Finance Minister P Chidambaram Tuesday said the Indian economy needed deeper reforms but political differences would have to be overcome for them to work and bring about a recovery from the low growth rate and high current account deficit.
“Let us not fool ourselves. There is simply no agreement now on what we will do,” Chidambaram said in the Lok Sabha as he proposed a 10-point programme and insisted that Parliament must point to the direction in which the country’s economy should move.
The sombre assessment by the finance minister came at the end of a four-hour discussion on the economy, during which he said everyone would have to suffer some pain in the short run as the government strives to bring down the fiscal and current account deficits.
“I believe even though the polity is divided, it is possible to weave together a tapestry of common actions and common programmes on which there can be some differences but basically we can all agree,” Chidambaram said. The finance minister’s plea for support came in response to sharp criticism from BJP leader Yashwant Sinha, who had accused the UPA government of “playing with the economy”.
The minister said agreeing on measures that need to be taken would provide the means to lift the growth rate of the economy “from what it is today at 5 per cent growth to what we had between 2004-08”.
Chidambaram also said that between 2009 and 2011, the UPA government had “allowed the fiscal deficit to be breached and...current account deficit to swell because of certain decisions that we took during the period”.
President Pranab Mukherjee was the finance minister then and the measures taken included a sustained rise in government expenditure to help the economy recover from the impact of the global financial meltdown of 2008.
The minister accepted that domestic factors such as these accentuated the 20 per cent fall in the value of the rupee since January. “There are not just external factors, there are also domestic factors. We recognise that there are domestic factors,” he said.
The rupee breached a new low of 66.30 against the US dollar in intra-day trade Tuesday. But Chidambaram reiterated that the government would contain the current account deficit at $70 billion and said all options to finance it were being considered.
Significantly, the minister in his reply to a short duration discussion on the economy did not rule out the possibility of