Next govt must do something 'dramatic': P. Chidambaram

DH EXCLUSIVE | Top 3 issues in 2019 polls are jobs, jobs and jobs: PC

As India hurtles towards the Lok Sabha elections next month, it's time to sit back and absorb the drama of Indian politics, to be entertained by it, but also to understand and analyse the complex issues at play. With this in mind, DH brings you its comprehensive political coverage under the umbrella of DH Political Theatre

An important part of our coverage is interviews with key leaders from across the political spectrum. Today we present former Union finance and home minister P Chidambaram, now the senior statesman in the Congress party, in conversation with Sitaraman Shankar, editor of Deccan Herald.


Hello and welcome to DH Political Theatre. Our guest for the day is former union finance minister P Chidambaram. Mr Chidambaram, as all of us know, has been finance minister several times, and home minister, and is unquestionably the senior statesman in the Congress party today. We will be asking him a range of questions on politics, the economy and his home state of Tamil Nadu.

Mr Chidambaram, thank you for being with us. So can we start, as you would expect, with a question on the economy? How do you rate the five years of Mr Modi's government? Give us an assessment of what worked and what hasn't.

It is a wasted opportunity. The BJP had 282 members in the Lok Sabha first time in 30 years and they could have brought about tremendous structural changes in the economy. Compare it to what Mr Narasimha Rao and Dr Manmohan Singh did in 1991 and 1996 and the state of the economy. I don't want to make a general statement. The best way to look at the economy is the indicators. The best way is to look at investment credit growth, fiscal deficit, exports, jobs, current account deficit. Every one of them at the end of five years, leaves much to be desired. The most important failure is jobs. Where are the jobs? Wherever you go, in whichever survey, the number one issue is jobs. So, I think altogether the five years were wasted. Not only were they wasted in terms of opportunities being available, they derailed the economy by demonetisation and a hopelessly flawed GST. I think demonetisation is one ground that is sufficient to come to the conclusion that this government has no clue of how to run a national economy.

Let me take you up on a few of the very interesting points that you made. Now tell us, are we in for a prolonged slowdown given that all these indicators are all quite weak? How do you see this panning out in the next two to three years?

See, the world is turning protectionist. World economic growth is expected to slow down in 2019-20. Exports are sluggish in India and thanks to protectionism and withdrawal of GSP, exports are not likely to pick up. Where is the trigger for India's growth? The only trigger is government expenditure. But even there, they are constrained by the fiscal deficit and the revenue deficit. I think what we saw in the three quarters of the current fiscal year of 2018-19 – 8%, 7%, 6.6%.. This is likely to continue until or unless the next government that comes does something dramatic.

This brings us very neatly to the next question...what would you do to fix some of these things if you come to power?

It will depend upon the nature of the government. Who is in the government or rather, who are in the government. If it is a single-party government, Congress, there is much we can do. But if it is a coalition government, where the power is shared with the other parties, we have to work on a common programme. I think you will find the Congress manifesto quite bold, quite radical and quite transformative. So if we have the opportunity to implement the Congress manifesto, I think we will be able to bring the economy back on rails.

Could you tell us a little about what is there in the manifesto? I know it is quite early ...

I can invite you to Ahmedabad tomorrow and if the Congress Working Committee discusses the manifesto, you can be privy to that discussion but at the moment I can’t give the details of the manifesto, except that the manifesto has several sections and each section deals with a problem and lays out the path forward.

Let me come at this in another way...what changes would you make to GST to make it slightly more effective? How would you streamline it?

We are going to call our GST 'The GST Two'. Which means this GST is hopelessly flawed. They are trying to fix it. You must have seen in the last six to seven months, they are desperately fixing it...cutting rates...issuing a notification...making a rule. It is in utter confusion. I had a long conversation with a former chairman of the Central Board of Excise and Customs, who is an authority on GST. And he just threw up his hands when I pointed out this or that. He said it doesn't make sense at all.. I am a practising lawyer and I do not know whether you have read the GST Act. If anyone can understand the key sections of GST Act or simply the English language they have written there and if you can make sense, I am prepared to recommend that you be admitted to the bar without passing the law examination...

