Finance Minister P Chidambaram on Friday dubbed as 'an exercise in self deception' the BJP National Executive's resolution and issued a rejoinder.

Following is the text of the rejoinder by Chidambaram:

"BJP National Executives Resolution  A Rejoinder: I have carefully read the press release containing the 'Resolution on prices' adopted at the meeting of the National Executive of the BJP a few days ago. I regret to point out that the Resolution is an exercise in self-deception and is aimed at spreading disinformation.

"BJPs false claims. . ..

"2. Let us look at the claims made by the BJP. The party claims that the National Democratic Alliance inherited an economy that was on the verge of bankruptcy and that, in 2004, it left behind a legacy of a strong economy. It is difficult to believe that the BJP is talking about the Indian economy!

"In the three years between 1994 and 1997, the economy had recorded an average growth rate of 7.5 per cent and, despite the severe Asian crisis, the economy grew at 4.8 per cent in 1997-98. That is when the BJP assumed office.

"What is the record of the BJP/NDA in the subsequent six years? The average for those six years was only 5.8 per cent and, in two of those years, the growth rate was abysmally low at 4.4 per cent (2000-01) and 3.8 per cent (2002-03).

". . . and poor fiscal management

"3. The legacy of the BJP/NDA was not only a low growth rate. At the end of 1997-98, the fiscal deficit was 4.8 per cent and, when the NDA left office after six years, the fiscal deficit was reduced marginally to 4.5 per cent.

"The revenue deficit at the end of 1997-98 was 3.0 per cent and the NDA left an inglorious legacy of a revenue deficit of 3.6 per cent. Need anything more be said about BJP/NDAs fiscal management?

"4. In 2003-04, the NDAs last year, the economy registered a growth rate of 8.5 per cent. However, this was a statistical aberration and entirely due to the base effect of the low growth rate of 3.8 per cent in the previous year.

"The agriculture sector appeared to bounce to a growth rate of 10.0 per cent in 2003-04, but this, again, was only a statistical quirk because the previous year had recorded a negative growth rate of 7.2 per cent! Not surprisingly, when the NDA claimed in 2003-04 that India was shining, the people voted them out.

BJP/NDAs legacy

"5. When the United Progressive Alliance government took over, we had to overcome the legacy the NDA left behind. As the 2005-06 Budget speech pointed out, there were a number of pressing problems that had to be tackled before the economy could take off again, like it did in the beginning of the nineties.

"The first was the liquidity overhang at the end of 2003-04 which had spilled over into 2004-05. The second was the definite build-up of inflationary pressures as a result of a sharp rise in global petroleum prices. The third was an unanticipated 13 per cent deficiency in the south-west monsoon.

"The fourth was an apparent decline in business confidence that had led to a sharp downturn in new investment, and also showed up as current account surpluses." 

Figures speak for themselves: NDA vs UPA

"6. Thanks to the UPA governments management, the economy has recorded an unprecedented high rate of growth, the average for the four years being 8.9 per cent. This is a good 300 basis points more than the average for the NDAs six year period.

"The UPA government has overhauled the moribund manufacturing sector the NDA left behind and the increased business confidence is reflected in the investments made by both domestic and foreign investors. Even in the agriculture sector, the average growth rate in the four years of the UPA government has been 3.55 per cent.

"Specifically, in the production of food grains, output has increased by about 10 million tonnes every year. The figures for the four years are:

"Year              Food grains output (million tonnes)

2004-05         198.4

2005-06         208.6

2006-07         217.3

2007-08         227.3

"7. One of the most important aspects of the UPA government has been its commitment to strengthening the economic fundamentals. Within days of assuming office, the UPA government notified the FRBM Act which the NDA government was reluctant to do. Inheriting a fiscal deficit of 4.5 per cent, it has been brought down to 2.8 per cent in 2007-08.

"Likewise, inheriting a revenue deficit of 3.6 per cent, it has been brought down to 1.2 per cent in 2007-08."

