Former Finance Minister P. Chidambaram criticised the financial package announced by the Centre on Wednesday, describing it as a “cruel blow” to the lakhs of migrant workers who have been the worst-hit by COVID-19 related restrictions and a let-down in terms of expectations of a cash transfer for the bottom half of the population.
Reacting to Finance Minister Nirmala Sitharaman’s announcement of the first tranche of the Centre’s Rs 20 lakh crore financial package, Chidambaram said that except for the modest concessions made for the Medium and Small Sector Enterprise, the Congress is disappointed with the announcements.
“Let me first point out that there is nothing in what the FM said today for the lakhs of poor, hungry and devastated migrant workers who have walked, and many thousands are still walking, back to their home states. This is a cruel blow dealt to those who toil every day,” said the senior Congress leader.
He said that there is also nothing by way of cash transfer to the bottom half of the population or 13 crore families that have been pushed into destitution. He pointed out that just a day ago, noted economist Prof Thomas Pikketty pleaded for cash transfers to the poor.
The Congress has been demanding from the Centre that it should immediately announce cash transfers to the poor families, arguing that this would boost demand. In line with its proposal of a minimum income guarantee scheme, the party has asked the government to transfer Rs 7,500 each to the accounts of the poor, estimating that it would cost around Rs 65,000 crore.
Chidambaram acknowledged that the finance minister announced some support measures for MSMEs, but said that the announcement was skewed in favour of the larger 45 lakh MSMEs. “I think the bulk of the 6.3 crore MSMEs were left high and dry,” he said.
He also said that while he welcomed the offer of subordinate debt of Rs 20,000 crore and equity corpus fund of Rs 10,000 crore, he we will await the “terms and conditions”, noting that the devil is in the detail.
On the credit guarantee fund, he said it is not the entire fund that will be actually spent and the expenditure will be limited to the extent of NPAs in the outstanding guaranteed credit to MSMEs. Assuming an NPA level of 20-50 per cent, the actual expenditure over the period of the loans, which may be years, will be a maximum of Rs 3,00,000 crore, he said.
“We will also count the Rs 30,000 crore credit guarantee to NBFCs. We will therefore include Rs 3,60,000 crore in the Rs 20 lakh crore package,” said Chidambaram.
The former finance minister said that the announcements comprised liquidity-related measures, which do not amount to fiscal measures of support. He said that nowhere in the world are they included or counted in a fiscal stimulus package.
Chidambaram also asked where the rest of the Rs 16.4 lakh crore is. “This government is a prisoner of its own ignorance and fears. The government must spend more, but it is not willing to do so. The government must borrow more, but it is not willing to do so. The government must allow states to borrow more and spend more, but it is not willing to do so,” he said.
