Was it Chidu Who Messed Up the Economy?

The policies taken up by Chidambaram were not reformist, rather they were pro-market. He made way for capital flow at a time when the entire economy was swamped under leveraged liquidity emanate from a mortgage bubble in the U.S. ever since Chidambaram took office in 2004, India received over $10 billion every year. This drove up the equities and sensex raised five fold and drove up rupee that gained over 15 percent during 2004-08.

Chidambaram took up policies like floating of oil bonds to absorb oil subsidies that were rising as elevated global oil prices were not being passed through to consumers. Then there was announcement of farm loan waiver of around 70, 000 crore, followed by sixth pay commission implementation costing around 30, 000 crore to the exchequer. Chidambaram struggled with then RBI Governor YV Reddy on capital controls as the governor could foresee the bubble forming. The lack of governance lead to the huge telecom 2G scam and the countless land scams. No tax reforms were implemented to increase the tax-GDP ratio. It was thumbs up by corporate India for Chidambaram’s policies that again failed to see a bubble leading to the accumulation of debt both in rupees and U.S. dollars.