New Delhi: Former finance minister P Chidambram on Sunday said the fiscal stimulus package inducted between 2009 and 2011 was a collective decision of the government that led to breaching of fiscal and revenue deficits and high inflation for which people punished the UPA government in the Lok Sabha elections.
In a speech that analysed the first full budget of the Modi government presented by Finance Minister Arun Jaitley, he said the budget for 2015-16 has not passed the test of equity, fiscal and financial stability and the test of rising inequality while it had some good aspects.
In his speech at the Loyola Institute of Business Administration (LIBA) in Chennai yesterday, Chidambaram, at no stage, had taken the name of President Pranab Mukherjee, during whose tenure as finance minister the stimulus package was decided by the Union Government following the 2008 economic crisis.
Chidambaram said he had only made a passing reference to the stimulus package that led to the Centre breaching targets on fiscal and revenue deficits, current account deficit and the resultant high inflation led to a price situation that people punished the government in the elections.
In the LIBA speech, the former finance minister said Jaitley has pushed the deadline of curbing fiscal deficit to three per cent of GDP to 2016-17 by another year to 2017-18.
As against a target of 3.6 per cent fiscal deficit fixed by the UPA government for 2015-16, he has relaxed it to 3.9 per cent of GDP.
Through this, Chidambaram said, the NDA regime was planning to borrow an additional Rs.42,500 crore which the government was planning to spend not on plan expenditure but on non-plan expenditure.
Replying to questions, Chidambaram said there was a need
for a fourth slab in the personal income tax rates.
He recalled that in his budget of 1997 he had introduced three tax slabs but felt there was need for a fourth slab since the liberalisation was giving huge rise in income for certain people.
The former finance minister said the government's acceptance of the 14th Finance Commission report, which increased the states' share of divisible central taxes to 42 per cent from 32 per cent, did not mean states were going to get more money. "This calls for another long debate," he added.
He also defended the Minimum Alternate Tax (MAT) which was introduced to force companies which did not pay tax due to availability of concessions, exemptions and deductions to pay tax.