SHRI ANIL DESAI: Sir, employment is the biggest problem. If you do not have industrial growth, if you do not see your domestic industry growing, employment remains a larger question, and, that has to be attended by the Government because employment is on the decline for the last five-six years.
MR. DEPUTY CHAIRMAN: Please conclude.
SHRI ANIL DESAI: Sir, now I come to the definition given by the Planning Commission. Taking into account the way the Tendulkar Committee has submitted its Report, it is arguable; its arguments are there, and, the way you define or decide the ‘Below Poverty Line’, that has to be considered. (Time-bell) Sir, the things which are happening now are not in the interest of the nation. The UPA Government has to take some strict decisions. They have to come up not by depending upon foreign investment to come but you have to concentrate your attention on whatever resources are there within the country. Sir, India is a resourceful country, and, we can make progress and we can set an example for the world by becoming a super power. Thank you.
MR. DEPUTY CHAIRMAN: Now, Shri P. Chidambaram.
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Mr. Deputy Chairman, Sir, I am happy that we are having a debate on the state of the economy. Although attendance is sparse, I think, the speakers from all political parties have contributed to this debate. I am grateful to all of them beginning from Shri Ravi Shankar Prasad and ending with Shri Anil Desai.
Sir, the Deputy Leader of the Opposition, I think, wanted to make a thoughtful speech on the economy but felt to the temptation of straying into political arguments from time to time, and, that is perfectly understandable. It is acceptable. After all, economics cannot be divorced from politics, and, it is the politics of a political party or the politics of a Government that decides the course and direction of an economy. There can be no economic policy debate without a political or an ideological context. What was sadly missing, of course, was the political and ideological context that he sought to set at the end of his speech, and, I am afraid, it is something which I find in most well-meaning criticisms. At the end of a speech, at the end of an article, or, at the end of an essay, what is the political and ideological context that you are setting for future policy? I think, he was tempted to begin to compare the five years of the NDA Government, leaving out the first year, the short period of 13 months, with the nine years of the UPA Government and part of the tenth year. I am afraid, if you do that, you will fail. I will demonstrate by numbers. That kind of comparison will only end with egg on your face. I know, there is a popular phrase in Hindi, “तू-तू, मैं-मैं”. I do not want to do that, but the fact remains that if the Deputy Leader of the Opposition was indeed correct in his assessment of the kind of economic growth and stability and progress and development that the NDA delivered, why did they lose the election of 2004? And, if he is correct in his argument that the first five years of the UPA were an utter disaster, why did they lose the 2009 elections even more disastrously?
(Contd. by YSR-3S)
SHRI P. CHIDAMBARAM (CONTD.): So, I think, once and for all, we must put an end to this kind of odious comparisons because each period of five years of each Government is determined by a context in which the Government holds office. But since he started the argument, it would be unfair to my colleagues in the Treasury Benches, it would also be unfair to the rest of the House if I do not answer some of those charges with some facts and figures.
Let’s take growth. I put it in three columns. Imagine three columns. One is for five years of the NDA from 1999 to 2004. Another one is for five years of the UPA-I from 2004 to 2009. And the last one is for the UPA-II from 2009 to 2013. Let’s take growth. It was 5.9 per cent followed by our 8.4 per cent. And even in this four-year period, it is 7.3 per cent.
Take coal production. In the five-year period, it was 361 million tonnes. In the first five years of the UPA, it was 493 million tonnes. In 2003-04, when they left office, it was 361 million tonnes. In 2008-09, it was 492 million tonnes. And in 2011-12, it was 540 million tonnes.
Take electricity, capacity installed. In 2003-04, it was 1,12,000 megawatts. By the end of 2008-09, it was 1,48,000 megawatts. By the end of 2011-12, it was 2,00,000 megawatts.
Take generation of electricity. In 2003-04, it was 558 billion kWh. In 2008-09, it was 724 billion kWh. And in 2011-12, it was 877 billion kWh.
Take foodgrain production. In 2003-04, it was 213 million tonnes. In 2008-09, it was 234 million tonnes. In 2011-12, it was 257 million tonnes.
Take steel. In 2003-04, it was 38.6 million tonnes. In 2008-09, it was 63.4 million tonnes.
Take cement. In 2003-04, it was 117 million tonnes. In 2008-09, it was 207 million tonnes. In 2011-12, it was 230 million tonnes.
