Has Congress considered the cost of lofty poll promises, asks Sitharaman

Union finance minister Nirmala Sitharaman on Monday questioned the Congress on how it would manage to fund its “lofty” electoral promises while pointing at the poor debt management during its 10-year rule at the Centre between 2004 and 2014.

In a series of posts on social media platform X, Sitharaman asked the Congress about the cost estimates of its poll promises and the means to fulfil them. According to her, the Congress will have to resort to borrowings, raise taxes or drop some of the popular schemes to fund its poll promises.

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“Has @INCIndia considered the cost of the lofty promises made in their manifesto? Have they calculated how much the ‘Khata Khat’ schemes will cost fiscally? Will they borrow substantially for them, or will they raise taxes to fund them?,” she said. “How many welfare schemes would @RahulGandhi shut down to accommodate the fiscal cost of the ‘Khata Khat’ schemes?”

She was referring to Rahul Gandhi’s assertion at a political rally in Rajasthan about a month ago that his party would remove poverty from the country by carrying out “Khatakhat, khatakhat [quick] transfer of ₹1 lakh into the account of one woman belonging to a poor household”.

“Would @RahulGandhi care to answer these real questions and explain how their gigantic schemes of fiscal splurge would work without increasing taxes or borrowing heavily and running down the economy? Here’s a challenge to him to answer these questions for the people of India,” she added.

Sitharaman compared the debt management strategies of the two governments.

“A lot has been said in recent times about the fiscal management (especially on debt) of our government under PM Modi’s leadership,” she said. “Many times, absolute numbers have been compared without considering the gross domestic product (GDP) growth on which we base the debt calculation. I would like to put out a clear picture, unlike @INCIndia, which hides behind lofty promises that are non-transparent and disconnected from reality,” she added.

“The truth is that our government’s fiscal management is much better than that of the UPA despite facing the Covid-19 pandemic in which substantial resources were used for relief efforts,” she said.

During UPA rule from financial year 2004 to 2014, central government debt, including external debt at current values, grew about 3.2 times, from ₹18.74 lakh crore in March 2004 to ₹58.59 lakh crore in March 2014. This increase was much greater than the 2.9-time growth from ₹58.59 lakh crore in FY14 to ₹172.37 lakh crore in FY24 (RE), she said.

“This lower increase between FY 2014 and FY 2024 occurred despite the impact of the Covid-19 pandemic, where the Centre borrowed to provide relief to those in need even as revenues fell,” she said.

The central government’s debt, which was 52.2% of GDP at the end of FY 2013-14, was reduced to around 48.9% in FY 2018-19 through gradual fiscal consolidation, the minister said. During this period, the fiscal deficit was lowered from 4.5% in FY 2013-14 to 3.4% in FY 2018-19. However, due to the Covid-19 pandemic and proactive government measures to protect lives and livelihoods, the fiscal deficit surged to 9.2% of GDP in FY 2020-21, increasing the central government’s debt to 61.4% of GDP.

“Post-pandemic, our government pursued a balanced approach to fiscal consolidation while sustaining economic growth. This strategy reduced the fiscal deficit from 9.2% of GDP in FY 2020-21 to 5.8% in the revised estimates (RE) for FY 2023-24,” she said.

The interim budget presented on February 1 projected a further reduction to 5.1% of GDP in FY 2024-25. Similarly, the central government’s debt-to-GDP ratio fell from 61.4% in FY 2020-21 to 57.1% in FY 2023-24, she said.

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Under UPA, for six consecutive years between FY 2009 and FY 2014, the ratio of India’s Gross Fiscal Deficit (GFD) to Gross Domestic Product (GDP) was at least 4.5%. It was between 4.5%-5% of GDP in three out of the six years, between 5%-6% in one, and more than 6% in 2 years. And there was no Covid-19-like crisis that needed such a quantum of fiscal expansion, Sitharaman said.

The net market borrowings (G-secs) of the Centre went up 4.5 times during the UPA regime. It went up 2.6 times under the NDA government despite the pandemic, she said.

“During Covid-19, ‘borrow, spend & even print money’ to reboot the economy was the predominant advice given by the so-called ‘luminaries’ of the opposition parties led by Congress. Ironically, the same people are complaining about high debt levels,” she said.