Fuel prices will be raised a day after election results, says P Chidambaram

'A finance minister under Manmohan Singh would in 2022-23 have crafted a Budget emphasising the three Ws - work, welfare and wealth', he said

Former finance minister P Chidambaram tells Indivjal Dhasmana that the government has contained the petroleum prices due to the forthcoming assembly elections. But cutting the petroleum subsidy gives a signal that prices will rise and such signals were given by cuts in fertiliser and food subsidies too, he says. Edited excerpts:

The Budget’s focus is on capex-led economic recovery. What is your take on this strategy in the context of the economy struggling to come out of the Covid-induced slowdown?
 

Our problem is not lack of capital. Our problem is lack of jobs. In India, unemployment is at a very high level. The urban unemployment rate is about 8.2 per cent. The rural unemployment rate is about 5.6 per cent, which is mostly because of the disguised unemployment. What we need are job-creating investments, not capital-intensive investments. We have abundant capital, we don’t have jobs. Therefore, I protest, I reject an approach which is based on capital-intensive investment.

In your press statement, you have criticised the Budget on fiscal prudence too. Had the Budget addressed so many concerns as underlined by you, would that not have widened the Centre’s fiscal deficit?

I am not unhappy that they did not compress the fiscal deficit too much. This is the time when there must be fiscal liberalisation. You are reiterating that you will reach the four per cent fiscal deficit target in 2025-26, three years from today.  If that is your goal, this compression of 0.5 percentage points for the next financial year is not sufficient. You will have to still compress about 2.5 percentage points in the remaining two years. How are you going to do that?  For this year I am willing to live with 6.9 per cent of fiscal deficit.

You also said huge market borrowings will crowd out private investments but the government believes that it will crowd in these investments. How do you view the government side?
 

This is an unusual economic theory.  So far I have heard every (RBI) governor, finance minister saying that if the government borrows too much from the market, it will crowd out private borrowings because the private sector will not have enough money to borrow in the market and even if money is available interest rates will be high. This is what we have heard for the last 20 years. Today, you turn it around on its head and say if the government borrows more, it will crowd in private investments. This is illogical. Either what you said for 20 years was wrong or what you say now is wrong. I think what you say now is wrong.

According to your press statement, every kind of subsidy was cut in the Budget. Don’t you think this was part of fiscal prudence?
 

Absolutely wrong. People are suffering from high inflation today. WPI (inflation) has crossed 12 per cent and the CPI (inflation) is touching the upper limit of six per cent. This is not the time to cut subsidies when inflation is high, people have lost jobs, lost incomes and they are suffering because of the pandemic. Crude oil prices have touched $90 a barrel, so petroleum prices will normally rise. The government has contained it because of the elections. You take it from me petroleum prices will rise after the date of counting. You have a petroleum subsidy of Rs 6,517 crore in the current year and you are reducing it to Rs 5,813 crore in the next year. What is a signal? The signal is crude oil prices will rise, I am cutting my subsidy. Be prepared, prices will rise. The same thing is with fertiliser. So what do they tell the farmers? Brace yourself, fertiliser prices are going to rise. There is the cruellest cut in the food subsidy. The current year subsidy is Rs 286,469 crore. You have cut it to Rs 206,831 crore, a cut of Rs 80,000 crore, about 40 per cent. What does that mean? Either you will reduce the ration quantity, which is difficult. Therefore you will increase the price.

You also said there was no word in the Budget about raising resources from the 142 super rich.
 

I am not against wealth creation. I even support wealth accumulation because new wealth is new capital and new capital is new investment. The point is at what point wealth creation should stop. Put some ceiling, some cap somewhere. What is this Rs 53 trillion wealth for 142 people. This means Rs 37,000 crore is the average wealth (per person) of these 142 people. This will perhaps grow this year and next year. When will this stop? If there are so many wealthy people beyond our imagination, you should tap into that wealth.

You described the Budget as capitalist. Why such a sudden angst against capitalism?

I have no angst against capitalism. I believe that regulated capitalism is a driver of a competitive economy and a competitive economy grows faster and creates more wealth and it can share more wealth with people. But at the same time there must be welfare. There is not a word (in the Budget) about cash assistance to very poor, not a word about 46 million people who have been pushed into extreme poverty, not a word for those who have lost jobs, not a word about six million MSMEs who have been shut down, not a word of comfort or a gesture to 84 per cent households that have lost income. Therefore, I called it a capitalist Budget.

What would you have done in this Budget had you been the finance minister?
 

A finance minister under Narendra Modi has nothing to do. The finance minister only has to read a speech drafted in the PMO. So you must tell me the finance minister under which prime minister?

Say under Manmohan Singh…
 

A finance minister under Manmohan Singh would in 2022-23 crafted a Budget which emphasises on three Ws — work: how do you create jobs; welfare: how do you reach out or make gestures or comfort people who have suffered in the last two years; wealth: how do you create wealth. All three Ws would have been balanced in a Manmohan Singh government’s Budget.

But will you credit this government for not succumbing to populism even when elections to five assemblies are around?
 

What they are saying is that five elections are around the corner. I would have normally been populist, this time I have restrained myself, I have not been populist. You want to congratulate the finance minister for not doing a wrong. You have to do the right thing if you need my congratulations.