You can’t win this argument by saying that nothing has happened in nine years, that we have not added to capacity, that we have not increased production, that we have not provided growth, and that output has not increased. In every measure, any Government that delivers any kind of growth will indeed add to capacity, will indeed add to growth, and will indeed add to output. I think we should give up these kinds of comparisons and ask ourselves what can be done to accelerate growth.
But I come back to my first point. None of us would be any wiser if we don’t set the context and say this is the context, this is the policy that has to be followed, this is the course you should adopt, and whatever we get out of that is for the benefit of the whole country.
Now let me ask five questions on fiscal deficit. Here in this House we have heard -- I have heard it before and I have heard it today -- that fiscal deficit is myth-making by economists; it is irrelevant; and that you are all fiscal fundamentalists. Now I ask myself this question. Is fiscal deficit a relevant factor or not in order to make policy?
(Contd. by VKK/3T)
SHRI P. CHIDAMBARAM (CONTD.): And when I returned to the Finance Ministry, please remember I knew I was returning not to a bed of roses. I was returning under very challenging circumstances. I came back to the Finance Ministry on the 1st of August and on the 6th of August, I made my first statement where I said that the biggest challenge facing this country is fiscal deficit and we have to grow on the path of fiscal consolidation. I know I was savagely criticised in the Press. They said that fiscal deficit will go to 6.1 per cent. The Kelkar Committee recommended that we should peg it at 5.3 per cent. When I presented the Budget, I was able to say that we have contained it at 5.2 per cent, but the actual numbers are even better. We have pegged it at 4.9 per cent. Why does that not deserve any kind of credit? I want to know that. If you were in Government, you would have to do the same thing. I find myself in a situation where the fiscal deficit is getting out of hand. I proposed a path of fiscal consolidation. Any responsible Finance Minister would do that and working together, you supported me when I presented the Budget. I thanked you for that and I said so in the statement I made three days ago. I thank you for your support. But, that is the path we have to go or the alternative is, do not care about the fiscal deficit that is a myth-making by some economists and forget the fiscal deficit. I think, each one must take a stand. I take a stand; my Party takes a stand; my Government takes a stand. We must put this country back on the path of fiscal consolidation and contain fiscal deficit to below three per cent of the GDP which we did. When? Not during the NDA Government; we did it in 2007-08. For the first time, fiscal deficit came below three per cent.
Question no.2 is: What does the Deputy Leader of Opposition want to say about Monetary Policy? You heard different voices here, but what is his Party’s position? Do you want a tight Monetary Policy? Do you want a loose Monetary Policy? What is the aim of the Monetary Policy? Is it only to control inflation, as most Central Bankers will say? Now, my Government believes that while the mandate of the Central Bank is indeed price stability and containing inflation, much water has flowed under the bridge since this principle was laid down. Today, the mandate of price stability must be seen as part of a larger mandate and the larger mandate is growth and employment. President Obama two weeks ago said, “My next Fed Chairman must have two objectives – one is price stability and the other is employment.” I believe that the time has come for us to ask ourselves seriously: What is the mandate of the Central Bank? Yes, the mandate of the Central Bank traditionally has been price stability. In fact, there are many who argue that that should be the only goal of the Central Bank. Shri N.K. Singh is nodding his head. Many argue that. But, I believe, my Party believes and my Government believes that price stability must be seen as a part of the larger mandate of growth and employment, and I wish each party takes a stand on this. Let Parliament take a stand on this so that a message will go to the country, a message will go to the Central Bank that price stability is important. It is the primary mandate of a Central Bank, but it is part of a larger mandate for promoting growth and employment.
Question no.3 is: What kind of growth do we want? Do we want growth for the sake of growth? Do we want unbridled growth? Do we want unregulated growth or do we want inclusive growth that is sustainable? We believe growth is a necessary condition. We must have growth. It is because of growth that millions have been lifted above poverty and I will come to poverty in a moment.
