‘Will Messenger of God Answer?’: Chidambaram Slams FM on Economy

In a series of tweets on Friday, Chidambaram reflected upon the Centre’s two options for compensating states.

Taking a dig at the Finance Minister Nirmala Sitharaman's 'act of God' comment amid the coronavirus outbreak, senior Congress leader P Chidambaram on Saturday, 29 August, questioned the "mismanagement" of the economy before the pandemic struck India. "Will the FM as the Messenger of God please answer?" he wrote in a tweet.

In a series of tweets on Friday and Saturday, Chidambaram reflected upon the two options for compensating states, proposed by the government in the 41st GST Council meeting held on 27 August.

In the meeting, Sitharaman had also stated that the pandemic was an "act of God, which might even result in a contraction of the economy" in the current fiscal.

This prompted Chidambaram to question the "mismanagement of the economy" in the three years before the pandemic struck.

The two options given by the Centre to the states are:

• To borrow up to Rs 97,000 crores at a reasonable interest rate.
• To borrow the entire GST compensation gap of Rs 2,35,000 crore of this year.

Chidambaram on Saturday condemned the Centre for "absolving itself of any financial responsibility," calling both the options put forth by the Modi government as "unacceptable."

Under one option, “the States are asked to borrow by pledging their future receivables under Compensation cess," he stated, while in another option, "States are asked to borrow from the RBI window. It is more market borrowing, only by a different name."

In both the cases, “the financial burden falls entirely on the State,” Chidambaram added.

Reject Both Options: Chidambaram Rallies The States

In another set of tweets on Friday, Chidambaram went on to accuse the government of financially crippling the states and reducing them to "beg money from the Centre," and called for the rejection of both the options.

He rallied the states to demand, "in one voice," for the Centre to "find the resources," since "the obligation to compensate the States falls solely on the central government," by law.

Earlier, BJP leader and Rajya Sabha MP Subramanian Swamy had also questioned whether "the decline in annual growth rate in GDP from 8 percent in FY15 to (1st Qtr 2020) 3.1 percent pre-COVID-19” also was an act of God.

The GST Council Meeting

Addressing the media after the 41st GST Council meeting on 27 August, Finance Minister Nirmala Sitharaman had said that two options of compensating states were discussed at the 5-hour-long meeting.

"Option 1 presented to the GST Council was to provide a special window to states, in consultation with RBI, to provide Rs 97,000 crores at a reasonable interest rate... Option 2 presented to GST Council was that the entire GST compensation gap of Rs 2,35,000 crore of this year can be met by states, in consultation with RBI. These options will be sent to states for a view within seven days and will apply for this fiscal year only," Finance Secretary Ajay Bhushan Pandey was quoted as saying at the briefing.