Cambridge Forecast Group Blog

Indian Finance Minister blames US for

diverting food products to make

biofuels

Indian Finance Minister P.

Chidambaram

26 Mar 2008

Growing world economies, rising food demand and expansion of corn for producing bio-fuels has caused food inflation.

Indian Finance Minister P. Chidambaram blamed countries like the US for diverting food grains such as corn for producing bio-fuels, which led for to soaring food grain prices globally.

India banned exports of Edible Oils and even raised rice export prices to control rising prices.

He said the price food grain prices has soared worldwide to record levels in the last year, but diverting food for fuel had also contributed to increase in food prices.

“It has been estimated that nearly 20 % of corn grown in the United States is diverted for producing biofuels,

As citizens of one world, we ought to be concerned about the foolishness of growing food and converting it into fuel,” Finance Minister P Chidambaram said in Singapore.

P. Chidambaram

Palaniappan Chidambaram is an Indian politician and present Finance minister in the United Progressive Alliance (UPA) coalition (federal) government led by Indian Prime Minister Manmohan Singh. He has held the portfolio since May 2004, when the UPA formed the government. He was also a cabinet minister with the same portfolio for a brief period in the United Front coalition government from 1996 to 1998. Prior to this, he was Minister of State (Deputy Minister) in the Rajiv Gandhi and Narasimha Rao led Congress-party governments, holding other portfolios.

A Harvard University graduate, Chidambaram is regarded by financial gurus, investors, the financial press and people across India as a qualified and highly competent minister of finance, carrying forward the economic reforms started in 1991 by then Prime Minister P.V.Narasimha Rao.

Chidambaram, as finance minister under Prime Minister Manmohan Singh and Deputy Chairman of India’s Planning Commission, Montek Singh Ahluwalia is a part of the Planning Commission of India.

Background and education

Palaniappan Chidambaram was born on 16th September, 1945, in Kandanur in Sivaganga district of the state of Tamil Nadu. He was born into an affluent family. Chidambaram did his schooling from the prestigious Madras Christian College Hr.Sec.School, Chennai. After a B.Sc., he obtained his B.L. from Madras Law College, University of Madras and then did his M.B.A. at Harvard University.

Personal life

He is married to Nalini Chidambaram, a prominent lawyer practising with the Madras High Court, primarily in women’s issues. He has a son Karthi Chidambaram who studied in the United States at St. Edwards University in Austin, Texas. He is an avid tennis player.

Career as a lawyer

In 1969, he enrolled as an Advocate in the Madras High Court and established a successful law practice. He was designated as a Senior Advocate in 1984. He has chambers in Delhi and Madras and practices in the Supreme Court and in various High Courts in India. He has also appeared in a number of arbitration proceedings, both in India and abroad.

Politics and ministerial portfolios

Chidambaram was first elected to the Lok Sabha (Lower House) of Indian Parliament from the Sivaganga constituency of Tamil Nadu in general elections held in 1984. He was re-elected from the same constituency in the general elections of 1989, 1991, 1996, 1998 and 2004.

He was inducted into the Union (Indian federal) Council of Ministers in the government headed by Prime Minister Rajiv Gandhi on 21 September 1985 as a Deputy Minister in the Ministry of Commerce and then in the Ministry of Personnel. He was elevated to the rank of Minister of State in the Ministry of Personnel, Public Grievances and Pensions in January 1986. In October of the same year, he was appointed to the Ministry of Home Affairs as Minister of State for Internal Security. He continued to hold both offices until general elections were called in 1989. The Indian National Congress government was defeated in the general elections of 1989.

When Chidambaram was first given a ministerial post, he was one among a relatively young, well educated class of men brought into government by then Prime Minister Rajiv Gandhi in 1984. Rajiv Gandhi was assassinated in May 1991 during an election campaign appearance in the state of Tamilnadu; in the general elections the following month a wave of sympathy for the assassinated Rajiv Gandhi, and a disunited opposition brought the Congress party back to power. Manmohan Singh, a leading economist and former Governor of the Reserve Bank of India (India’s central bank) was made Finance Minister in the new government headed by Prime Minister Narasimha Rao, essentially the first technocrat on the job in post-independent India. Manmohan Singh’s reforms began taking India away from the erstwhile Soviet-style centralised planning, into a liberalized, free market economy.

