GDP growth rate is no answer to the huge challenge of inflation

At a press conference held at the Congress headquarters in Delhi in the wake of Union finance minister Nirmala Sitharaman's presentation of the Union Budget 2024, veteran Congress leader and former finance minister P. Chidambaram issued a statement on the Budget. Below is the full and unedited text of the statement:

You have listened to the Budget Speech of the Hon’ble Finance Minister as I did. The Budget documents were uploaded only about 3 hours ago, and it will take time to read and analyze the documents. On behalf of the Congress Party, I shall make a few observations and comments on the Budget for 2024-25, and my colleague here (Congress spokesperson Supriya Shrinate - Ed.) will add more observations.

I have already tweeted that I am happy that the Hon’ble Finance Minister had an opportunity to read the Congress’ Manifesto after the LS 2024 elections. She has virtually adopted the ideas underlying our proposals on Employment-linked Incentive (ELI) scheme, the Apprenticeship Scheme with an allowance to the Apprentice, and on the abolition of the Angel Tax. I wish she had adopted many more ideas from the Congress’ Manifesto.

I had created a template to comment on the Budget. In the first part of this statement, I have set out our expectations of the Budget. In the second part, I have noted the relevant statement in the Budget — whether there was a response in the Budget and, if so, what was the response? You will notice that on some matters there was no response at all.

1. Unemployment is the biggest challenge facing the country. For a few dozen vacancies or a few thousand posts, millions of candidates apply and write an examination or appear for an Interview. According to CMIE, the all India unemployment rate is 9.2 per cent.

The response of the government is too little and will have only little impact on the grave unemployment situation. The claim that the schemes announced by the FM will benefit 290 lakh persons is highly exaggerated.

2. Inflation is the other major challenge. WPI inflation is 3.4 per cent, CPI inflation is 5.1 per cent, and food inflation is 9.4 per cent.

The Economic Survey (ES) has stated that the deflator for manufacturing has been assumed as 1.7 per cent. The deflator(s) assumed by the government have been severely criticized by several knowledgeable economists. Unless the puzzle of the ‘deflator’ is resolved, it is not possible to unquestionably accept the claimed GDP growth rate of 8.2 per cent in 2023-24. Besides, the GDP growth rate is no answer to the huge challenge of inflation.

The Economic Survey dismissed the issue of inflation in a few short sentences. The FM dismissed it in ten words in para 3 of her speech. We deplore the casual attitude of the government. And nothing in the Budget Speech gives us the confidence that the government will seriously tackle the issue of inflation.

3. Education, especially school education, is widespread but of poor quality. Nearly one-half of the children are unable to read or write a simple text in any language and are numerically challenged. They are not fit for any skilled job. The central government must drive — and help — the states address these fundamental problems.

The other issue concerning education is NEET and the scandal-ridden National Testing Agency. Several states have demanded that NEET should be scrapped and the states should be free to adopt their own methods of selecting candidates to various courses in medical education.

No response. I did not hear the finance minister refer to school education. Yet, the government is stubbornly clinging to NEET which, you will recall, is an examination at the end of school education. Interestingly, against BE of Rs 1,16,417 crore on Education, the government spent only Rs 1,08,878.

4. Healthcare is better but not sufficient. Public healthcare is growing quantitatively but not in quality. Out of pocket expenditure is still about 47 per cent of total health expenditure. There is a grave shortage of doctors, nurses, medical technicians, and diagnostic equipment and machines. The central government’s expenditure on healthcare has declined to 0.28 per cent as a proportion of GDP and to 1.9 per cent as a proportion of total expenditure.

No response. I did not hear the finance minister speak about the grave deficiencies in public healthcare. Moreover, against a BE of Rs 88,956 crore, the government spent only Rs 79,221 crore.

5. Wages have stagnated in the last 6 years after adjusting for inflation. Between 2017-18 and 2022-23 the average monthly earnings of workers were: self-employed — Rs 12,800; casual/daily labour — Rs 7,400; and regular wage/ labour — Rs 19,750. The minimum wage should be fixed at Rs 400 per day for every kind of employment.

While some relief has been given to the tax-paying citizen in the 0-20 per cent tax bracket, no relief — I repeat, no relief at all — has been given to the poorer sections of the people, especially those who are non-tax paying wage labourers and casual/daily labourers. The government seems to be blissfully ignorant of its own statistics that wages have stagnated in the last six years while inflation is raging. And such workers are not paid a decent minimum wage.

6. Farmers are mobilising to protest. One of their demands is that the MSP announced for an agricultural produce must be backed by a legal guarantee. The Congress had in its Manifesto promised to provide such a guarantee.

No response. Let’s wait to hear from the farmers.

7. Owing to massive unemployment, many students who had availed of Educational Loans have defaulted in payment of interest and/or repayment of the principal. There is a demand that the government should write off the unpaid balance of educational loans as a one-time measure of relief.

Response: the government has, unusually, spoken about giving education loans. But what about the huge burden of unpaid education loans? Students and their families were hoping that, given the acute unemployment situation, the government would give relief to the current borrowers. They must be bitter and disappointed.

8. Several political parties, including the Congress, have demanded that the ill-conceived and discriminatory Agnipath scheme should be scrapped forthwith and the Armed Forces should resume the time-honoured methods of recruitment.

No response. The agitation to scrap the Agnipath scheme will continue.