People's Democracy

IN the run-up to the union budget for the year 2002-03, the Vajpayee government has mounted a massive offensive for further mortgaging our economy, draining our assets and impoverishing our people. All the measures are gleefully welcomed by big business.

The most recent step, contrary to the public pronouncements that only loss-making public sector units would be sold, is the union cabinet decision to part with government equity in the 'blue chip' profit-making units, IBP and VSNL, to the private sector for the usual song. The money thus raised will once again be used to bridge the fiscal deficit which our 'most efficient' finance minister has been unable to control, and given the inefficiency and profligacy of the Vajpayee government, has now risen alarmingly.

This was preceded by the decontrol of movement of essential commodities, which, in one stroke, will deprive whatever little support that has been provided both to the farmer and the consumer. Apart from throwing people at the mercy of unscrupulous speculators and hoarders, the Vajpayee government has also removed price restrictions on many essential drugs. In short, at the expense of making the lives of crores of Indian people more miserable, super profits have been assured to the private sector.

Aggravating the unemployment situation in our country further, also recently announced is the Vajpayee government decision to foist a voluntary retirement scheme on government employees. The aim is to eliminate 11 lakh jobs in the coming year, i.e., more than 25 per cent of the current numbers. The middle class already suffering under the assault of the massive reduction in interest rates on their small savings, will now literally be thrown on the streets.

Quite understandably, the corporate world and its controlled media is hailing these decisions as a "boost for reforms". Some national dailies and electronic media have also become euphoric in their praise. The corporate world has become so brazen as to go to the extent of blatantly defining the "second generation reforms" as a set of measures that will transfer the people's assets to the private sector, and create conditions for higher rates of profit by squeezing the vast majority of the people. They have no compunction in giving vent to such a naked expression of capitalist exploitation. Their lust for mercenary superprofits is such that they are blind to the fact that by further impoverishing the vast mass of the people, they are only compounding the recessionary conditions in the economy.

At the time of the last budget, when the corporate cheer leaders of the Vajpayee government were singing praises, through these columns, we had pointed out that they are, in fact, missing the wood for the trees. Corporate magnates had given the last budget nine out of ten marks, claiming that it would kick-start the economy and boost industrial growth. We, on the other hand, had pointed out that by reducing the purchasing power of the people through increased indirect taxes, and giving a bonanza to the corporate sector by reducing direct taxes, the budget would only further contract the aggregate demand in the economy.

It is elementary economic sense that when people have little to spend, the goods produced by the manufacturing sector cannot be sold, leading to an economic recession. This, in turn, leads to a further reduction in employment as industrial activity shrinks, which then leads to a further reduction in aggregate domestic demand. This is the vicious circle into which these reforms have pushed our economy.

What has been the experience of the last year?

Industrial growth continues to fall sharply. For the period from April to November, 2001, it registered a growth of 2.2 per cent compared to the levels of around 6 per cent in the previous years. Notwithstanding the fudging of official data, now a common practice under the Vajpayee government, the estimates put out by the Central Statistical Organisation (CSO) place last year's growth to be at a mere 4 per cent, i.e., a full one-third less than announced by the Finance Minister while presenting his budget. This is the lowest growth rate India has seen since 1986, barring the crisis year of 1991.

More alarming is the fact that infrastructural growth has registered one of its worst performances, growing at an insignificant one per cent, compared to 7.6 per cent for the corresponding period last year. Exports have dramatically fallen, showing a growth of less than 2 per cent, compared to 20.7 per cent last year.

The most worrisome aspect is the fact that these statistics reflect not a temporary one-year problem. They reflect a much deeper malaise afflicting the Indian economy. Despite a series of 12 healthy monsoons, agricultural growth remains virtually stagnant. Foodgrain production growth has actually declined, leading to a sharp fall in the per capita availability. The rate of growth of foodgrain production has fallen below the population growth rate. Starvation deaths and distress suicides are rearing their head as never before in independent India.

The overall result is that the overall levels of savings in the economy have declined, leading to a sharp fall in investment levels, to even below what they were on the eve of the reforms in 1991. Consequently, according to the Reserve Bank of India, gross capital formation has been slowing down across all three sectors of the economy - manufacturing, agriculture and services. This has grievous consequences for the future health of the economy. To make matters worse, the Planning Commission reveals that during the decade of these reforms, the employment growth rate has been a mere 1.5 per cent, well below the growth of population.

In other words, our prognosis, that curtailing aggregate domestic demand, while providing immediate bonanzas for the rich, will lead to a further contraction of the economy has been vindicated. The economy, under this Vajpayee government is, on the one hand being speedily mortgaged, while unprecedented burdens are being imposed on the people, on the other.

The answer to the question of how to revive the economy does not lie in a further dose of such reforms. This would only compound the situation. The answer lies, as we have repeatedly stated during the last decade, in drastically increasing public investment which will create the required economic and social infrastructure on the one hand, and generate employment, thus, boosting domestic demand, on the other.

But this Vajpayee government is loath to take such a course. Given its servility to US imperialism, its economic decisions are guided more by the interests of foreign capital than that of the Indian people. Given its unabashed championing of the interests of the exploiting classes, its economic decisions are bound to increase the burdens of the people in order to facilitate superprofits for the former.

The "reforms" of this Vajpayee government are thus against the interests of the self-reliant foundations of our economy, and against the interests of the vast majority of our people.