NEW DELHI, July 17: Finance minister Yashwant Sinha today ripped into his predecessor P Chidambaram, arguing that it was the previous government which was responsible for the economic mess the country was in high inflation and poor growth and not the BJP. "If his fiscal deficit is not inflationary, why is mine? If everything he did was virtuous, why is everything I do vicious," Sinha argued in the Lok Sabha while replying to the Finance Bill, stating that he had not reversed any of the reform-oriented policies of the past seven years such as lowering taxes, or curbing expenditures.Defending his government's against the criticism that the budget had stoked inflation by levying taxes on items of everyday use, he told members that inflation had actually started rising from October last year. And foreign investors, he added, had actually started withdrawing funds from the stock markets in November itself this peaked in June, but actually declined to a small trickle this month.
"Surely this doesn't showthat the world greeted the budget with a thumbs down signal, as my predecessor has been arguing," he said. He said that Chidambaram's contention that interest rate spreads had gone up by 4.5 per cent post-Pokharan was also incorrect they went up by only one per cent, but went up by 2.5 per cent in November, when Chidambaram was the finance minister.
The Moody's decision to change its outlook on India was, he pointed out, also announced last year, many months before the BJP was anywhere near coming to power. The finance minister stressed that he was determined to keep the fiscal deficit at 5.6 per cent to keep prices under check. He said the main reason for inflation was the galloping fiscal deficit.
Sinha said the government was taking various steps to bring down prices and said what was required was a sound analysis of the nature of inflation. He added that the government was making efforts to control the money supply. The growth of money supply (M3) Last year was more than 17 per cent, which was veryhigh, he added.
Stating that the rise in inflationary trend since September last was mainly due to the higher money supply allowed by the previous United Front government, Sinha pointed out that the fiscal deficit left by the previous government was 6.1 per cent as against the intended limit of 4.5 per cent.
Sinha said the charge that he had tried to distort the tax structure was far from true. He said the reason why duties had been lowered on items like whiskey was because of India's commitment to the World Trade Organisation (WTO). He asked members to judge the budget proposals in their proper perspective. He said the country has a heterogeneous tax structure and added that the imposition of special additional duty of four per cent should not construed as a swadeshi measure.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