(Contd. by KR/3u)
SHRI P. CHIDAMBARAM (CONTD.): I am not subscribing to the theory of the poverty line. But I will tell you what my take on poverty is. We believe in growth, but that growth must be inclusive; and that growth must be sustainable. I do not know how many of you have got a chance to read parts of my speech that I have made in Ahmedabad. I am not taking names of States; and I am not taking names of Chief Ministers. The difference between a single-minded pursuit of growth and growth with inclusiveness as a goal is the difference, I believe, Maharashtra and Gujarat; and I believe that must also be sustainable where environmental concerns, ecological concerns must be taken into account. Therefore, let us take a stand on growth. I believe, my party believes and my Government believes we must have a growth but it must be inclusive and it must be sustainable. If that means.. (Interruptions)... Mr. Goyal, I am sorry, I am not yielding. If that means we may have to sacrifice some growth. So be it. What do I do? What can we do? The people who lived for thousands of years near Niyamgiri Hills say that they will not allow bauxite to be mined. We have to respect that. If that means an alumina plant has to be closed down, so be it. We have to sacrifice some growth. We have to find alternative sources of raw material. Therefore, let us take a stand on what kind of growth we want.
Question No.4 is on investment. There are people who say FDI is necessary. There are people who say FDI will enslave this country; and we are throwing open the doors to the FDI. How do you then bridge the deficit? I will come to the Current Account Deficit in a moment. In very simple terms, as I understand it, the Current Account Deficit is this. And I am using dollars as synonym for foreign exchange, I am not entirely attached to the dollar. I am using the word 'dollar' as a synonym for foreign exchange. What is the Current Account Deficit? The dollars we earn, the dollars we spend, the difference is the Current Account Deficit. There is only one way to bridge it. Earn more dollars, then, you spend more dollars. If you can't earn more dollars, spend fewer dollars. Import less oil, import less capital goods, import less gold, import less silver, remain within the limit of your capacity to earn dollars, you will not have the Current Account Deficit. You have a Current Account Deficit because you have to import oil. We have to import oil for $160-170 billion. We have to import coking coal. If you have to import edible oil, if you have to import capital goods, if you have to import electronic software, hardware, if you have to import defence equipment, if you don't have dollars, the only way you can pay for those imports is to allow foreign capital flows to come to the country; and capital flows will come to the country only in one of three ways. FDI, FII or ECB. Among them even Economics 101 knows that FDI is higher in the hierarchy than FII and ECB which is why we have to attract FDI because there is no other way we can pay for our imports. So, let us take a stand.
What is our stand on foreign investment? Are we shutting our doors to the foreign investment? Please remember there is an ODI, Overseas Direct Investment. Indians are investing abroad. Indians are acquiring companies abroad. Indians are acquiring assets abroad. Indian companies are acquiring coal mines and petroleum fields abroad. That is good for India. Like China is doing, India should do it. We are encouraging the ONGC to do it. We are encouraging the OGL to do it. Just as we are acquiring assets abroad, when the FDI comes in, they will come here to acquire assets, or, create new assets. That means more employment, more output, more wealth and more per capita income.
(Continued by 3W/VK)
SHRI P. CHIDAMBARAM (CONTD): So let us take a stand on FDI. But we hear different voices here. The last question is on prices. Let us take a stand. Are we going to give our farmers generous MSP? Or are we going to be parsimonious with them? The NDA was extremely parsimonious; Rs. 10 a year. I have got the numbers; Rs. 10 a year. Since my friend, the Deputy Leader, is vigorously shaking his head, I am afraid, I have no option but to read the numbers on MSP. As Dr. Mungekar said, we have virtually doubled MSP. Take wheat; in 2001-02, it was Rs. 610 per quintal; in 2002-03 - Rs. 620 per quintal; in 2003-04 - it was kept at Rs. 620 per quintal. So when we came to office, the MSP of wheat was Rs. 620 per quintal. This year, we are giving Rs. 1,350 per quintal. The point is, whatever is the reason...(Interruptions)... Yes, the input costs have gone up. I know that. Of course, it has gone up.
SHRI RAVI SHANKAR PRASAD: At least say that, hon. Finance Minister.
SHRI P. CHIDAMBARAM: I am saying it. But that does not mean that in between 2001-02...(Interruptions)... Mr. Deputy Leader of the Opposition, please resume your seat. Between 2001-02 and 2003-04, in a two year period, was the cost only rising by Rs. 10 a quintal? ...(Interruptions)... Did it rise only by Rs. 10 a quintal? Today we are giving prices to farmers, the same approach applies to MGNREGA. There are people who say you should not give those wages to rural India, there are people who say you should not give MSP to farmers. If poverty has declined, nobody can argue that poverty has not declined. We can argue about the delta, how much has it declined. But nobody can say poverty has not declined. If poverty has declined, it is because it has declined more in rural India than in urban India. It has declined more in rural India because of MGNREGA wages and because of MSP. Rural India today has more income than it had before, one in the form of wages for rural workers and one in the form of better MSP for farmers. Poverty has declined.
