Budget and Beyond: Urban middle class should be educated to understand farmers need to be paid more, says Chidambaram

Ever since Finance Minister Arun Jaitley assured, in his Budget speech, that the government will pay farmers 50 percent more than their cost of production, the Congress Party has been pointing out that this is meaningless unless the comprehensive cost of production is the metric that is used. It probably knows that this could see a spike in inflation and will give it another stick to beat the government with and help it stoke middle class anger.

Unlikely that it will follow what its own party heavyweight, former finance minister P Chidambaram, thinks should be done to balance the procurement price-inflation conundrum. He thinks the urban middle class should be educated to understand that farmers need to be paid more.

“India must grow all the food it needs. . . and our people must be ready to pay so that farmers remain in farming. . . even if it means paying Re 1 extra per kg,” he said in a Facebook Live interaction. He, however, is doubtful that the government will make good on its promise – “its record of the last four years doesn’t inspire confidence.”

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One doesn’t know about the party, but Chidambaram appears likely to make an issue out of the proposed change in fiscal responsibility measurement – with the fiscal deficit being the sole operational parameter and doing away with revenue deficit targets. “Where did they get this idea?” he asks, adding that if it was from the N K Singh Committee report, that is “unacceptable”. Unfortunately, there is little he or his party may be able to do about this.

Continuing to question the assumption of a 67 percent increase in GST collections in 2018-19, Chidambaram reverts to his criticism of a flawed GST model of multiple rates. He has a valid point when he says that this excise-customs model leads to lobbying. “We got out of his model in service tax where we had just one rate,” he points out and says the government should have followed this model. “They don’t have a philosophy on GST, they are just shooting in the dark.”

But is it fair to blame only the central government for this flawed model, when the GST Council is the one which decides all this? Jaitley certainly has facts in his favour when he points out that all decisions in the Council are based on consensus. Chidambaram’s response to this is less than convincing: “when nineteen state governments [BJP-ruled] and the central government propose something, what is the point of opposing.” Perhaps the Congress Party should get its state governments to force a vote in the GST Council on issues dear to it – like the inclusion of petroleum and construction in GST.

Chidambaram says the central government is not keen on bringing petroleum under GST because this will not allow them to pass on every crude oil price increase to the consumer. Well, Jaitley says he is ready to bring petroleum under GST but it is the state governments who are putting up stiff opposition. If this is not correct, then the best way for the Congress to expose him would be to force a vote on the issue at the next GST Council.

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(The writer tweets @soorpanakha)