There's a technique that schoolchildren follow when they have to inform their parents about how poorly they have done in their exams. They first talk about how badly other students have done. It's a childish trick, and it comes naturally to every child. Evidently, P. Chidambaram hasn't forgotten his childhood. Because soon after the speech began, it began to sound like a review of how badly other countries' economies were doing. Before the Finance Minister mentioned India at all, the first topic he spoke about was the crisis in the global economy since 2008. He then pointed to the poor aggregate growth rate of the world economy over the last three years. He then came to the long recession in the US economy, then the troubles of the Japanese economy and then the recession in the Eurozone.
It didn't end there--he then went on to express his joy (thinly disguised as disappointment) over the declining growth of the Chinese economy. Amazingly, it still wasn't over! We were then treated to comments about something called the Global Risks 2014 report. He didn't just mention this report. He read out, with evident pleasure, the top ten risks that the world is facing today. Clearly, the strategy was to try and convince the nation as to how much worse things could be.
Eventually, when this avoidance of India became almost too embarrassing to sustain, he sort of drifted around to start talking about the Indian economy. What made the scene almost surreal was that throughout this time he had to shout out this survey of world economy in order to be heard over the slogans of his own party's MPs from Seemandhra. There were also three hefty-looking MPs standing next to him who were either protecting him or were protesters--it wasn't clear. Thankfully, no one was wearing a gas mask.
Then followed another trick. You see, any change, when compounded over a decade, looks like an impressive number. This was the clever idea on which a good part of Mr. P Chidambaram's vote on account speech was based upon. In the middle of the speech, there was a long litany of statistics about the UPA's achievements. All of them were given for the total change achieved over ten years.
To take the example of the very first thing that Mr. Chidambaram pointed out, foodgrain production has grown from 213 million tonnes to 265 tonnes during the two UPA regimes. This is a decidedly meagre growth rate of 2.1 per cent per annum. Similarly, the impressive sounding growth in 'installed' electricity capacity amounted to 7.6 per cent a year and that of coal production 4.4 per cent a year. Neither number is even close to what is needed. In fact, if we are talking ten-year numbers, here's the important one: consumer prices were up a cumulative 120 per cent over these ten years. Meaning a basket of consumer goods that cost Rs 10,000 in 2004 would cost Rs 22,000 today.
Anyhow, since this was a vote on account, there was no room for the FM to do anything on that affects people's personal finance, either through savings, direct taxation or investments. He did speak one bit about personal finance, in which he mentioned a step that has been 'envisaged', which was 'To create one record for all financial assets of every individual'. This sounds like extending the concept of having a centralised dematerialised account. Such an account would have to extend to banking, over and above things like stocks, mutual funds, and insurance that it can currently do. A convenience, certainly but nothing to get excited about.
He also spoke of the National Spot Exchange crisis as a sort of an achievement because it did not spill over to other financial markets. But in doing so, he was speaking on behalf of his own ministry in implicit criticism of the Consumer Affair ministry which was earlier regulating the NSEL. However, the real issue is, why did the NSEL fiasco take place at all?
Mr. Chidambaram made much of his achievement in sticking to the self-declared red-line on fiscal deficit. He claimed that he had managed to bring the deficit in at 4.6 per cent of the GDP. This is just financial jugglery. When deficit has to be expressed as a percentage of GDP, there are three numerical inputs: revenues, expenditure and GDP. By subtly manipulating all three, the output can be adjusted with ease, which is what the FM has done. One, he has pushed expenditure to the next year, as well as savagely cut plan expenditure. Two, he has boosted revenues by asset stripping PSUs and banks. And three, he has overestimated GDP. The final GDP for the year won't be known for a long time and right now, he can just assume a higher GDP to enable the deficit/GDP ratio to be favourable. Anyhow, such short-term cleverness is something we have to come to expect from this government.
As expected from a vote on account, this was a 'mark time' speech which was all about pointing out the government's achievements. The most telling fact was that the last five years have so little to speak about that he was forced to talk about ten years rather than five. All any Indian would wish for is that the next five years be as unlike the last five as possible.
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