Credit is more debt, Chidambaram slams govt's new relief measures

After the Centre on Monday announced eight economic relief measures, former finance minister P. Chidambaram on Tuesday slammed the government saying that credit guarantee is not credit and it is more debt and no banker will lend to a debt ridden business.

In a tweet Chidambaram said, "Credit is more debt. No banker will lend to a debt-ridden business. Debt-burdened or cash-starved businesses do not want more credit, they need non-credit capital. More supply does not mean more demand (consumption)."

He said, "on the contrary, more demand (consumption) will trigger more supply and demand (consumption) will not grow in an economy where jobs have been lost and incomes/wages have been reduced."

"The answer to this crisis is to put money in the hands of the people, especially the poor and lower middle classes," he said further.

On Monday union finance minister Nirmala Sitharaman announced relief measures worth Rs 6,28,993 crore.

The schemes entail enhancement of existing relief measure such as ECGLS and support for state governments.

Besides, a total of four new measures were announced to provide loans to micro finance credit users as well as tourism industry.

Further, Sitharaman announced Rs 50,000 crore guaranteed loan for creation of medical infrastructure. She said that ECLGS scheme will be enhanced by Rs 1.5 lakh crore. She also announced a Rs 1.1 lakh crore loan guarantee scheme for Covid affected sectors.