"8. Thanks to the robust growth of the economy, the savings to GDP ratio has increased from 29.8 per cent in 2003-04 to 34.0 per cent in 2006-07. Likewise, the investment to GDP ratio has increased from 28.2 per cent in 2003-04 to 35.9 per cent in 2006-07.

"9. The sound management of the economy is also reflected in better collection of taxes and curtailment of wasteful expenditure. In the six year period of the BJP/NDA, the tax to GDP ratio crawled from 9.1 per cent to 9.2 per cent.

"Starting with 9.2 per cent at the end of 2003-04, the UPA government has raised it to 12.5 per cent in 2007-08, and the ratio is expected to reach 13 per cent this financial year.

Towards inclusive growth

"10. Prudent fiscal management and robust revenue collections have enabled the UPA government to take up programmes that were beyond the comprehension and capacity of the BJP/NDA. For example, why did the BJP/NDA not conceive of the National Rural Employment Guarantee Programme?

"Why was the BJP/NDA parsimonious in increasing the MSP for paddy and wheat? Why did the BJP/NDA not bring succour to the farmers through a Debt Waiver and Debt Relief Scheme? Why did the BJP/NDA not introduce any measure of social security for the workers in the unorganised sector?

"The answer is simple: the BJP/NDA Government did not have the vision or the compassion or the fiscal space or the  financial resources to undertake schemes and programmes that would directly benefit the poor and make growth inclusive."

"11. The allocation of resources under the two governments reveals an irrefutable picture. Just a few examples would suffice:

"Sector/Scheme Budget allocation in 2003-04 (in Rs Crore)/Budget allocation in 2008-09 (in Rs. crore)

Health                                                6,983/16,534

Education                                           7,024/34,400

Sarva Siksha Abhiyan                       1,951/13,100

Mid-day Meal Scheme                     1,175/8,000

Agriculture                                         3,262/10,075

ICDS                                                  2,356/6,300

Rural employment schemes              4,986/16,000

Inflation is a problem

"12. I would be the first to admit that we have not overcome all our problems. Notwithstanding the many successes under the UPA government, we admit that inflation is a problem. It was a problem under the BJP/NDA government too. In 2000-01, in 48 out of 52 weeks, the WPI was over 6 per cent; in 22 of those weeks, it was over 7 per cent; and in 12 of those weeks, it was over 8 per cent.

"These are facts that cannot be wished away. During the entire six year rule of the BJP/NDA, crude oil prices per barrel ranged from US$22 to US$28. How I wish that the UPA government had enjoyed such benign crude oil prices? We have not been fortunate.

"The average price of the Indian basket in 2007-08 was $79 and, since March 2008, the average price has increased to $99. On May 22, 2008, crude oil prices touched an all time high of $130 per barrel. All countries of the world, including India, are victims of high crude oil prices."

"13. The current inflation is almost entirely due to the relentless rise in crude oil prices. This rise has also triggered the rise in commodity prices and, because bio-diesel is produced from food items such as maize, sugarcane and palm oil, food prices have also come under pressure.

"The government of India, like governments all over the world, is fighting inflation. We have taken fiscal, monetary and administrative measures, and we are willing to take more measures.

"But, to criticise the government on the ground of inflation without going into the causes of the current inflationary trends and without offering any concrete solutions would amount to merely politicising the issue.

"The BJP/NDA is, of course, in the Opposition, but that does not mean its duty to the people is only to oppose the government. I may point out that we have not heard of any concrete suggestion made by the BJP/NDA that, if implemented, would help in moderating inflation." 

"14. There are many other stray references in the BJP National Executives Resolution which can only be described as 'economising with the truth', and hence are not dealt with in this rejoinder.

"15. We believe that the people of India realise the immense gains that have accrued to the country  and to the poor people in particular  during the four years of the UPA government. We also believe that they understand the very difficult situation caused by a relentless rise in world prices of crude oil and commodities.

"The UPA government is confident that it will, with the understanding and support of the people, overcome the current difficulties and ensure, in the medium to long term, robust and inclusive growth with price stability."

Inflation, the silent killer