Chidambaram Cautions Govt on Inflation, Queries RBI's Rate Policy

Former finance minister P Chidambaram on Wednesday warned the government against underestimating inflation, stating that every family is severely affected by rising prices. He questioned why the RBI has not reduced bank rates for 13 months if inflation is as low as claimed. Initiating a discussion on the Union Budget 2024-25 in the Rajya Sabha, he also criticised Finance Minister Nirmala Sitharaman for adopting ideas from the Congress manifesto for the proposed employment-linked incentive (ELI) scheme.

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Inflation Concerns and RBI's Role

Chidambaram argued that inflation is much higher in India's interiors than in data collected from towns and villages along highways. He took exception to the Chief Economic Advisor's statement in the Economic Survey that India's inflation is low, stable, and moving towards a 4 per cent target. "It has been moving for the last four years. When will it arrive at the 4 per cent target?" he asked. He further questioned why the RBI has not revised downward the bank rate fixed in June 2023 if inflation is indeed low and stable.

He emphasised that inflation is a humiliating situation because it affects every family. "I warn this government, you are taking inflation not so seriously. The results of the last set of by-elections in which the INDIA bloc won 10 out of 13 seats was a punishment and warning administered by the people to the NDA for high inflation," he said. "If you don't take inflation seriously, you will be punished more."

Employment-Linked Incentive Scheme

On the proposed ELI scheme, Chidambaram expressed doubt about its effectiveness, suggesting it might be an admission that the existing production-linked incentive (PLI) schemes have failed to generate employment. "Earlier, there was a production-linked incentive. When you introduced the ELI, it must be for some reason. And I suspect the reason was that the PLI scheme did not create the kind of jobs that you wanted to create," he said.

While acknowledging ELI as an interesting idea, he doubted its ability to place 290 lakh people under it. "It should not turn out to be another election jumla like your 2 crore jobs a year," Chidambaram added.

Unemployment and Economic Growth

Highlighting unemployment as a significant challenge, Chidambaram cited instances of excessive applications for limited vacancies across different states. He lamented that about two-three weeks ago, the RBI stated: "There is no jobs crisis in India." He questioned why no minister or officer stood up to reject this statement.

Chidambaram also questioned the government's methods of calculating economic growth, saying that claims of high growth have not been felt by common people on the ground. On tax relief proposed for individuals in the Budget, he said it would benefit only 2-3 crore people and asked what relief has been given to those in irregular jobs and daily labourers.

Income Disparity and Federalism

Highlighting income disparity across the population, Chidambaram said India continues to languish in the global hunger index. He noted that giving free food grain to 81 crore people is a tacit admission that many cannot afford food. "Your own action shows that people cannot afford food," he said.

The senior Congress leader also attacked the government for destroying federalism by selectively granting relief to certain states while neglecting others. "I don't grudge at all that you are giving relief to Andhra Pradesh or Bihar, but what about other states? We are a federal country. This is the death knell of federalism if you pick and choose among states," Chidambaram asserted.

Reactions from Other Parties

Radha Mohan Das Agrawal of BJP refuted opposition allegations, stating that several policies and measures have been taken for the welfare of various groups under Prime Minister Narendra Modi's leadership during ten years of NDA rule. Jawhar Sircar of All India Trinamool Congress termed the Budget anti-federal and alleged it declared an economic war on West Bengal.

NR Elango of DMK and Sujeet Kumar of BJD expressed disappointment, claiming Tamil Nadu and Odisha were neglected in Budgetary proposals. Sanjeev Arora of Aam Aadmi Party suggested increasing budgetary allocation on healthcare to 2.5 per cent of GDP as a way forward.

The discussion highlighted significant concerns about inflation, employment, economic growth calculations, income disparity, and federalism among various political leaders.