We don’t see a ‘V’ shaped recovery. We feel the recovery, slow & painful, will leave millions of households struggling to survive, it will resemble the letter ‘K’ : P Chidambaram

Special Congress Party briefing by P Chidambaram, Mallikarjun Kharge and Jairam Ramesh :

The Budget for 2021-22 will be presented four days from now. The Congress party wishes to place before the people its assessment of the year that will conclude on 31-03-2021 and a list of things that need to done in 2021-22.

We have no expectations this govt will accept our assessment or heed our diagnosis & prescription for economy. We know this govt is exceptionally obstinate, impervious to good advice, uncaring about calamitous consequences of its economic policies.

The Budget for 2020-21 began to unravel within weeks of its presentation. The Congress party had, even at that time, pointed out that the assumptions behind the Budget were wrong and the targets set were unattainable

Even without pandemic, economy would have continued on downward path that began in first quarter of 2018-19 and continued for eight successive quarters. The pandemic pushed economy into an abyss: -23.9 per cent in Q1 of 2020-21 and – 7.5 per cent in Q2

The current Finance Minister has the distinction of presiding over the first recession in four decades.The year 2020-21 will end with negative growth. None of the numbers estimated at the beginning of the year will be achieved

Revenue targets will be missed by a large margin, capital investment will take a hit, revenue deficit will near 5%, fiscal deficit will exceed 7%. No point in wasting time over Budget 2020-21. It was a disaster at the start it’ll be a catastrophe at the end

We are afraid that the FM will present a dressed-up Revised Estimates for 2020-21 and attempt to build an attractive narrative for 2021-22. The RE for 2020-21 will be a set of false numbers and, therefore, the BE for 2021-22 will be a conjurer’s illusion

We believe that the reality is-

  • the economy is in a recession, the recovery will be slow and painful, and the rate of GDP growth in 2021-22 (in constant prices) will be modest, no more than 5%
  • current unemployment rates- rural- 9.2%, urban- 8.9%. Unemployment level in 2021-22 will remain high, most jobs lost will not come back, new jobs creation rate will be low. Wage cuts in organised sector may be restored, real wages will not grow in 2021-22.
  • agriculture will grow at a satisfactory rate if the government does not arbitrarily disrupt the sector with anti-farmer laws and retrograde import/export policies for agricultural produce
  • the industry sector will not attract huge investments because of low savings rate, inadequate credit growth, protectionism, crony capitalism, encouragement of monopolies, a climate of distrust and vindictive administrative actions.
  • services sector will achieve moderate growth as it’ll be technology-driven, but growth rate of jobs in that sector will be low
  • exports & imports will be in doldrums because of protectionist policies and the world economy not fully recovering in 2021-22
  • the current rates of inflation are high and painful, but it is likely that any further increase in inflation may be contained by rate hikes by the RBI
  • because of mishandling of economy & govt’s underwhelming response to pandemic, economic inequalities have grown. Oxford report- ‘Inequality Virus’ shows vast majority have lost incomes & livelihoods while a tiny few on top have multiplied their wealth.

Seven years of the Modi government have wrecked our economy and the prospects of high growth. Dr Arvind Subramanian, former CEA, described the period 2004-2010 as the golden years of the Indian economy

The equivalent period of 2014-20 has witnessed the slow but inexorable descent into a deep hole. The conclusion of a recent study by Brookings using IMF and World Bank data is humiliating but not surprising at all.

Biggest rise in poverty will be in India and India will overtake Nigeria and become the country with the largest number of poor people. That is the contribution of the Modi government at the end of seven years.

We don’t see a ‘V’ shaped recovery. We feel the recovery, slow & painful, will leave millions of households struggling to survive, it will resemble the letter ‘K’. As a result, inequality will increase. Those who are behind will be pushed back further

We recognize that there are some imperatives that fall outside economic management such as (a) increase in expenditure on health infrastructure and (b) increase in defence expenditure. We will support significant increase under both heads.

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