Highlights of the press briefing along with youtube link of Shri P. Chidambaram, MP 11-4-2017
The budget session of Parliament will come to a close tomorrow.
The budget session is mainly to transact the financial business of the government. It is marked by three major events: (1) The Budget; (2) The Appropriation Bill; and (3) The Finance Bill.
This budget session was special because there was a fourth major event -- the passage of the GST Bills.
The country expected that at the end of the budget session, thanks to the debates and the information provided by the government, there would be greater clarity about the state of the economy. Unfortunately, there is no such clarity. At the end of the session, we are no wiser than we were at the beginning of the session.
ON THE BUDGET, the Congress Party had pointed out that the best that could be said about the budget was the nation was relieved that no more harm was done to the economy. The general consensus was that it was a totally wasted opportunity. It beat the drums to a march that was not there.
ON THE APPROPRIATION BILL, we had pointed out that the priorities of the government were wrong and the allocation of funds was poor. The most affected sectors/programmes were Defence, Agriculture, MGNREGS, Fertilizer subsidy, Food subsidy and Pradhan Mantri Gram Sadak Yojana. All of them will receive less funds, as a percentage of GDP, in 2017-18 than they received in 2016-17.
ON THE FINANCE BILL, it was widely criticized for including non-financial and non-money matters in the Bill in flagrant violation of historically accepted norms and conventions. The Finance Bill was passed as a Money Bill when it will be apparent to anyone familiar with Article 110 of the Constitution that it ceased to be a Money Bill upon the addition of matters falling outside Article 110. The sole purpose was to avoid a scrutiny of these matters by the Rajya Sabha. It was an assault on the Constitution of India and we hope that, sooner than later, the Courts will pronounce upon the legality of such devices.
We had also pointed to many unacceptable provisions in the Finance Bill. As examples, I may cite (i) the amendment to the Income-tax Act that the 'reason to believe' in the case of a search need not be disclosed to any person or authority and (ii) the provisions relating to electoral bonds. The first is an example of tax terrorism and the second is intended to make political funding more opaque and more partial.
ON THE GST BILLS, we had pointed out that they were imperfect Bills and no attempt was made to make them less imperfect. The Rajya Sabha could have improved the Bills, but that opportunity was denied when the government stubbornly turned down the demand that the Bills be introduced, debated and passed as non-Money Bills.
Altogether, from the point of view of understanding and assessing the state of the economy, it was an unsatisfactory session. Nevertheless, throughout the session, the Congress Party adopted an attitude of co-operation in the best traditions of democracy.
The state of the economy is poor. Four major indicators tell the true story:
1. Between January 2015 and January 2017, gross bank credit to all industries increased by a meager Rs 7,413 crore or 0.29 per cent.
2. In the same period, the IIP increased by a mere 1.1 per cent from 189.2 to 191.3.
3. Growth of Gross Fixed Capital Formation (GFCF) was 6.11 per cent in 2015-16. In 2016-17, growth of GFCF plummeted to 0.57 per cent.
4. The actual rate of growth of the economy is moderate; and even that growth is jobless growth. According to the Labour Bureau, only 109,000 jobs were created (in eight job-intensive non-farm sectors) during the period April to September, 2016. This must be viewed against the promise to create 2 crore jobs every year.
Besides issues concerning the economy, there were many issues, social and political, that were raised in both Houses of Parliament. I am sure you have questions regarding some of those issues.
I shall stop here and take your questions on the Budget session of Parliament.
On the question whether date of rolling out the GST should be postponed, Shri Chidambaram said the goal of 1st July is impractical as well as undesirable. The millions and millions of Micro, Small and Medium enterprises have to adjust to the new regime. Many of them may simply have no in-house talent or in-house skill to comply with the provisions of the GST law and may make mistakes. Take it from me; thousands of people will make mistakes. We have to learn as well as to implement the GST Law. Secondly, the GSTN, the network has to prove itself in a trial. A very large number of returns have to be tried in a trial and that must be proved.
In my view, the wise and correct date would be 1st of October. Allow a trial run of GST and give enough time to businesses, service providers as well as sellers of goods to adjust to the new regime so that when it is ultimately rolled out, it is reasonably a smooth roll out.
1st October is what many-many businessmen have told me would be the appropriate date.
On the likely impact of the GST, Shri Chidambaram said never predict a future. GST will indeed bring greater efficiency in tax collection. GST will bring more potential tax-payers into the net and GST will restrict the scope for tax evasion. So in that sense, it will bring more tax revenues and that will give a boost to the GDP. But on the other hand, in the immediate future, GST will be inflationary whether it would be mildly inflationary or highly inflationary, I cannot say. That will depend upon the ultimate rates which the Government announces for the Goods and Services.
I have no doubt in my mind that in the medium to long term, GST is extremely beneficial to the country but in the short term, it might bring us less benefit than the Government claims but I think it will bring us some benefit.
On further question what can be termed as short term, Shri Chidambaram said it depends on two things – first it depends on the fitment. As I have said elsewhere if 70% of goods and 70% of services are fitted into the 18% model rate, I think short term will be reasonably short but if they put more goods in the 28% rate or in the 40% rate and add cesses on top of that, then a short term could actually extend to a longer term. That is point one.
Point 2 – it also depends on how the Government implements GST. I have advocated, they must implement with a benign hand, there must be forbearance. Thousands and thousands people will make mistake but if on every mistake, the tax official is unleashed on the unsuspecting tax-payer, there will be push back, there will be a backlash. When they switched over from the positive list to the negative list in service tax, I called my officers and said "listen, this is a new regime; many people may not even know that they are service providers and liable to service tax. Therefore, I administered this law with a benign hand and forbearance. If the Government shows forbearance, to small mistakes, I am not talking about criminal fraud, small mistake, the Government shows forbearance and the tax officials apply the law in the first year or so with a benign hand, then I think the short term can be a short term.
