Former Finance Minister P Chidambaram on Saturday said that the Reserve Bank of India should bluntly tell the Bharatiya Janata Party-led central government to “do your duty and take fiscal measures” to help revive the economy that has been severely affected by the coronavirus pandemic.
The senior Congress leader’s comments came a day after RBI Governor Shaktikanta Das said that the Gross Domestic Product growth in 2020-’21 is likely to remain in the negative. “Governor Shaktikanta Das says demand has collapsed, growth in 2020-21 headed toward[s] negative territory. Why is he then infusing more liquidity?” Chidambaram asked.
He also attacked Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, urging them to rethink the Rs 20-lakh-crore package, which the Centre has said is 10% of the GDP. “Even after RBI’s statement, is the PMO [Narendra Modi] or Nirmala Sitharaman lauding themselves for a package that has fiscal stimulus of less than 1% of GDP?” he said.
“RSS [Rashtriya Swayamsevak Sangh] should be ashamed of how the government has dragged the economy into negative growth territory,” Chidambaram added.
On Friday, in Das’ first address to the media after the Centre’s economic package, the RBI extended the moratorium on term loans and working capitals by three more months from June 1 to August 31. This will help borrowers in easing the burden on their savings and avoid turning defaulters. Das had announced the first three-month moratorium for all commercial banks and non-banking financial corporations on March 27.
The RBI chief also announced that both the repo rate and the reverse repo rate will be reduced by 40 basis points during the coronavirus crisis. This is aimed at encouraging banks to lend more and is likely to make loans cheaper.
On May 21, Former Reserve Bank of India Governor Raghuram Rajan had said the package was inadequate. Rajan had said that the government’s challenge is not just to tackle the impact of the worsening health crisis but to repair years of “economic drift”.
The Opposition has also been very critical of the package. At a meeting on Friday, Congress President Sonia Gandhi said the economic package was a “cruel joke on the country”. She added that all decision-making powers rested with the Prime Minister’s Office and federalism had been completely forgotten.
Earlier this week, Chidambaram had claimed that the package actually amounted to only Rs 1.86 crore, or 0.91% of the Gross Domestic Product. He claimed that the package has left several sections of the society “high and dry”. On May 16, Congress leader Rahul Gandhi had asked Modi to reconsider the package and emphasised the need to directly transfer money to the people’s accounts. Gandhi said the Centre should stop acting like a “money lender” by giving the poor credit instead of cash.
Earlier this month, Modi had announced the economic package in a television address to the country. The economic package consisted of five portions, focusing on the Micro, Small and Medium Enterprises sector, alleviating the plight of migrant workers, improving agricultural infrastructure and allied industries, coal mining and defence manufacturing and allocations under the Mahatma Gandhi National Rural Employment Guarantee Act.
The Centre claims that it is a Rs 20 lakh crore economic package, equivalent to 10% of India’s GDP, though analysts have pointed out that a significant portion of that amount includes measures earlier announced, efforts by the Reserve Bank of India and calculations that assume economic activity even though the government’s actual expenditure is far smaller than the stated amount.