Arun Jaitley, P Chidambaram Spar Over Effects Of Demonetisation

New Delhi:  As the deadline to deposit old Rs 500 and Rs 1,000 notes ended, Finance Minister Arun Jaitley and the former Finance Minister P Chidambaram got into a verbal duel over the impact of the note ban.

Responding to Mr Jaitley's claims that increased government revenues prove that the economy has not been as "adversely impacted as experts had predicted," Mr Chidambaram told NDTV that "there is no direct correlation between the growth in GDP and revenues."

"The Reserve Bank of India itself has revised the GDP forecast by 0.5 per cent...from 7.6 per cent earlier to 7.1 per cent now. The Finance Minister should pose his questions to the RBI," said Mr Chidambaram.

Almost immediately, Mr Jaitley hit back, saying "I would like to learn the kind of economics that leads to higher revenues from a lower GDP."

The war of words was triggered by Mr Jaitley's assertion on Thursday that the country's economic indicators proved the critics wrong.

"Of course there would be areas which would be adversely impacted, but what was predicted by the critics has to have rationale with the revenue collected. Assessment can be unreal but revenue is real," Mr Jaitley had said.

Listing out a number of areas that performed better than expected, Mr Jaitley said direct taxes had grown by over 14 per cent and the increase in indirect taxes was over 26 per cent. He claimed that though agriculture was an area of concern but latest sowing figures of Rabi crops had given the government reasons to cheer.

"Now the Rabi crop sowing has been higher than last year, life insurance businesses have increased , international tourism has increased, air passenger traffic has increased, petroleum consumption has increased, the flow into Mutual Funds has increased by 11 per cent," said Mr Jaitley.

But these claims are not being taken at face value by P Chidambaram, an ace lawyer like Mr Jaitley and also someone known to share a good rapport with the finance minister.

Mr Chidambaram said that though there have been various estimates about a drop in GDP - from RBI's 0.5 per cent to Dr Manmohan Singh's prediction of 2 per cent - the economy would certainly be hit.

"I can't say what would be the final figure but I think there is consensus that, at least, it would drop by one per cent i.e. Rs 1.5 lakh crores," said Mr Chidambaram at a press conference, and quickly added, "I hope that my wish for a happy new year indeed comes true."