Former finance minister P Chidambaram on Wednesday, 2 September, said that since GDP contracted by 23.9% in a country which has a low per capita income and which is already close to 35-40% below poverty, it is a massive blow.
Speaking to The Quint's Editorial Director Sanjay Pugalia, Chidambaram said that the Modi government’s mismanagement of the pandemic and the economy has plunged millions into poverty.
The former finance minister said “among the large economies, the worst affected is United States, the second worst affected is India, other large economies like China, Japan, France, Germany, UK, in top seven or eight, have been able to contain the damage to a single digit number, only one of them maybe in double digit number”.
India’s gross domestic product (GDP) dropped by 23.9% in the first quarter of FY 2020-21, revealing the extent of damage the pandemic has caused to the country’s economy.
If Consumption Falls Drastically, Rate Cuts Won’t Help: Chidambaram
“Merely rate cuts will not help, people need to have money to consume, to buy things, 24% fallen output means corresponding fall in jobs which produce that output, even 10-15% fall in number jobs means a corresponding fall in incomes. A fall of 10-15% incomes means that so many families have become poor, therefore you have to put money in the hands of people, so that they can start consuming,” said the former finance minister.
Chidambaram attacked the Centre by saying the argument that the “government doesn’t have money is a myth”.
“How can government not have money? They gave a huge bonanza to the corporate sector by cutting the corporate tax rate, except the corporates, who demanded that? Which economist advised that,” Chidambaram asked.
‘Borrow, Spend And Give Money to the Poor’
Chidambaram said that the government needs to use funds for putting money in the hands of poor people who lost income in the pandemic.
“In normal times monetising is a bad idea, but do not monetise straight away, monetise that part of the deficit which you feel has reached a limit, which makes you uncomfortable, which threatens the financial stability of the society, you should borrow, spend and transfer cash to the poor,” said Chidambaram.
‘Economy Will Always Be an Issue’
Even in the most prosperous times, economy will be an issue and will bring its own problems, said the former finance minister.
“We have to work together, we have to ensure the economy keeps buzzing and booming , even when financial stability is not compromised.”
Talking about the recovery of the GDP, the Congress leader said “a recovery is when the government makes up 23.9% and register positive growth, but I am afraid that isn’t possible anytime soon, if at all it happens, it will be in 2021-2022.”
“The past three years of gross mismanagement have brought the country on its knee.”
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