In June 1991, Chidambaram was inducted as a Minister of State (Independent Charge) in the Ministry of Commerce, a post he held till July, 1992. He was later re-appointed Minister of State (Independent Charge) in the Ministry of Commerce in February 1995 and held the post until April 1996 . He made some radical changes in India’s export-import (EXIM) policy, while at the Ministry of Commerce.

In 1996 Chidambaram quit the Congress party and joined a breakaway faction of the Tamilnadu state unit of the Congress party called the Tamil Maanila Congress (TMC). In general elections held in 1996, TMC along with a few national and regional level opposition parties formed a coalition government. The coalition government came as a big break for Chidambaram, who was given the key cabinet portfolio of Finance; this put him in the limelight. Although the coalition government was a short-lived one (it fell in 1998), it showed Chidambaram’s competence as Finance Minister, a factor which was to lead to his reappointment to the same key portfolio in the government formed by Prime Minister Manmohan Singh in 2004.

In 1998 the Bhartatiya Janata Party (BJP) took the reins of government for the first time and it was not until May 2004 that Chidambaram would be back in Government. Chidambaram became Minister of Finance again in the Congress party-led United Progressive Alliance government on 24 May 2004. During the intervening period Chidambaram made some experiments in his political career, leaving the Tamil Maanila Congress in 2001 and forming his own party, the Congress Jananayaka Peravai, largely focused on the regional politics of Tamil Nadu. The party, however, failed to take off into mainstream Tamil Nadu or national politics. Just prior to the elections of 2004, he merged his party with the mainstream Congress party.

Political traits

Generally a simple down-to-earth person, Chidambaram moves easily from the highly-charged politics of his home state Tamilnadu, to addressing the financial media in Mumbai, and presenting India’s views at the World Economic Forum at Davos, Switzerland.

He is a trustee of the Rajiv Gandhi Foundation, associated with charitable causes and also a trustee of the Tamil ‘Ilakiya Chintanai’ (Tamil Literary Foundation – literally, Tamil Literary Thoughts), Chennai, India. He is also fond of literature and sports. He has delivered lectures at many universities, both at home and abroad.

Controversies

He represented the bankrupt American energy giant Enron, as a senior lawyer in India, and is again set to revive its Dhabol power project.[2][3]

He resigned on 10 July 1992 from minister position owning moral responsibility for investing in Fairgrowth, a company allegedly involved in securities scam. [4]

In 1997, he announced a controversial voluntary disclosure of income scheme which granted income-tax defaulters indefinite immunity from prosecution under the Foreign Exchange Regulation Act, 1973, the Income Tax Act, 1961, the Wealth Tax Act, 1957, and the Companies Act, 1956 in exchange for self-valuation and disclosure of income and assets.[5] The Comptroller and Auditor General of India condemned the scheme his report as abusive and a fraud on the genuine taxpayers of the country. [6]

It should be noted that Chidambaram also represented the controversial British mining conglomerate Vedanta Resources in the Bombay High Court until 2003 when he became the finance minister of India. He was also a member of the board of directors of that company.[7]

In August 2006 the then President A.P.J. Abdul Kalam gave permission to enquire into the allegations that Prime Minister Manmohan Singh and his Finance Minister P. Chidambaram had been holding office of profit at the time of elections. It has been alleged that they both had been the board members of Rajiv Gandhi Trust Foundation. The Election Commission will enquire into the allegations. [8]

In February 2008, he announced a $15 billion farm loan waiver scheme triggering a public interest litigation.[9][10]

Indian Finance Minister blames US for diverting

food products to make biofuels

Indian Finance Minister P. Chidambaram