Kolkata: The Narendra Modi government failed on the test of fiscal consolidation and the people of this country will pay the price for it, former Union Finance Minister P. Chidambaram said on Monday.
“Starting from 4.5 per cent, the present government should have brought down fiscal deficit to three per cent in 2016-17. They twice postponed it and they said they would do in 2017-18. Last year they said they would do in 2018-19.
“In 2017-18, the fiscal deficit is supposed to be 3.2 per cent, but in the budget he (Finance Minister Arun Jaitley) has done 3.5 per cent. Next year, it should have been 3 per cent but he said he would do 3.3 per cent. On the test of fiscal consolidation, the government has failed,” he said.
“From 4.5 per cent to 3.3 per cent of fiscal deficit, it is a reduction of 1.2 per cent in five years,” Chidambaram said, adding that when the UPA government left office, it had brought down the fiscal deficit from 5.9 per cent to 4.5 per cent — a reduction of 1.4 per cent in two years.
The UPA government had also brought down revenue deficit to 3.2 per cent and current account deficit 1.7 per cent, he said at an interactive session organised by the Bharat Chamber of Commerce.
“We achieved reasonable fiscal consolidation,” he said, noting that fiscal stability is the base on which any economic policy can be constructed and without fiscal stability and nothing can be achieved in any country.
Out of 3.5 per cent of fiscal deficit in the current year, revenue deficit was 2.6 per cent, he said, adding that the government is borrowing for revenue expenditure, not for capital investment.
Explaining on the budgetary numbers, he said the nominal GDP growth was 10.5 per cent and gross tax revenue increased by 13.42 per cent in 2017-18.
For 2018-19, the nominal growth is projected at 11.5 per cent but gross tax revenue is supposed to jump from 13.4 per cent to 16.7 per cent.
“How does an additional one per cent in nominal GDP growth give you revenue buoyancy of about 3.3 per cent? This is a question the economists are asking. But there is no answer,” he asked.
The breaking down of tax revenue numbers showed the corporation tax is supposed to grow by 10.1 per cent, income tax to grow by 20 per cent and GST (Goods and Services Tax) is supposed to go up by a whopping 67 per cent, Chidambaram said.
“The current year, you (the government) took a hit on GST… The GST network is still wobbly, the e-way bill has been postponed, people are still complaining about filing too many returns… The GST is still a problem child.
“How do you project the GST revenues will go up by 67 per cent especially when you are bringing down the rates on the high value items? Therefore, the revenue numbers are suspect,” he said.
Farmers and youth of the country are “in distress” as the government has failed to provide relief to the stressed agriculture sector and to create jobs for youth, said the Congress leader.