SHRI T.K. RANGARAJAN: Why do they sell their land and come to cities?
SHRI P. CHIDAMBARAM: They sell the land because 60 per cent of the rural labour force is still dependent on agriculture. As the population rises, the land does not increase and more and more people burdening on the land and some will have to migrate. Why do they migrate in China? It is for the same reason they migrate here too. They will have to move from rural parts to urban parts. Urbanization, in fact -- we can argue it on some other day -- is an inevitable concomitant of progress. There is no other way. Show me any country which has made economic progress without urbanization. Anyway, that is a different matter.
SHRI RAVI SHANKAR PRASAD: Just a minute, hon. Finance Minister.
SHRI P. CHIDAMBARAM: Let me complete this part and then I will yield to you. Therefore, Sir, we have to take a position. Are we going to be generous towards those who are extremely poor by giving them better wages, better prices even if it means, and I say this with responsibility, a slightly elevated inflation? I am not defending inflation. Our inflation is high. Consumer price inflation is high. In the last 12 months, we have been able to moderate wholesale price inflation to below five per cent. We have been able to contain core inflation to two per cent. But consumer price inflation is high. I take the point that unless we address the supply side constraints, consumer price inflation is not likely to fall. But even if there is slightly elevated inflation, are we going to deny to our people better wages and better prices? Let us take a stand. I have raised five questions. Why? I have raised these five questions so that we know what is the context in which policy is being made. What are the principles that should drive the economic policy?
(Contd. by 3X/RG)
SHRI P. CHIDAMBARAM (contd.): What is the ideology that will point to the direction in which the economic policy in this country should go? As I have said, I believe, my party believes, my Government believes, that we must proceed in the path of fiscal consolidation and that we must have a monetary policy, the prime objective of which is price stability. But that must be seen as a part of the larger mandate of growth and employment. We must have growth. But the growth must be inclusive and sustainable. We must promote investment, both domestic investment and foreign investment into India. We cannot shut our eyes to foreign investment. We must show concern for the poor and give the very poor better wages and better prices. It is, in that context, that we are trying to make a policy. Since Mr. Ravi Shankar Prasad wants me to yield, I am yielding.
SHRI RAVI SHANKAR PRASAD: Sir, there is a World Bank Report of 2013, prepared by a very close friend of yours, which must be well known to you, which says that one-third of the world’s poor live in India. And it has been written by none other than Mr. Kaushik Basu, who is the Chief Economic Advisor of the World Bank and who was the Chief Economic Advisor of the Government of India, known to have worked with you. Therefore, should I take your point as solid or should I believe him? I ask this because years ago, India was found to have only 20 per cent of the poor. Anyway, I leave it to you.
SHRI P. CHIDAMBARAM: It is true that one-third of the world’s poor live in India, but one-sixth of the world’s population also live in India. We are a large country. That is why when we talk, we compare ourselves with only large countries. And we have to understand that we are steering a large country’s economy, in a democratic framework, where laws can be made only by consensus and not by a fiat, where policies can be implemented only after consultation and consensus, not by a fiat. These are complex tasks, the tasks which you performed, to the best of your ability, in the six years that you were in the Government, and the tasks that we have performed, to the best of our ability, in the ten years that we are in the Government. That is why, I said, we should not constantly compare ourselves with China. In China, I don’t have to sit and plead with everybody saying, “Please pass the Insurance Bill.” I have to only plead with two people, the General Secretary of the Communist Party and the Prime Minister of the country. Here, I do plead with two people, the Leader of the Opposition of this House and the Leader of the Opposition of the other House. But we don’t have a consensus yet. If you stand up and say, “Yes; we must have the Insurance Bill”, then, I will bring the Insurance Bill immediately. But what is the guarantee that the Insurance Bill will be passed by this House? Therefore, I don’t think that we should compare ourselves with China.
SHRI ARUN JAITLEY: Before you come to us, you need a consensus in the National Advisory Council.
