Chennai: Former Union Finance Minister P. Chidambaram spoke to ETV Bharat on a range of issues the Indian Economy is facing.
In this exclusive interview the Senior Congress Party Leader, who is known for his incisive understanding of the domestic and global economy and sharp criticism against the Narendra Modi-led NDA Government, puts forth his views on the current slowdown in Indian economy, efficacy of reduction in corporate tax rate and issue of Non-Performing Assets (NPAs) among others.
Excerpts from the Interview -
Question: You said the country’s economy is in ICU, but the government is denying. The Government is also saying that its recent reforms are delivering results. How do you respond to that?
Answer: I didn’t use the word ICU. In fact, it was used in an interview by Dr Arvind Subramanian, who was the Chief Economic Advisor (CEA) to this government until a few months ago. If the government wants to answer Dr Arvind Subramanian I have already appealed to the Finance Minister to give their version. But, they won’t.
This government believes in bluff and bluster. They are not willing to deal with facts and figures. And, therefore the government says that the economy is doing well; I am afraid, only the government believes that. Nobody believes that the economy is doing well.
Question: How do you see the government's recent reforms to revive the economy like the reduction in corporate tax rate?
Answer: I don't think corporate tax rate cut is a reform. In fact, it is a wrong thing to do. When there is demand constraint, when there is no purchasing power in the hands of people, if you want to cut taxes - you have to cut indirect taxes. Corporate tax is a direct tax, it is a progressive tax and it is a wrong tax to cut.
Question: You have said that the government data is not believable and the government has to take measures to make the data accurate. Government has recently made a panel to study this issue. How do you see this?
Answer: It is a belated acknowledgement that the credibility of government data is under question. They suppressed the NSSO data on unemployment, they have suppressed a survey on fall in consumption in rural India.
I welcome the appointment of commission/committee under Dr. Pronab Sen.
But, they should act quickly and restore the credibility of data. India’s data was credible until 6 years ago. It has lost its credibility in the last 6 years.
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Question: The government is saying Non-Performing Assets (NPAs) are coming down. How do you see this? You have suggested complete reforms in the financial sector. What are those suggestions?
Answer: I am not suggesting reforms. They have to suggest reforms and ask our opinion. We are asking on behalf of the people and they are in a position to answer.
They are not our master and ask us questions and we will give answers.
As far as recent data of NPAs are concerned, it is a cosmetic exercise. They have shown a marginal reduction in NPAs for about 10% or 9.6% by indulging in massive write offs.
If you write off the loans, the numerator gets reduced. But the RBI report released a few days back said NPAs are going to rise again in the next six months.
Question: How do you see the employment situation in the country and the impact of slow down on the common man?
Answer: Employment rate has been falling. CMIE data shows the employment has fallen between 3 and 4 crores in last few years. And there is no other data to contradict CMIE data.
We don't see great recruitment done by the private sector. Therefore, my conclusion is that employment is falling after demonetisation and it continues to fall. In the present slowdown it is logical conclusion that employment will fall.
But the government is in denial. We know as a matter of fact and intuitively, the employment is falling and has fallen.
Question: Is it a proper solution to cut personal income tax to tide over the current slowdown?
Answer: This is not the correct time to cut income tax rates. If you want to cut any taxes – you must cut indirect taxes – which is customs duty and Goods and Services Tax (GST).
