People's Democracy

Editorial

Retreat from the Dangerous Path

THIS winter session of the parliament, beginning next week, comes in the background of a dampened and subdued celebration of Diwali.  Surveys appearing in mainstream media show that nearly half of India’s working class did not receive their customary bonuses ahead of the festive season.  More than 60 per cent of our people reported spending less than in the previous years. On the other hand, confirming the widening hiatus between the two Indias, 20 per cent boasted of spending more this season. 

While these constitute the major issues of public importance that the parliament should discuss and hold this UPA-2 government accountable, unfortunately, it looks most unlikely that this will be permitted to happen. The last session was washed out due to the `match fixing’ between the Congress and the BJP with neither of them wanting a structured discussion on the allocation of coal blocks scam. Similarly this session is bound to witness an intense mudslinging between the BJP and the Congress given the exposure of various scams involving their leaders. It would be most unfortunate if this winter session also ends up as a disrupted one.  If this were to happen, then it is bound to increase further the growing cynicism amongst people over the efficacy of our parliamentary democracy in delivering a better livelihood for our people.

There are many important issues that need to be discussed in this session, apart from the menacing growth of corruption scams.  The impact of the economic slowdown is having a tangible affect pushing more and more people into misery. The relentless rise in prices is leaving very little in the hands of the vast number of families after meeting their survival needs.  This economic slowdown is leading to a larger degree of unemployment and salary squeezes.  India’s factory output fell by 0.4 per cent in September, exports fell by 1.63 per cent in October, contracting for the sixth successive month. Job cuts and retrenchment are on the rise.  For the vast millions in rural India, the agrarian distress continues with farmer’s suicides simply not abating.  The quarterly GDP growth rates have been well below even the downgraded projection of six per cent for 2012-13. In fact, the IMF has recently forecast that India’s growth would be a mere 4.2 per cent down from its earlier forecast of 6.9 per cent.

In order to tackle the economic slowdown, this UPA government proposes to march along with GenNext reforms of financial liberalisation to attract greater inflow of foreign capital.  This, it is presumed, will increase the levels of investment leading to a higher growth.  The fundamental flaw of this diagnosis is that no amount of increased availability of funds for investments will lead to growth unless people have the necessary purchasing power to buy what is produced.  Clearly, the opposite of this is happening and, hence, the hopes of high growth from such reforms will remain an illusion. 

India is adopting such a strategy to revive its economy at a time when the USA and, indeed, the global economy is bracing itself to face the consequences of what is called the US “fiscal cliff”.  If both the Republican and Democrat lawmakers do not arrive at any agreement, as it appears to be, the newly re-elected President Obama would be helpless. The levy of new taxes and automatic spending cuts are set to take effect from the beginning of 2013.  This will lead to a severe contraction of the US economy.  The impact would be devastating leading, according to some analysts, to as much as 4 to 6 per cent decline in the US GDP.  Such a falling of the `cliff’ would push not only the USA into prolonged recession but lead to a global economic devastation.   The Fitch, a rating agency, says that this would push the global economy into recession and “halve the rate of global growth in 2013”.

When Bill Clinton demitted office in 2001, USA was the largest indebted country in the world with a national debt of $ 5.9 trillion.  Since then the Congress has raised this statutory debt ceiling 13 times to stand at $ 16.4 trillion – overstripping US annual GDP of around $ 15 trillion.  Since President Obama assumed office, this ceiling has been upwardly revised five times.  Unless the US Congress agrees to raise the ceiling again, the deflationary measures will automatically be set in motion.  In any case, USA, which is used to finance its debt by merely printing dollars as it is the medium of international wealth holding and transactions, will find it very difficult to stop its downslide into sovereign insolvency.

In this background, India’s GenNext reforms can only spell further disaster for our people.  With the impending crisis, international finance capital is in search of newer avenues for its profits.   Permitting such capital to further enter Indian economy through multi-brand retail trade, increasing the FDI cap in the insurance and banking sectors, in the pension funds etc would place humongous amounts of working people’s lifelong savings at the disposal of foreign capital and its speculative activities, thus making India extremely vulnerable to international financial fluctuations which will have disastrous consequences. 

Instead of focusing on expanding domestic demand through increased public investments to build our much needed infrastructure (for which, there is no dearth of resources as we have repeatedly discussed in these columns in the past), which would generate substantial new employment, the current trajectory of GenNext reforms will only lead to a further contraction of domestic demand which, in turn, will heap further misery on our people. 

India’s finance minister, at the recent IMF meet in Tokyo, expressed our concern saying, “Should the economic situation in the US worsen, its impact on emerging market economies will be much more severe than in the case of the situation in the Euro area”. However, instead of meeting such an impact by strengthening India’s domestic demand, India is pursuing such reforms that would make it more vulnerable to global financial volatility. 

These are issues that need to be seriously discussed by the parliament.  The UPA-2 government must be forced to retreat from its dangerous path that it is now treading.  The CPI(M) leaders in both the Houses  have served notices under rules that entail voting to express the Indian parliament’s disapproval of the decision to allow FDI in the multi-brand retail trade sector. The Left parties would be pushing for a structured discussion on this motion along with other issues of public importance. Whether this will be permitted by both the BJP and the Congress is the big question.  Given the fact that both would be eager not to allow  their inner-party dirty linen to be washed in the parliament and, thus, be more exposed before the people, they may well go in for another round of `match-fixing’ in this session as well.  The CPI(M) MPs, along with the other Left parties and secular opposition allies,  will try  to ensure that the session functions and the government is forced to reverse  these  reform policies that are not in the interest  of both the country and the people. 

(November 14, 2012)