Economy not yet out of the woods: Chidambaram

Indian economy is not yet out of the woods and claims of a V-shaped recovery is premature, former Finance Minister P Chidambaram said while delivering the R K Shanmugam Memorial Lecture organised by The Tamil Chamber of Commerce in Chennai on Saturday.

He said that India, in reality, is experiencing a two-speed K-shaped recovery where only about 10 per cent of the population has seen some increase in income while 40 per cent of the people have seen a sharp fall in income and are in financial distress. For the balance 50 per cent, it has been a status quo.

He quoted RBI report to state that demand has been sluggish, growth in bank deposits have dipped, household debt have risen, financial savings have declined and high fuel prices have crowded out other discretionary spending. Inequality, he added, has widened. “We are not yet in a recovery and the Government must understand it,” he said.

He emphasised that the economy has not even reached the levels of 2018-19, if one goes by the current fiscal first quarter numbers. “There is recovery only if we pass FY20 GDP numbers. In my view, It may not happen even in FY22.”

‘Running on one engine’

He also said that only one (private consumption) of the four engines of growth – private consumption, public investment, private investment and exports – is firing.