Nirmala's stimulus package another hoax, says Chidu

KT NEWS SERVICE. Dated: 10/14/2020 10:13:19 AM

NEW DELHI, Oct 13: Former Finance Minister and senior Congress leader P Chidambaram on Tuesday said Finance Minister Nirmala Sitharaman belatedly realised the need to push up demand, but the stimulus package she unfolded to let the government employees start spending is another "hoax," alike an earlier package of Rs 20 lakh crore unfolded in March.
He told a virtual press conference that "the grand announcement on Monday was no stimulus package to push economic growth, but another sly attempt to dazzle people with exaggerated numbers and lead them to believe that the government is hands-on an responsive to the needs of people and economy."
Chidambaram said the package reminds him of a Hindi proverb: "Khodapahad, niklichuhiya."
He said: "The numbers claimed this time too are a hoax. The stimulus is not of a value of Rs 73,000 crore as the finance minister claimed. Nor is it of the value of Rs 1 lakh crore, another number thrown at us. The fiscal impact of these announcements is estimated by analysts to be a mere 0.1% of GDP. I am also amazed by the use of the phrase 'demand infusion.' Wonder if such a phrase exists."
The former finance minister then goes on to analyse the three announcements:
1. The Rs 10,000 crore interest-free festival advance to government servants is not additional expenditure. It would be recovered in 10 monthly instalments. It is like buying on equated monthly instalments, i.e. EMI.
2. The Rs 12,000 croree offered to the states is not a grant but a loan. All the big states put togetheer will get Rs 7,500 crore which is a minuscule fraction of the capital expenditure of Rs 9 lakh crore budgeted by the states for 2020-21. It will make little difference.
3. The offer of a tax concession to 35 lakh central government employees on LTC is a pathetic attempt to induce them to spend thrice that amount out of their own money to gain a small tax benefit. The FM has also dis-incentivized encashing 10 days of leave by requiring that it must be spent as stipulated by the government in order to get the paltry tax benefit.
Chidambaram said the most deserving people who really need the money desperately have been once again left in the cold. They are the bottom half of the families in India. He said the government stubbornly refuses to make a cash transfer to their accounts as recommended by dozens of economists and as also demanded by the Congress and other political parties.
He doubts that many government employees will avail of the FM's 'generous gift' that comes with strings attached, to fulfil not one or two but seven conditions to expect a tax benefit of Rs 300-7200! What are those conditions:
-- Must spend Rs 12,000 to Rs 72,000 out of own money/savings;
-- Must buy items that have a GST rate greater than 12%;
-- Must buy only a non-food item;
-- Must buy only from a GST registered shop;
-- Must pay digitally, not in cash;
-- Must buy before March 31; and
-- Must produce GST bills.
A poor consumer will have to go hunting the shops and find out what items attract greater than 12% GST as the consumer so far is concerned about what is the end price to him since it is only the traders who take count of the GST rates, Chidambaram said. He said no surprise if the shops put up notices describing the items having more than 12% GST to attract the government employees to empty their purse.



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