Chidambaram attributes high GDP growth to low-base effect

Former Union finance minister P Chidambaram said Saturday that the GDP growth, reported at 8.2 percent in April-June quarter, can decline going forward as the rise was possible because of the low-base effect.

Speaking to media here, he also said tumbling of the rupee against the US currency was because of reasons such as fiscal deficit and foreign investors pulling out their money.

Asked about impressive GDP growth in the first quarter of this fiscal, Chidambaram said, "Going further 8.2 percent GDP growth will decline. 8.2 percent is because of the lowest base in last eight quarters and several economists have already said it today it is because of the low base of 5.6 percent."

"I am not unhappy with 8.2 percent, but (it) is on the lower (base) of 5.6 percent," he said.

Earlier in the day, he tweeted, "Q1 GDP at 8.2 percent is a statistic. Rupee at 70 to a dollar is a reality. In Delhi, Diesel at Rs 70.21 and Petrol at Rs 78.52, is a cruel blow."

Fiscal deficit, pressure on the current account deficit, inflationary expectations and loss of confidence of foreign portfolio investors -- these four circumstances are putting pressure on the rupee, the senior Congress leader said.

"The first reason (for the slide of the Rupee) is that the fiscal deficit is under pressure and there is a serious doubt whether the government will be able to stick to its target of 3.3 percent.

"Secondly, the current account deficit is under severe pressure. The years 2017-18 ended with the current account deficit of 1.9 percent and 2018-19 will definitely be 2.2 percent or 2.3 percent, some people say maybe around 2.5 percent," Chidambaram said.

A third reason is foreign portfolio investors "are pulling out the money", he said.

"Now why they are pulling out their money, I don't know but the fact is that they are pulling out money. Besides, the fourth reason is Reserve Bank's report released yesterday says that the inflation is expected to rise and they are keeping a careful watch. All these four reasons...are putting pressure on the rupee and the government must address them," he said.

On demonetization, he said the exercise had been devised to "help people convert their hoards of black money to white money".

"This was the easiest money-laundering system devised by the Modi government...the most elegant money-laundering exercise in the world," the former finance minister said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)