Thank you very much. So it is very complex and dense.

And the best of my knowledge, the GST Act should have been translated into various Indian languages. How does somebody in Karaikudi understand what they say? It should be in Oriya, in Bengali, in Assamese. I believe it is not there. Even English is not understandable.

But they had a long time running into it. What do you think went wrong?

What went wrong is incompetence and their unwillingness to consult. In Parliament, we offered. Please consult us and we would help you design the constitutional amendment and the GST law. They flatly refused. For example, I have never been asked by this government what my views are and how the GST be implemented.

In a sense, is it the style of functioning coming back to back to bite them? In the sense they are not speaking to other parties, they have not had an open mind on some of these things?

I know that they have not spoken to anyone. But within the government, there is very little competence. Take for example, is there any internationally reputed economist in this government? The answer is no. Is there any reputed tax economist in the government? The answer is no. And contrast it with what the UPA had. We had Dr Parthasarthy Shome, Kaushik Basu, Raghuram Rajan, Dr Rangarajan, Govind Rao, Bimal Jalan, Vijay Kelkar. And I can give you a whole set of names...this government has nobody...nobody is in the government today who can be called an internationally reputed economist. And a couple of guys, who had joined Prime Minister's Economic Advisory Council, very cleverly and very quickly, quit the Council and they have not been replaced either.

So what does that say about their political bosses?

It says that there is no rapport between the economists and their political leaders. Either the political leader feels overshadowed by the arguments of the economists or the economists are uncomfortable with the policy thinking of the government leaders. They are certainly not on the same page but they are not even able to sing from the same hymn sheet. That is if you give them a hymn sheet, at least they should be able to sing together.

What do you think went wrong in the RBI…the equation between Urjit Patel and the government?

You saw the RBI minutes now? The minutes have been published. The RBI Board, a truncated Board, which was called to hold an emergency meeting in Delhi at 5.30 p.m. on November 8. The RBI Board pointed out that it would not be able to deal with the issue of black money, It will not make any dent into the counterfeit currency because the total currency was Rs 400 crore, it will not be able to stop funding of illegal activities and yet they were asked to frame the one-line recommendation approving demonetisation. They must have done it reluctantly. The reluctance is obvious when you read the minutes. But unfortunately, the RBI Board and the then Governor Dr Urjit Patel did not cover themselves with glory but sent the recommendations. I think it was a major failure and I think Dr Urjit Patel, unfortunately, paid a price for that failure.

So you would say that he was dragged kicking and screaming into this whole demonetisation thing? He should have quit?

It appears so. He should have stood his ground and said sorry, we can’t look at a proposal like this within 24 hours, we need to study it, we need to gather data and we need to come back with a proper response. The letter is written to them on the 7th (November) and the Board meets on 8th, half-an-hour before demonetisation. I think it is a very, very unfortunate chapter in the history of the RBI.

But governments in the past have also had a testy relationship with the RBI governors. How do you see that? Do you see that as a healthy tension to have?

These tensions are healthy. I had my book launch at Hyderabad and you see the two most prominent guests at the launch were Dr Y V Reddy and Dr Subbarao – they were there in the first row, in the first two seats. It is a healthy tension that the finance minister and RBI governor must be able to engage each other practically every other day and certainly every week, and debate. Ultimately, the RBI's views prevail. In the entire tenure of UPA, we allowed the RBI's views to prevail on the matters under domain of the RBI, although I may have been unhappy. Never have we acted in a manner that the BJP has acted -- namely, force the governor to fall in line, threaten him with a Board-managed RBI, pack the Board with your own nominees and if he does not fall in line, he may go. This is unheard of. Have you ever heard of two successive RBI governors resigning in disgust and walking away within their term?

The most contentious thing that the government did, as you mentioned, was demonetisation. Is it still playing out now, the positive and the negative effects?

