The Union government should print bank notes or borrow more and spend aggressively without bothering about fiscal deficit, former finance minister P Chidambaram has said.
His remark came a day after reports said the GDP had shrunk by 7.3 per cent in fiscal 20-21.
Chidambaram said India has space and sovereign right to print money. He also favoured direct cash transfer to beneficiaries. “The PM said, ‘We give free ration.’ It translates to ₹32 per head. More and more economists are supporting cash transfer to the needy.”
The former FM also feared that the non-payment of the GST revenue share to states would affect the vaccination drive as the economic situation has already pushed millions of people below the poverty line.
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“My advice to the government is to act boldly and spend. Borrow or print money and spend,” he said at a virtual press conference. “This is not the time to worry about the fiscal deficit. So what if the deficit grows to 6.5 per cent? We can’t lose another year like we did the last year. But the way the government is reacting, we are going to lose another year.”
The Congress leader said if the government did not take steps now, “how will you tackle the third or fourth wave?” He said Finance Minister Nirmala Sitharaman had said budget proposals would kick in. “The budget was placed on February 1. Today is June 1. How long it will take for the budget proposals to kick in?” he asked.
“When the first wave of the pandemic appeared to subside last year, the finance minister and her chief economic adviser began to sell the story of a recovery. They saw ‘green shoots’ when no one else did. They predicted a V-shaped recovery. It was a false story,” said Chidambaram.
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“What is most worrying is that the per capita GDP has fallen below ₹1 lakh, to ₹99,694. In percentage terms, it is a decline of (-) 8.2 per cent over the previous year. It is lower than the level achieved in 2018-19 (and maybe even 2017-18). The deeply worrying conclusion is that most Indians are poorer than they were two years ago,” he said.