‘Shining India’: Orchestrated Euphoria

 Sitaram Yechury

ONCE again, there is an orchestrated campaign being unleashed by the government and its agencies, ably supported by its cheer leaders in corporate India and the RSS pen pushers in the media, that all is not only good but is positively soaring in India and its economy.

NAUSEATING PROPAGANDA

The Election Commission has banned the official full page advertisements being put out by the BJP-led government, celebrating its four years in office and five years of Vajpayee as the prime minister, as being violative of the election code. This has saved the country and the people from being subjected to a surfeit of nauseating propaganda titled "Shining India." The few that came out before the Election Commission crackdown, inform us that India has never "shone" better than today. 

The so-called "feel good factor," we are told, has never been better. This orchestrated euphoria was being ably supported by the upward revisions of the growth rate of GDP by various agencies. 

The Investment and Credit Rating Agency (ICRA) has projected the GDP growth rate to be between 6.5 and 6.9 per cent. The Reserve Bank of India, while announcing no changes in the credit policy (i e, no change in the interest rates), used the occasion to make an upward revision of the GDP growth rate at 6.5 to 7 per cent as against its previous projection of 6 per cent.  The drummer boys in the CII go a step further and suggest that the GDP growth will be well above 7 per cent.

All these, we are told, constitutes the revival of the Indian economy under the  "able" leadership of this Vajpayee government.

TELLTALE FIGURES

What is the reality?  

At the outset, it must be kept in mind that all these projections still fall short of the targeted growth rate announced by this government --- an annual 8 per cent during the tenth plan period (April 2002 to March 2007). The claim that the economy has never shown a better performance is patently spurious, given the fact that it grew more than 7 per cent for three consecutive years between 1994-95 and 1996-97.

When the final data for the year arrive, it may well be that the growth rate could be close to 7 per cent, which is good compared to last year when it was 4.3 per cent according to the Central Statistical Organisation (CSO). But, then, what explains the higher growth rate this year? The single important factor has been the good monsoon which has come after a disastrous drought last year. Last year, the index of agricultural production fell by as much as 12 per cent. Foodgrain output registered a colossal drop of 14 per cent. In normal times, this alone should have been a cause for alarm. Given the excellent monsoon this year, it is estimated that agricultural growth rate would be around 9 per cent. But, remember, this is on the low base of a large negative growth last year. It means that such a rate of growth is simply unsustainable in the coming years unless heavy investments are made in agriculture sector. Apart from this is the fact that the growth this year has not wiped out fully the decline last year. 

That, the good monsoon and the consequent agricultural growth rate alone are responsible for the upward revision of the GDP growth rate becomes obvious from the sectoral data projections made by all the agencies referred to above.  The industrial growth rate is estimated to be 5.8 per cent, below the 6.1 per cent registered last year. The services sector which contributes nearly 50 per cent of India's GDP is slated to grow at 6.7 per cent, down from 7.1 per cent last year. In 1999-2000, this sector grew at 10.1 per cent. In other words, the only sector of the economy where there is a massive leap in the growth rate has been in agriculture. The others are on the decline or at the best stagnating.  This only confirms that Vajpayee's "shining India" is still predominantly dependent on the rain gods. The policies of this government, far from contributing to any growth acceleration only seem to consolidate the recessionary tendency in the Indian economy.

So, then, where does this "feel good factor" come from? We are told that the Sensex crossing the 5000 mark shows the health of the economy. But remember, when Harshad Mehtas and Retan Parekhs were in their full flow, the Sensex had shot up even higher. The movement of the Sensex may be an indicator to a minuscule section of the Indian economy, but has little bearing on the health of the entire economy. 

The government, likewise, boasts that the foreign exchange reserves, likely to touch the 100 billion dollars mark and a low rate of inflation are signs of a healthy economy. It could well be the other way round --- that inflation is low because of the lack of demand. Likewise, foreign exchange reserves are accumulating because of a fall in imports. The projections for this year show that exports are growing at a rate of less than 10 per cent from the 22 per cent growth they registered last year. Import growth is sluggish despite higher oil prices. This means that the non-petroleum product imports are actually declining. Hence, the demand for foreign exchange is also declining, resulting in an accumulation of these reserves.

STARVATION & JOBLESSNESS

As regards the foreign exchange reserves, it is pertinent to note that much of the new accretion has been due to the dumping of foodgrains into the international market. Over eleven million tonnes of foodgrains have been sold in the international market at prices lower than the BPL prices in India. This is happening at a time when, due to the severe drought last year, the incidents of starvation deaths and distress suicides ballooned alarmingly. Instead of feeding its own people who are suffering and dying from starvation, this Vajpayee government chooses to bolster its foreign exchange reserves! Can there be anything more inhuman and criminal? This government is willing to sell foodgrains at lower prices abroad than lower the prices, if not distribute them free, for its own people who are desperately in need of it. 

The worst feature of the economy this year has been the universally admitted fact of stagnant, if not declining, employment growth. The demographic composition of India shows that over 40 per cent of our population is in the working age group, i e, over 40 crores of youth. The privatisation of the public sector has already resulted in rendering jobless the lakhs employed earlier. Then, where is this "feel good factor" if the jobs are declining? Where is the "shining India" for the majority of Indians facing starvation, unemployment and insecurity, leading to distress suicides? An illusion at best! 

What is worse is that such jobless growth, a character of capitalist globalisation worldwide, is likely to intensify in India in the future. The higher profitability of corporate India has come along with a sharp reduction in the working capital (which includes the wages). Working capital, as a proportion of sales, has come down from 13 per cent to 3 per cent between 1995 and 2001 (see Paranjoy Guha Thakurta’s article in The Business Line, October 28, 2003).  If this is the method employed by corporate India, i e, downsizing the manpower requirement for garnering fatter profits, then for the majority of Indian, this can only generate a "feel worse factor."

That all is not hunky-dory with the economy and it suffers from a continued demand constraint, becomes obvious if one looks at the total credit taken from the banks and financial institutions. The interest rates have been the lowest this year in the last three decades. Yet, the total disbursement of development banks and financial institutions crashed from Rs 30,333 crore in 2001-02 to Rs 20,151 crore in 2002-03. In other words, the investment in the economy is declining. Every undergraduate student of economics will tell you that a declining rate of investment, far from generating any "feel good factor," must be seen as an alarming shortcoming with disastrous consequences for the economy.

THE ONLY SHINE

This, in fact, confirms that the Indian economy suffers from a serious disease of declining capital investment. Unless this trend is reversed, the economy would increasingly be fattening a minuscule minority of India while starving the vast majority.

Instead of tackling this disease, the government is more preoccupied with projecting the "feel good factor," while reality suggests otherwise. The economic fundamentals of our country need to be made healthier. But that is possible only when a large dose of public investment is made to create the much needed economic and social infrastructure. This, in turn, would generate both employment and higher domestic demand --- the things that will sustain the cycle of economic activity and growth.

Pre-occupied as it is, with its sole concern of continuing to remain in power at any cost, this government is loath to give the economy such a direction. This only confirms that the fact that if India is developing and Indians are scaling world class achievements, it is so not because of but despite the policies being pursued by this Vajpayee government. The only "shine" that most Indians see is the silver lining around the dark clouds of despair, want and communal strife created by the policies of this government. And that silver lining is the political defeat of this government and its policies by the people whenever the earliest opportunities arise.