Poor Handling of Economy by Modi Govt to Blame for Falling Rupee, Says Chidambaram

Kolkata: Former finance minister P Chidambaram has launched a scathing attack on the Central government, blaming its handling of a host of issues including falling rupee, employment generation and LPG price rise.

In an email interview with PTI, he said the currency’s decline was "inevitable" due to India's current account deficit as well as other factors like high inflation.

The rupee, which on Thursday closed at an all-time low of Rs 79.99 to a US dollar, recovered 8 paise to settle at 79.91 on Friday.

Chidambaram said the depreciating rupee can also be attributed to fall in exports, high inflation rate and outflow of foreign portfolio investments.

"The fall in the dollar-rupee rate is inevitable given our current account deficit, inflation, increase in interest rates domestically and in the US, outflow of foreign portfolio investments and decline in exports.

 “The exchange rate must be viewed as a ‘price’. It is one of the ‘trinity’ that the RBI has to manage. The rupee will gain only when the fundamentals improve," he said.

India's current account deficit or the shortfall between the money received by selling products to other countries and the amount spent to buy goods and services from other nations is projected to touch $105 billion this fiscal, or 3% of GDP, primarily due to the country's steadily growing trade deficit, according to a report by Bank of America (BofA) Securities.

The trade deficit in June ballooned to a record level of $26.18 billion, owing to a jump in gold and crude oil imports, government data said on Thursday. Imports expanded by 57.55% to $66.31 billion in June compared with the year-ago month, while exports in June rose by 23.52% to $40.13 billion, the data showed.

Meanwhile, retail inflation dropped marginally to 7.01% in June, though it still remained above the Reserve Bank of India’s comfort level.

The consumer price index (CPI) based inflation stood at 7.04% in May, and 6.26% in June 2021.

The senior Congress leader also criticised Prime Minister Narendra Modi's "one million job" drive, and said that it would not help ease the “employment crisis” in the country.

"The Union government has admitted that there are over 8,00,000 vacancies in the Central government alone. If you net off the vacancies against the proposed recruitment of 10,00,000 people, what is left is less than 2,00,000. And, that is over a period of 18 months," he said.

Union Minister of State for Personnel Jitendra Singh, had in a written reply to the Rajya Sabha earlier this year, said that there were over 8.72 lakh vacant posts in central government departments as on March 1, 2020.

Chidambaram said the large number of people applying for the Centre’s new ‘Agnipath’ scheme despite it being temporary in nature with no post-job benefits, was an indication of “how bad” the employment scenario is.

"Just recently, against 3,000 ‘Agniveer’ posts in the Indian Air Force (temporary with no tenure or pension and medical benefits), there were 7,50,000 applicants. That is an indication of how bad the employment situation is and how desperate the youth are," he said.

On the LPG price hikes, Chidambaram said the government was “not at all” bothered to help the common man at the time of crisis.

"This government is callous. When people are suffering, it is the duty of the government to help and mitigate their burden. The Centre is more concerned about the balance sheets of the oil and gas marketing companies.

 “They are anyway making windfall profit. Instead of passing on some of it to people (in the form of price cuts), the government is taxing the windfall gains and enriching itself," the former home minister said.

Cooking gas LPG price was on July 6 hiked by Rs 50 per cylinder, the third increase in rates since May on firming international energy prices.

Non-subsidised LPG now costs Rs 1,053 per 14.2-kg cylinder in the national capital, up from Rs 1,003 previously, according to a price notification of state-owned fuel retailers.