Now, we should face challenge, re-build our economy: P Chidambaram

Last year, India imported 845 tonnes of gold, worth $50 billion or Rs3 lakh crore. This year, in just two months — April and May — the country has imported over 300 tonnes. If we continued at that pace, annually India would have imported 1,800 tonnes of gold, which needs huge money. From where could we get that to import a huge amount of gold.

I have great sympathy for the gold, gems and jewellery industry as well as for their labourers. But, the people of India may not be aware that we buy gold in foreign currency. Not a single ounce is produced in India as we are 100 per cent dependent on import. But Indians are so passionately attached to gold.

Sorry for that, but we had to take strong measures to control gold import. I can’t ask people to stop buying gold but I appeal to moderate the demand. Buy one sovereign instead of two, buy 10 gm gold instead of 20 gm. There are different ways of investing in gold such as gold deposits or gold ETFs.

These are the excerpts from the speech of union finance minister
P Chidambaram when he was asked by a member of the jewellery association on the government taking harsh steps to curb the import of gold.

India’s largest listed media group Bhaskar Group’s Divya Bhaskar has completed 10 years in Gujarat. As part of the tenth anniversary, the group had organised a talk show with Chidambaram here in Ahmedabad on Monday.

At a packed YMCA auditorium, every individual had some questions related to the economy before the finance minister gave his speech.

The talk show began with a host of questions raised by Rameshchandra Agarwal, chairman of the Dainik Bhaskar Group. In his speech, the chairman said that everyone in the hall wanted to know something on inflation, slowdown, weakening of rupee, poor sentiments, rising interest rates and several other issues.

“At present, every individual and company want to know how the government will show the new way of growth till elections,” he said and opened the stage for Chidambaram to deliver his speech.

The finance minister started by talking about newspapers which he said scored over TV news channels. “For the print media, TV and internet are two challenging mediums. It is believed that something beyond internet in cyberspace is also expected. At present, 48 per cent people prefer accessing TV as their primary news medium. A quarter of the total still prefer newspapers as their primary news medium. TV is instant medium. But still, print scores on TV when it comes to detailed coverage,” he said.

The line between opinion and news was getting blurred, felt Chidambaram.
“These days, opinions come on page one and news on inside pages. I am confused whether I am reading newspaper or viewspaper,” he said.

“I like the spirit of entrepreneurship of the people of Ahmedabad. Everyone has aspiring businessman inside him or her,” he said.

Talking about the economy, Chidambaram said that despite the prevailing gloom, India was the second-fastest growing economy in the world after China. “China has revised their growth from 8.6 per cent to a little over 7 per cent this year. We are estimating our growth between 5.5 per cent and 6 per cent. The country is still live and kicking,” he said.

“Many economies collapsed because they allowed their fiscal deficit to go out of control. Ireland, Iceland, Spain, Greece and many others faced severe problems.
The Indian economy did not collapse, it slowed down,” said Chidambaram.

People say India saw a historic low GDP growth in 2012-13 at 5 per cent. “Let me remind you that in 2000-01, the growth was 4.3 per cent. In 2001-02, it was 4 per cent. And, in both the years, I was not the finance minister,” he said.

Looking at global factors, “India cannot remain unaffected,” he said. “Now, take whatever steps. We have to face the challenges and rebuild our economy. This is what we have done in 1991, 1997 during the Asian crisis and in 2008 during the Lehman Brothers collapse and now. We can do it, we will do it. We will build our economy,” he said.

After taking charge in August 2012, every morning before entering North Block around 9 am, Chidambaram remembers the three biggest challenges. “First is fiscal deficit. Before I took charge, we let our fiscal deficit go out of control. When I was FM in 2007-08, it was below 3 per cent. We will bring it back to that level. I promise the fiscal deficit will be 5.3 per cent or below by the end of this year,” he assured.

Inflation is the second-biggest challenge. “We have contained the wholesale price index to 5 pc. But the consumer price index (CPI) is still not under control.

There are challenges such as higher minimum support price and no efficient logistic support to supply fresh and perishable products to consumers. The core inflation, consisting of non-food and non-oil, is at the lowest level, virtually near zero. So, among inflation rates, CPI is the biggest challenge,” he said.

Explaining that there was nothing wrong if the consumer pays Re1 extra to the farmer, Chidambaram said: “There is not a single country in the world which can produce 260 lakh tonnes of grain for 1.3 billion people. We have to be self-sufficient to pay good to farmers.”

The economy’s third-biggest challenge is current account deficit. “If forex earning is lesser than forex spending, it leads to a rise in fiscal deficit. In India, we can print rupees but not dollars. We are importing coal, oil, edible oil, pulses, capital goods, electronic goods, technology and many things. Our earnings in dollar are less against our spending in dollars. For this, FDI, FII and external commercial borrowings are the best way to get more foreign funding,” he said.

Government has put the best minds to work on these three big challenges, he said. “We have a large number of economic advisers. Hence, I expect our growth to be close to 6 per cent this fiscal. Next year, the growth will increase to 7 per cent followed by 8 per cent,” said Chidambaram.

Mentioning the controversy between Nobel laureate Amartya Sen and Jagdish Bhagwati, the finance minister said both were correct in their own ways. “Sen said that we need passion for growth while Bhagwati believes that we need compassion for poor. So, I believe that we should grow with passion and compassion for the poor should also be considered,” he said.

Giving examples of Gujarat and Maharashtra, Chidambaram said both the states were formed together. “In the 11th Five Year Plan, Gujarat grew by 9.55 per cent and Maharashtra by 8.55 per cent. In agriculture, the growth of Gujarat was 6.65 per cent against 2 per cent for Maharashtra. Gujarat scores over Maharashtra when we talk about passionate growth,” he said.

But Maharashtra scores when it comes to compassion for the poor. “The infant mortality rate of Maharashtra is 28 per cent against 44 per cent in Gujarat. In maternal mortality rate, Gujarat has 149 against 104 in Maharashtra,” said the FM.

During the question-answer session, Chidambaram said the rupee was under pressure. “Between August 2011 and July 2012, rupee had already depreciated from 45 to 55 against dollar. After I took charge from August 2012, the currency was stable around 54 and 55 till May 2013. Before we could pat ourselves in the back, US Federal Reserve’s Ben Bernanke made a statement which affected all currencies across the globe. American companies rushed dollars back to America. So, it fell to the level of 60. It has happened because of speculative attacks,” he clarified, adding that the government and RBI were taking steps to control the weakening of the currency.

When an industrialist said they were afraid of the rise in interest rates, the finance minister said: “The rates will remain stable. Banks may reduce or keep it stable. But they have promised not to increase the rates.”

Chidambaram also requested industries to start investing in India. “Banks are ready to give finance but they are not getting the big tickets. Projects with Rs300 crore to Rs500 crore or more should approach banks for expansion. There is enough credit available with the banks,” he said.

When someone said companies had lost confidence as they do not know which government would come to power next year, Chidambaram replied with an air of confidence: “What do elections have to do with economic cycles? Do you think the next government will not be friendly to you? We are friendly to you at present and will be friendlier to you when we return next year.”

A friend from stock market complained that STT and CTT had affected the volume of transactions at stock exchanges. “STT and CTT are not intended to raise revenue. There were many transactions, which had no accounts and to make them accountable, these had been introduced,” said Chidambaram.