SHRI P. CHIDAMBARAM: Let me assure the Leader of the Opposition, Sir, that when I go to him, it is after there is consensus in the UPA. But after I go to him, I would still have to go to my other friends which they pointed out yesterday and I replied. First, let me get over the principal Opposition and then, I will have to go to others as well. I will have to go to them and talk to them. But unless I cross the first hurdle, how do I go to the other hurdles? So, all I am saying is that we have consciously chosen to be a democracy about which I am proud of. We believe that we must have this system where we speak freely; we argue and quarrel, noisy sometimes, sometimes extremely petulant and troublesome. But we believe that this Chamber must reflect the plurality of India and must have an opportunity for different voices to be expressed. That is something which we have, consciously, adopted. Given that context, what are we trying to do? Are we trying to do our best? That is the point.
Now, Sir, I made three statements as Finance Minister, after I returned to the office. The first was on the 6th of August, 2012, when I emphasized the fiscal deficit. Then, on 31st July, 2013, I recalled all that we accomplished in twelve months and the path forward. Then, on the 12th of August, 2013, I made a statement about the current account deficit. I would, respectfully, urge upon the hon. Members, when there is an opportunity -- these are on the website -- to read those three statements. India faces many challenges. There are domestic challenges and there are external challenges, as Dr. Mungekar and Shri N.K. Singh pointed out. Please do not under-estimate the external challenges.
(Continued by SSS/3Y)
SHRI P. CHIDAMBARAM (CONTD.): The external challenges are very grave. Let me quickly come to the current account deficit. The current account deficit, as I said, is the difference between dollars earned and dollars spent. In the last nine years, excepting two years, we have fully and safely financed the current account deficit and we have added to our reserves. In the previous six years also, the current account deficit was fully financed. I am not taking away credit from the NDA for that. We have only failed to finance the current account deficit in two years and which are those two years? The two years in which we failed to finance the current account deficit added two crisis years, namely 2008-09, when the US crisis hit the world and 2011-12 when the Eurozone crisis hit the world. Every year we have financed the current account deficit. So why assume I won’t succeed in financing the current account deficit this year? Last year also, I was told, you can’t finance the current account deficit. In the previous year, the crisis year 2011-12, we had a current account deficit of 78.2 billion dollars. We were not able to finance it. We drew down our reserves by 12.8 billion dollars. Last year, we had the larger current account deficit, 88.2 billion dollars, ten billion dollars more. Yet, we not only fully financed the current account deficit; we added 3.8 billion dollars to our reserves. So, why do you assume that I will not finance the current account deficit this year? Just as I made a commitment on fiscal deficit, I make a commitment on the current account deficit on behalf of the Government. We will leave no stone unturned to contain the current account deficit at about 70 billion dollars. We will fully and safely finance it and with a little luck I may be able to add some amount to my foreign exchange reserves. Just as the fiscal deficit line is a red line, which I said, we will not breach, the current account deficit is also a line and we will make every endeavour not to breach that line also. It does not matter who comes into Government next year. Whoever comes into Government will have to address the same problems. The problems may become more acute sometimes, less acute sometimes, but, similar problems have to be addressed in a developing country. But it is my duty as Finance Minister to ensure we are not only back on the path of fiscal consolidation, which we were in 2007-08, before the crisis hit the world, we are also back on the path of fully and safely financing the current account deficit. Sir, a number of measures have been taken. I don’t want to get into all that. I only want to address two issues. One is poverty. I don’t subscribe to this poverty line theory. You draw the line wherever you think is appropriate. You draw the line at one dollar; you draw the line at 1.25 dollars. You draw the line at two dollars or five dollars or, as Dr. Mungekar said fictitiously, even 500 dollars. The point is, what have we done in the last 15 years or 16 years or rather 20 years after liberalisation? Can anyone deny this fact? Wherever you draw the poverty line, over the years that poverty line and the new population below that poverty line, that delta is what we have accomplished as a functioning democracy that is committed to progress and our claim is, in the years we were in office about a 140 million people have been lifted above the poverty line. Our claim actually is, we have lifted about 140 million people. Wherever you draw the line, the number may be more by a couple of millions or less by a couple of millions but nobody can deny that ‘X’ million people have been lifted above the poverty line. You take the poverty-wise population, you take the income-wise population, stratify if, draw the line anywhere you like. I request the Deputy Leader to attempt that this evening. Draw the line anywhere at two dollars, at three dollars and then, what was the population below that line ten years ago, what is the population below that line today and the delta. The difference is about 140 million people.