I was in Tiruppur about three weeks ago, wherever you go, they will tell how SMEs have been forced to shut. If you drive on the roads of Tiruppur, you will find vacancies in Tamil – we are recruiting people. Practically on the gate of every large factory, you will find the board saying job vacancies are available. Today, you can’t find a single one. There are 5,000 ancillary units in Tiruppur, doing ancillary job work for major manufacturers, employing three-four people, Today 4,500 have been shut down. The Tamil Nadu industries minister told the state legislature that thanks to demonetisation and the GST, 50,000 MSMEs in Tamil Nadu alone have been closed down and 5 lakh jobs have been lost. This is Tamil Nadu alone. Now, you can apply that to other states. Jalandhar, Moradabad...whatever...all the industrial hub towns. Demonetisation started it. GST completed it. The complete or virtually complete destruction of MSMEs. Specially the 'M' and the 'S' in that. The micro and the small.

One of the major issues you touched on is jobs, and all this is related. What will you do on the jobs front when you come back to power?

I will tell you what our thinking is. We know which are the job-creating sectors of India. So we will have to take a sectoral approach. A focused approach for each job-creating sector. There can’t be a one-size-fits-all approach. There are about half-a-dozen job-creating sectors in India and for those, we will have a focused sectoral approach that will promote jobs rather than capital-led growth.

So this whole talk of doubling farmers’ income by 2022 looks difficult. Do you think it is possible at all?

It is impossible. The five-year agriculture sector income growth is 2.8%. If the farm income has to double in three years, it has to grow by about 16% a year. If it has grown just by 2.8% in the last three years, it has to grow by about 30% in the remaining period to reach that level, which is just impossible. Farm income will not double by the date they have set for themselves and it may not even double for several years thereafter. The highest farm sector growth was in the UPA period. 2.7%. So the farm income will not double. And that is the wrong approach. In fact, what we need to argue is how will the farm income and non-farm incomes of the farmer together get doubled. I think their arithmetic is wrong and their approach is flawed.

So if you were to make a similar commitment on farmer income, what would you like to say?

We will ensure that the farm income grows at a healthy rate but you have to supplement it with non-farm income and off-farm income. Farm income is entirely based on crop income. This is entirely crop-based agriculture. You have to move away from that. You have to talk about non-farm income, non-agricultural income..

Can you tell us a little bit about MIG, how it is going to work and what impact it will have on government finances?

Yes, Quite happily...MIG is a model imperative in the 72nd year of independence. The bottom 20% are in poverty. There is no hunger perhaps, thanks to MGNREGA. Poverty is a stain on India. That poverty has to be removed and it can be removed. And what we are proposing is not revolutionary. It has been tried in different countries of the world. All we are saying is that we will make a cash transfer to the bottom 10% in the first year of roll-out to bring them to a level of minimum income at which they will not be abjectly poor. And then we will move to next 10%. We are not going beyond the bottom 20%. I think this is doable. We have consulted and we are consulting the reputed economists. It is difficult but doable. The top economists are helping us design the programme and we will be able to convince the people of India that it is doable within the finances.

I started off by asking you for an assessment of the Modi years, and some positives. Would you say anything has worked at all, from your standpoint? MGNREGA, for example?

No they have not done anything great to widen MGNREGA. In fact, wages are due for about three months. The allocation for MGNREGA is not sufficient, and it is not any longer demand-based. There are several panchayats I know where there has not been MGNREGA work for several weeks. In fact, they have reluctantly implemented MGNREGA because they had no substitute for it. If MGNEGA is taken away, hunger will come back, so I do not credit them for anything great on MGNREGA. Yes, they have done good work on highways. Pradhan Mantri Gram Sadak Yojana is going well. But beyond that, I do not think they have done anything great. Yes, one thing you guys should be happy about is that there is a several-fold increase in advertisements to the media.

Switching track to elections, just one month away. I think Congress had a kind of Pulwama pause. They called off hostilities, so to speak, with the BJP, and stood shoulder-to-shoulder with them. How does the party come back on track and what are the major issues you can hope today that can have traction with the public?

We condemned Pulwama. The Indian Air Force did make a strike in Pakistan’s Balakot and the Congress president was the first to salute the Indian Air Force. I think the matter should have been left there and the unanimity among the political parties should have been remained intact as far the national security is concerned. But the BJP is blatantly politicising it by embellishing the event, and naturally, questions will be raised. Please remember we did not raise the questions first. The questions were first raised by the international media. The questions were raised by the two widows of martyrs. Questions were raised by local residents. And the political parties have to necessarily respond to the evolving situation. So we are not in any way belittling the IAF’s efforts. But what we are questioning is that the BJP is blatantly politicising it. Has there been a day when the prime minister has not raised Pulwama for partisan political purposes?

