'Please Also Talk About Subsidies For The Rich'

The hon. Prime Minister in his statement has said and I quote, "It is important to recognize that the fundamentals of the Indian economy continue to be strong." Yesterday, when I had raised the issue, he replied in negative by saying, 'Are we going back to the situation in 1991?' 

At that point of time, the then Finance Minister, Dr. Manmohan Singh, and today's hon. Prime Minister, in his Budget Speech had said and I quote, "We have no time to lose." And then, he outlined four parameters in 1991 by saying, "This is a worrying situation and we have to embark on this course of reforms."  

The first one was on the Current Account deficit. He then said, in his own words, that it was 2.5 per cent of the GDP and, therefore, it was not acceptable. Today, it is 4.8 per cent of the GDP.

The second point I wish to quote of what he had said then. He said, "The debt service burden is estimated at about 21 per cent of the Current Account receipts. " Today, Sir, that 21 per cent is 35.01 per cent according to the Budget papers. 

The third parameter that he used was on the question of inflation which, today's hon. Prim e Minister then said and I quote from his Budget Speech, "The major worrisome feature of inflation in 1990-91 is that it is concentrated in essential commodities." Today, in 2013, is there any difference? 

The fourth one is about the foreign exchange reserves. At that time, in his Budget Speech, he had said that 'foreign exchange reserves were very meagre and we can finance imports only for a few weeks.' Today, yes; we can finance imports for about six months. But, we have the reserves which is one of the lowest amongst all the BRIC countries. According to the data that has been furnished, some of them have it for 1 to 2 years of cushion.

But, on all these four counts, Sir, today the situation is worse than what it was in 1991. These are the figures, Sir. I am just quoting the figures to you. 

[Interruptions]

P. Chidambaram: Your interpretation is wrong.

I am yet to come to the interpretation. I am only saying that on the question of parameters of economic fundamentals, on all the four, the situation is worse. And then the worrisome thing here is the future reforms, about which the Prime Minister says, and I quote, "The most growth-friendly way to contain the deficit is to spend carefully especially on subsidies that do not reach the poor." I have no problem with how you regulate and make efficient what does not reach the poor. 

But the point at issue is, when you talk about subsidies for the poor, please also talk about subsidies for the rich. The tax incentives that you are giving as incentives for growth have resulted in a minus 1.6 per cent fall in your index of industrial production. It has come down to two in June. In spite of all these incentives, you have a decline in production. So, there is my interpretation -- hon. Finance Minister has asked me; so I am giving my interpretation. 

What is the reason why foreign capital is also not coming? Though there are many factors, as the Leader of the Opposition has mentioned, capital does not flow because they like your face or my face; it does not flow because it is a nice environment or a bad environment; it flows on whether there is profit that they can earn. If there is no avenue for earning profit, what will the investment do? Your global market is shrinking; you can't export. Your domestic demand is shrinking because of price-rise and disposable incomes are not there. 

Your domestic demand is declining. In that situation, what would investments do? Who is there to buy what you produce, unless you expand your domestic demand? That expansion of domestic demand can only come, and this is what I urge the Prime Minister in the interest of the country's economy to please consider, when you stop these incentives which are working to the contrary, collect your taxes, invest in public investment to build our much-needed infrastructure, generate new employment. When employees spend the wages that you give them, domestic demand would grow, and that would be the basis for a sustainable growth trajectory. The alternative is there. This is the alternative I seriously urge you to consider, because unless you have such alternatives... 

The final point that I want to make is about the reason why there is the fall in the rupee. You have a rise in the price of gold. Obviously, there is money in this economy; people are buying gold. They are buying gold and that is why the price of gold has gone up. They are buying real estate. India is today the fastest-growing real estate market in the world. It has outstripped Rio de Janeiro by nearly 16 per cent of the real estate prices. Dollar is growing, but the rupee is falling. Why? That is because these are the only three av enues left for the rich to park their money. They cannot invest because they cannot sell what they produce. So, what will they do with the money? They are storing in gold, they are storing in real estate and they are storing in buying foreign currency. That is the reality. So, tap that surplus money, invest in public investments, generate jobs and expand the domestic demand. I urge the Prime Minister to consider this strategy seriously