A day after Finance Minister Nirmala Sitharaman announced a package to support the pandemic-hit economy, senior Congress leader P Chidambaram on Tuesday said the answer to this "crisis" is to spur demand by putting money in the hands of the people, especially the poor and the lower middle classes.
Sitharaman on Monday announced Rs 1.5 lakh crore of additional credit for small and medium businesses, more funds for the healthcare sector, loans to tourism agencies and guides, and waiver of visa fee for foreign tourists as part of a package to support the pandemic-hit economy.
Reacting to the development, Chidambaram said, "Some elementary truths: Credit guarantee is not credit. Credit is more debt. No banker will lend to a debt-ridden business."
Debt-burdened or cash-starved businesses do not want more credit, they need non-credit capital, the former finance minister said in a series of tweets.
"More supply does not mean more demand (consumption). On the contrary, more demand (consumption) will trigger more supply," he said.
Demand will not grow in an economy where jobs have been lost and incomes or wages have been reduced, Chidambaram argued.
"The answer to this crisis is to put money in the hands of the people, especially the poor and lower middle classes," he said.
The Congress had on Monday claimed that the measures announced by the Finance Minister "delivered nothing but headlines" and said the government should take steps to spur demand to revive the economy "which continues to be in the doldrums".