So that is the advantage of being in power, I guess. How will you counter this?

See, Pulwama is not going to promise jobs to the youth. It is not going to revive medium and small industries. It is not going to revive the acute agrarian distress. It is not going to bring down prices. Please remember the non-food inflation is 5.6%. So we think when we go out to the people, we start thinking about the real issues. Real issues of jobs, businesses, credit. People will wake up and say yes, you have been there for five years. What have you done? Now, Pulwama cannot give all this. Are you going to ask for votes only on the fact that the IAF struck at Balakot? The Indian Air Force does not belong to BJP. It belongs to the country. Therefore five years of failure on jobs, investment, economic growth, on the farm sector, all that is going to be kept aside? We might as well then vote for the Indian Air Force chief to be prime minister. I don’t think that is the way people will look at it.

Let me tell you the top three issues in the next elections are: Jobs, jobs and jobs.

How would you ensure that Rafale remains at the front and centre of your campaign? Do you think it is getting traction or it is too abstract?

No, it is, it you saw Mr Ram say that the story is not over, there is more that has to be investigated. How can you wish away Rafale? See, the aircraft was delayed because the earlier deal was scrapped and a new deal was entered into. The first of the aircraft will not come before September, I have my doubts about that. And the serious questions have not been answered. Why were the three anti-corruption clauses deleted? Why was the payment security mechanism completely jettisoned? No sovereign bank guarantee, no escrow account and the questions about the offset partner? I think these questions will not go away. And if you think the questions are too abstract for the people of India, you are wrong. The people of India are no longer uninformed. In many states, literacy is nearly 100%. People read newspaper, watch television, debate it. Therefore, I do not think this is the India of 1950s and 60s and the issues like this will not gain traction at all.

So finally can we go to your home state of Tamil Nadu. The political landscape has changed so radically now that two big leaders have gone -- Mr Karunanidhi and Ms Jayalalithaa. How do you see this panning out and what kind of alliances are you looking at? How do you see the situation evolving?

The alliances have been firmed up as of yesterday. On our side, we have DMK, Congress, the two Communist parties, the Indian Union Muslim League and the Dalit party, the Vidudhalai Chiruttaigal. We have a Kongu party. The AIADMK seems to have firmed up its alliance as of yesterday with the BJP, DMDK and PMK. We have the MDMK on our side. The battlelines have been drawn. The spoiler in the game is Mr Dinakaran, who has split the AIADMK, and don’t write him off. In any constituency, a significant portion of the hardcore AIADMK worker is with Mr Dinakaran. He won the by-election in RK Nagar. He is now focusing on the 21 by-elections now. He will split the AIADMK vote. Firstly, the AIADMK today is not the same as it was under Jayalalithaa. There is no Jayalalithaa. That makes the difference. And that vote is going to be split. And I’ve told my friends in the Opposition camp that in Tamil Nadu the AIADMK alliance is not one plus one plus one plus one. but it is one plus one plus one minus one. The BJP is a negative factor. It is minus one. It does not add to the AIADMK alliance. It actually subtracts from the alliance. Once you see the BJP flag, once you see them come and harangue us in Hindi, the first question that arises that this Hindutva party is imposing Hindi upon us and dragging Tamil Nadu back several years. Tamil Nadu today has moved away from many ideas which are cherished by the BJP. The BJP brings to the Tamil voters the threat of Hindi imposition, the threat of diluting reservation, threat of the NEET exam and the threat of Sterlite factory, so many things on which Tamil people are united and have an opinion, which is diametrically opposite to the views of the BJP. All other parties to some degree are acceptable but BJP is completely unacceptable to the people of Tamil Nadu.

But it is being said the traditional 39-0 or 40-0 is not going to happen this time.

Maybe. It may not be 39-0, I will be quite happy with 36-3.

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