Government, RBI behind the curve in controlling inflation: Congress


Congress on Saturday attacked the Reserve Bank of India for being behind schedule in bringing inflation under control and preventing outflows from the country, and accused the government of not letting the central bank do so.

The party also called the government’s decision to ban wheat exports anti-farmer.

Congress also requested a three-year extension to the states’ indemnification period to compensate for losses due to the introduction of the Goods and Services Tax (GST). The compensation mechanism expires on June 30 of this year.

“A lot of people think the RBI was behind the curve. And why was the RBI behind the curve? Because we believe the government pushed it in that direction. We cannot use the war in Ukraine to explain the high inflation in WPI and CPI,” former finance minister P Chidambaram told a news conference at Nav Sankalp Chintan Shivir here.

Had the RBI taken timely action and raised the policy rate, the outflow of funds could have been prevented, he said.

The RBI’s Monetary Policy Committee (MPC) raised the repo rate by 40 basis points last week outside its scheduled meeting, in addition to raising the cash reserve ratio by 50 basis points to suck excess liquidity in the system in its fight against inflation. However, CPI inflation had already reached 6.95% for March, the third month in a row to have inflation over 6%, which is an upper tolerance limit set for the MPC. The latest data showed that inflation increased further to 7.79% in April.

Chidambaram said the ban on wheat exports showed the lack of preparation and planning on the part of the government. On the one hand, purchases had plummeted, while on the other, the government had imposed a ban on wheat exports, which was an “anti-farmer” measure.

Using the war in Ukraine to impose an export ban was a mistake and reflected a lack of planning, he said.

The former Union finance minister also said: “We strongly oppose the June 30 end of GST compensation to states. We are asking the government to extend this measure for another three years. »

A compensation tax was imposed on certain items, including cigarettes, cold drinks, automobiles, under separate legislation for the first five years of the GST rollout from July 1, 2017. However, States are requiring extended compensation periods since their revenues have taken a hit. The GST Board at its last meeting in September 2021 had decided to extend the suspension of compensation until 2026. However, this fund will be used to repay loans made by the Center on behalf of States to meet their TPS losses due to Covid-induced blockages.

Chidambaram said there was a complete breakdown of trust between the central government and the state government.

“It is not only non-BJP state governments who have complained about this, but also privately many BJP finance ministers have told us that regarding GST compensation, there is a complete breach of trust.” he said.

There must be a comprehensive review of the fiscal relations between the Center and the State, he said, adding, “The consequences of the poorly drafted and unfairly implemented GST laws by the Modi government in 2017 are there. so everyone can see them.

The state fiscal situation is more fragile than ever and requires urgent corrective measures,” Chidambaram said.

He said Rs 78,704 crore is pending from the central government to the state governments as compensation.

“That’s the figure in mid-May. And the compensation period will end at the end of June,” he said, asking the government to extend the compensation period, which was the unanimous request of all. state governments.

Generally, the Center pays compensation until January of a fiscal year. Those of February and March are postponed to the following year. But the government has paid compensation to states until November only in 2021-22.

Chidambaram also blamed the government for deflecting the real problems of the people.

“For the Indian people, what is most important? Is it a question like should someone eat Halal meat or Jhatka meat? Is it about whether bulldozers should be used and what decibel level the speakers should be? These issues can be addressed in normal administrative courts,” he said.

“In our view, the most important issues are hunger, stunting in children, anemia in women, learning outcomes…These should be the areas of concern. What kind of learning outcomes does our country have in the 75th year of our independence?These things have struck you, as a sensitive citizen of this country,” the veteran congress leader said.

Chidambaram said Congress favors moving forward on liberalization, not backing down. He said it was Congress that launched liberal economic policies 30 years ago and was looking to “reset” them to go faster, not back out of them.

He said the government was the biggest employer in India. And while the private sector could create jobs, the hiring freeze by government agencies was “anti-youth, anti-tribe and scheduled caste, anti-women. it deprived young people of hope”.

He said Congress and the BP had, in their 2019 manifestos, promised each other to close the government’s hiring gap. It had to start again immediately, he said.


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