P Chidambaram writes: Crucial questions, cautious answers

The very large amount included a small sum of Rs 500 crore for Defence capital expenditure for construction of strategic and border roads in the Northern and Eastern states of the country. (PTI Photo)

P Chidambaram writes: Since you want Rs 500 crore for Defence capital expenditure, will you please tell us if China has conceded anything on Hot Springs; if China has agreed to disengage in the Depsang plains and the Demchok junction…

Written by P Chidambaram 

December 25, 2022 7:16:51 am

In an unusual turn of events last week, the duration of the sessions of both Houses of Parliament was abruptly curtailed and both Houses were adjourned on December 23, 2022. It seemed that the government was keener than the Opposition to end the sessions early.

Before Rajya Sabha (RS) was adjourned, there was — again unusually — a civil discussion on the Supplementary Demands for Grants for fiscal 2022-23 and the Appropriation Bill to authorize the expenditure of Rs 3,25,756 crore (additional cash outgo) and Rs 1,10,180 crore (where expenditure will be matched by savings). The very large amount included a small sum of Rs 500 crore for Defence capital expenditure for construction of strategic and border roads in the Northern and Eastern states of the country.

I opened the debate. I did not want it to be another fruitless debate where there are questions from the Opposition and no answers from the government. I flagged past experience and hoped it would be different this time.

It was indeed different. There were questions and, to my pleasant surprise, there were answers — some ambiguous, some cautious and some non-answers. The questions and answers, closely analyzed, will bear out the apprehension expressed by former RBI Governor, Dr Raghuram Rajan, that growth in 2022-23 will be moderate and the economy will face heavy weather in 2023-24.

Now, to my questions and the Hon’ble Finance Minister’s (FM) answers:

1. Since the Budget documents project a nominal growth rate of GDP of 11.1 per cent in 2022-23, what will be the inflation rate and what will be the real GDP growth rate? (It is a thumb rule that inflation rate + real growth rate = nominal growth rate).

There was no direct answer. No break up was given. To be fair, to my second question, the FM hinted that the nominal growth rate may be higher but gave no number or the break up of that number. It was an unsatisfactory answer.

2. How will the government raise the additional sum of Rs 3,25,756 crore?

(a) Government already has the money because it has collected more revenues than the budget estimates;

(b) Government will borrow more;

(c) Government expects the nominal growth rate to be more than 11.1 per cent and hence, even if it borrows more and spends more, it will meet the target of fiscal deficit of 6.4 per cent;

(d) None of the above.

The FM re-affirmed her resolve that the fiscal deficit (FD) target of 6.4 per cent will not be breached. She also hinted that tax collections, at this point of time, were higher than the Budget estimates. Translated into simple English, the government hopes that buoyant revenues will yield the additional sum of Rs 3,25,756 crore. That hope and the implied higher nominal growth rate of GDP will put the government in a sweet spot. It was a cautious answer that leaves wiggle room in case growth is slower in the third and fourth quarters of 2022-23.

3. In 2013-14, corporate tax revenues amounted to 34 per cent of Gross Tax Revenue. In 2022-23, corporate tax revenues, as budgeted, will amount to only 26 per cent of GTR. Despite a bonanza of 8 per cent (roughly, Rs 2,50,000 crore), why is the private corporate sector not making investments?

The FM listed figures of investment (mostly promised, e.g., under the PLI scheme rolled out for 14 sectors) but did not applaud the private corporate sector. Nor did the FM chide them as she did when she addressed the Apex Chambers. It was clear that she was in a wait-and-watch mood. Thanks to slowing demand, inflation, rising interest rates, unutilised capacity and global uncertainties, the private sector is in a wait-and-watch mode. With both waiting and watching, it will be a year of discontent on the investment front.

4. Among the four engines of growth, apart from government expenditure, which are the promising engines?

The FM was cautious on private investment. She did not pick private consumption. She expressed a hope about exports, but we know that the trade deficit is soaring. It was a non-answer.

5. Real GDP doubled in 12 years between 1991-92 and 2003-04. It doubled again in 10 years by 2013-14. Will your government double the real GDP at the end of 10 years of your rule?

The Finance Minister was stumped. She could not say yes, she was reluctant to say no. My assessment is that the government will fall far short of the target of Rs 200 lakh crore.

6. Since you want Rs 500 crore for Defence capital expenditure, will you please tell us if China has conceded anything on Hot Springs; if China has agreed to disengage in the Depsang plains and the Demchok junction; if China has built and is building massive infrastructure like roads, bridges, communications, helipads and settlements and is amassing troops and weaponry along the LAC; does creating a buffer zone mean that Indian troops can no longer patrol in that area; and did PM Modi raise the issues with President Xi at Bali?

Since China is an unmentionable word, the FM joined the conspiracy of silence.

That, dear reader, is the state of the economy, the situation on the India-China border and the value added by a discussion in Parliament.

© The Indian Express (P) Ltd

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