On the reaction of the Congress Party on Government's growth figures post-demonetization, Shri Chidambaram said I do not know who most of the industry or Economists are? I am only going by the figure put out by the Central Statistics Bureau. According to the Central Statistics Bureau, Gross Value Addition in Q1, Q2 and Q3 was 6.89% declined to 6.69%, declined to 6.61% and if you come to the value addition leaving out three sectors which are admittedly not affected by demonetization like Government expenditure, the monsoon and utilities which accepted old notes. The GVA from the three Quarters are and these are important numbers – 7.35%, 6.47% and 5.73% even on Government's own admission. Gross Value Addition which is the measure currently used for measuring growth has declined between Q1and Q3. It can be nobody's case that Q4 would be any better than Q3. Demonetization took place in Q3. Let us wait for the Q4 figures. You will find it is lower than 5.73%. So, to say that in the light of these figures, the demonetization has not affected growth, I am afraid, one must be quite challenged to make that statement.
On the question of state of economy and election results in PDP's favour, Shri Chidambaram said I am not sure people vote on any one issue. The BJP won in UP, they lost an election in Punjab and according to all independent Observers, the BJP came second in Goa and Manipur except the Governors of the two thought they came first. So, BJP wins and looses elections, Congress Party wins and looses elections. You cannot relate winning and losing election to the economy. There are other issues. There are social and political issues. And I must admit that the BJP has successfully polarized elections. It is not a referendum on the economy, it is an election.
On the question of death sentence awarded to Shri Kulbhushan Jadhav by Pakistan, Shri Chidambaram said I recall a statement by Mr. Sartaj Aziz in December 2016 where he said that there is not enough evidence against Mr. Kulbhushan. I think we should dig out the statement and carry that statement. I think it was on 7th December 2016.
Now, from a statement which says that there is not evidence to legally proceed against Mr. Kulbhushan to a death penalty given by Military Tribunal whose jurisdiction to try a foreigner is seriously in doubt, is a huge leap. I think the world knows that this was a kangaroo trial; his trial never took place at all. And the so-called justice meted out to Mr. Kulbhushan is a sham justice. The whole Nation condemns Pakistan for conducting this mock or kangaroo trial and inflicting the maximum penalty upon an admitted citizen, who according to reports, was perhaps kidnapped from a third country and not arrested in territory controlled by Pakistan.
We condemn what has happened in Pakistan and we hope that good sense will prevail and that the death penalty imposed by this sham Tribunal will not be carried out. This I am saying in the fervent hope and prayer that Mr. Kulbhushan is still alive.
On a question if this is a failure on the part of the Central Government, Shri Chidambaram said that would be too strong a statement. I am sure they must have made efforts. I do not know. But if they have made efforts, I am sure they will tell Parliament what efforts they made. They should tell the Parliament what efforts they made. At the moment, my concern is that the maximum penalty imposed by the sham Tribunal should not be carried out and I am saying this again in the fervent hope and prayer that Mr. Kulbhushan is still alive.
On the question that what is the Congress view about the 'The Bad Bank', Shri Chidambaram said Bad Bank is a bad idea.
On the question of functioning of EVMs and the reply of the Election Commission of India, Shri Chidambaram said as per the memorandum submitted by Opposition parties there is overwhelming evidence that EVMs can be tampered with. The EVMs are vulnerable to being manipulated. Therefore, we should go back to the tested and tried ballot paper system and we have also proposed an alternative that you can have EVMs along with VVPAT and we have proposed a second alternative. Therefore, if it is not possible to acquire so many VVPAT machines in a short time, let us try EVMs in 50% of the Booths and ballot paper in 50% of the Booths. We are suggesting various methods by which this wide spread suspicion, widespread apprehension where EVMs can be tampered with and EVMs may have been tampered with here and there, is put to rest. I have got the memorandum in front of me and I am sure you have copies too.
Shri Chidambaram said Election Commission's insistence on clean chit, I would call it "Institutional Certitude". No Institution should be so certain. Institutional Certitude is a weakness of every Institution. We must be willing to re-examine the position. There is enough evidence that EVMs can be technologically hacked or tampered with. Even the Pentagon was hacked. A guy sitting in Europe is able to hack all kinds of databases. So, why assume that this machine cannot be tampered with. Therefore, it is the duty of the Election Commission to put to rest these apprehensions. Let me look at it in another way.
Our whole democratic system is a political party based democratic system. Without a political party, we do not have this kind of democracy - multi party based democratic system. Theoretically every party including the BJP of 2014 vintage, as exemplified by Mr. GVL Narasimha's Rao's book doubts the impenetrability of the EVM. They have cast doubts on the EVM. All political parties at some time or the other have serious doubts over the EVMs. Then you should look for alternative. The alternative does not exclude an EVM. It says EVMs plus VVPAT or EVM plus ballot. We are proposing several alternatives. I think the Election Commission should not reject it out of hand but must have the humility to accept the case of the political parties and re-examine its position.
On the question of prayers on Article 110, Shri Chidambaram said there is already a case in the Hon'ble Supreme Court on the Aadhar Bill which was passed as Money Bill has been challenged on the ground that it violates Article 110. Although the court said about six weeks ago they will hear it in a month we still have not got a date. When the more cases will be filed, I cannot say.