Fiscal deficit will be kept at 4.8 pc or below in 2013/14: Chidambaram
Allan Lasrado March 5, 2013On Monday evening, Finance Minister P. Chidambaram became the first union minister to participate in a 'Google+ Hangout', answering questions about the Budget and the state of the economy.
Hangout is a video chatting feature of Google+, Google's social networking site.
In a smooth performance delivered from the comfort of an office, Chidambaram took pains to defend the government's management of the economy and pointed out that India's problems needed to be seen in a global context. "The Eurozone is in recession. Germany has contracted... The UK has contracted in the last quarter. Italy is in a tailspin. Japan is stagnating. In the US you get good news one week and bad news another week," he pointed out in response to a question from Mahindra & Mahindra Chairman and Managing Director Anand Mahindra. Chidambaram emphasised that the government was trying to steer the economy towards the growth path. "We can't invent a big bang. What we're trying to do is stabilise our economy, like many other countries and get the growth engine started."
That eloquence underlined the lawyer-turned-politician's patient - and a little benign - responses all through the hour-long session.
As expected, Chidambaram, clad in his trademark white shirt, doled out the government's oft-repeated statistics liberally. "In six of the last eight years, we have grown over eight per cent. Only China has grown more. We have not gone so very wrong that we have to wear sackcloth and ashes," he said. "I am confident we will get to six per cent next year and seven per cent the year after. Our potential is eight per cent. We are aiming at nine per cent."
While the event may have been a minor public relations coup for the finance minister, it did not really live up to its promise of being a virtual town hall, where Chidambaram would reach out to the common people and address their concerns. Instead, a good part of it dealt with macroeconomic issues such as curbing the fiscal and current account deficits and attracting foreign direct investment. Barring a couple of questions towards the end, there wasn't much time for questions from the aam aadmi quarter.
Some of the questions were lengthy. Indeed, in his inimitable style, Chidambaram delivered lengthier answers.
Mahindra sent Chidambaram a broad hint to talk the Reserve Bank of India (RBI) into lowering interest rates. "All businessmen want to invest. We are waiting for some kind of trigger to believe again. There is a strong body of opinion that believes that if the RBI follows up on this budget by lowering interest rates, it will be that signal," he said. But Chidambaram, who has not shied away from sending such messages to RBI Governor D. Subbarao in the past, did not take the bait.
Apart from Mahindra, the others on the show were JP Morgan's Senior Asia Economist and India Chief Economist Jahangir Aziz, Axis CapitalMD & CEO Manish Chokhani, and Google Inc Senior Vice President Amit Singhal.
The only women on the panel, Reechal Vardhan, a student from Bangalore, and Kala Kudva, a homemaker from the same city, represented the common man.
The session was moderated by CNBC TV18 anchor Senthil Chengalvarayan.
Chidambaram, 67, began by outlining the three objectives he had set himself when he began his third stint as India's finance minister. "First, to be on the fiscal consolidation path. Second, to attract investment to deal with the current account deficit. Third, to restart the growth engine, especially manufacturing."
He also touched upon the women's bank, one of the unusual features in his budget for 2013/14. "We are going to start with a headquarters and at least six branches in the six regions of India. We should be able to start the preparatory work by October, and we should be able to inaugurate the bank in November."
Throughout the session, he did not shy away from patting himself on the back, pointing out that the current account deficit was conspicuous by its absence in the general discourse until he took over. "How many spoke about the current account deficit until I spoke about it repeatedly? Not many in government and not many in industry even acknowledged something like a current account deficit."
There was also a hint of one-upmanship over his predecessor Pranab Mukherjee, now the President. "After I took over (on July 31, 2012), every single disinvestment has been a success. I started with about Rs 2,000 to 3,000 crore. We ended the year with Rs 24,000 crore."
Chidambaram, a man who is as comfortable in a suit as he is in a veshti (a dhoti-like garment worn in south India) and shirt, appeared to be quite comfortable in the hotseat throughout the Hangout. He expressed confidence that the government would meet its disinvestment target in 2013/14. "For the next year, we have lined up the list of companies… I know exactly which company, what amount. We have even a sequence laid out. So, we will raise Rs 40,000 crore."
There was some praise for his predecessor Mukherjee. "We did pretty well in 2008 to stem the slide." But it was followed with some veiled criticism. "We may have overdone it by the second and third stimulus packages, which pushed up inflation, which pushed up the fiscal deficit."
Rishad Premji, Chief Strategy Officer of Wipro's IT Business and son of Wipro Chairman Azim Premji, popped up to ask Chidambaram a not-too-audible question on the fiscal deficit. With a touch of drama, Chidambaram declared he would contain the fiscal deficit within the target: "I have drawn these red lines, I will not cross them. I did not cross the red line in the current year; I shall not cross the red line for the next year. It will be kept at 4.8 per cent or below."
Towards the latter part of the video interaction, the finance minister finally got to deal with some bread and butter issues. There was a blunt message for the middle class. "If you buy a mobile phone of Rs 6,000, you should be prepared to pay a small tax of Rs 300. If you eat out, and you are willing to pay Rs 1,000 for a dish… is it unfair to ask you to pay service tax… I can't tax the poor." When he was done responding to her persistent questions, Kudva, the homemaker from Bangalore, mistakenly referred to him as the "PM".
Chidambaram also spoke about the tax on richest of the rich. "42,800. That number was used deliberately, to shock you. I want all of you to be shocked… that there are only 42,800 people in the country who admit to a tax(able income) of Rs 1 crore," said Chidambaram. "We have to tax someone to raise the revenue to meet our other objectives."
All in all, Chidambaram came out of the Hangout looking like a man very much in command of his ministry, a man who knows exactly what needs to be done to get the economy back in shape.
By this time next year, we should know if he is able to walk the talk.