs of revival in the economy, but the GDP growth may (still) be in negative zone or near zero in the current fiscal year,” Sitharaman said, adding: “This is primarily because of a huge 23.9% contraction in the economy in the first quarter of current fiscal.”

Speaking at the India Energy Forum of CERAWeek, Sitharaman said the focus for the government is on public spending to boost economic activity.

“Festive season will further spur the economy, rekindling hopes of positive growth in the third and fourth quarters”, she said, adding that GDP growth should revive from the next fiscal year.

However, Congress leader and former finance minister P. Chidambaram raised serious questions about the finance minister’s growth estimate.

Talking to ETV Bharat, Chidambaram said: “The finance minister is whistling in the dark when she says there could be near-zero growth in 2020-21 and revival will happen in 2021-22. Such soothing words do not inspire confidence in the capacity of this government to turn the economy around.”

Giving his own GDP estimate, Chidambaram said 2020-21 is rather likely to record massive negative growth of -10%. “Next year, if the government takes the right measures, we may see positive growth after September 2021,” he added.

Importantly, Sitharaman’s GDP growth figure is also much higher than the forecast given by the Reserve Bank of India (RBI) earlier this month during the bi-monthly monetary policy review meet.

RBI governor Shaktikanta Das had then said that the Indian economy will contract 9.5% in 2020-21 due to disruptions caused by the Covid-19 pandemic that has hit economic activities

Das had said that the pandemic had dealt a crushing blow to the demand, thereby severely impacting the economy.

However, he had mentioned that growth “may break out of contraction and turn positive during the January-March quarter”.