People's Democracy

Editorial

GRIM ECONOMIC SITUATION

Fight the Onslaught

On People’s livelihood

IN the midst of the urgent legitimate concern for the enactment of the Lokpal legislation in order to begin tackling corruption at high places, the grim economic situation and the forewarning of an oncoming severe crisis that will further cripple the livelihood of the vast masses of the Indian people cannot be overlooked.

The UPA-II government fielded its `trouble shooter’, finance minister, to try and give some confidence to India Inc. in the face of the fast deteriorating economic scenario. The index of industrial production has registered a minus 5.1 per cent growth in October 2011. The value of the rupee continues to plummet breaching a historic Rs 54 to a dollar. Exports have been falling dramatically, despite the advantage inherent in the declining rupee value. Estimates of the GDP growth have been drastically downgraded. Replying to the debate on the Appropriation Bill in the Rajya Sabha, which sanctioned an extra Rs 63,180 crores, the FM said that India had “the capacity and resilience to overcome the crisis.” The key factor that will determine Indian economy’s bouncing back is to build a consensus on further reforms of financial liberalisation, he underlined. Clearly, he was appealing to the main opposition BJP for support on such measures. He was quick to remind the BJP that many of these reforms were those that were contemplated by the earlier BJP-led NDA government.

Sure enough, such cooperation from the BJP was immediately forthcoming. The UPA-II government would have lost the vote on an CPI(M) moved amendment to the bill reducing the government’s guarantee to the state insurance sector from 95 to 90 per cent had the BJP not come to the government’s rescue in the Rajya Sabha. Both the Congress and the BJP have now agreed to cooperate in passing a legislation on the privatisation of the pension funds and further banking reforms.

These reforms are essentially aimed at wooing international investors and foreign finance capital to come and reap extra profits from India. Such inflow of foreign capital, it is hoped, will beautify India’s financial balance sheets and provide a boost of confidence to India Inc. and the sensex. This in turn would generate the so-called `feel good factor’.

All this however, will be of little use in improving the livelihood of the aam aadmi. On the contrary, the creation of such greater avenues for profit maximisation by international finance capital will only leave the vast mass of our people poorer.

Further, alarmed at the rising levels of expenditures that is mounting the fiscal deficit, crossing the limits set by the budget, and a serially declining sensex, the government hopes that such reforms will reverse these trends. The inflow of foreign capital may show a healthier fiscal picture in the books but will hurt the economic fundamentals further. While the sensex may derive a boost, this will only allow India Inc. to access greater profits through market capitalisation rather than providing any improvement in the livelihood for the vast mass of the people.

In seeking the sanction for the extra expenditures from the parliament, the finance minister, spoke of the pressures of rising import costs mainly of fuel and the growing subsidies in the country. He lamented that the subsidy expenditures are crossing over Rs One lakh crores annually. Ironically, he was silent, in fact refused to clarify when questioned in parliament, on the fact that the central exchequer garnered, this year, so far, a revenue of over Rs 1.3 lakh crores from taxes on petroleum products. These amount to greater earnings by the government than the subsidies it is providing the poor. Much of these governmental revenues have been due to hikes in prices of petroleum products which are ultimately borne by the people. As it turns out, it is the people who are subsidising the government to a tune of over Rs 30,000 crores annually.

Through these `Gennext reforms’ the government hopes that the extra capital that will accumulate in the hands of India Inc. through greater profits will be utilised for investments which in turn would stimulate GDP growth. This however, is based on an erroneous assumption that such investments would automatically lead to growth. The major mistake lies in not taking into account the fact that what is produced through such investments must necessarily have to be sold in order that growth takes place. This, in turn, needs adequate purchasing power in the hands of the people to generate demand for such products that will result from such investments.

It is precisely this purchasing power that is sharply declining amongst our people due to the relentless rise in the prices of all essential commodities. It is this drastic shrinkage in the domestic demand that to a large extent is responsible for this sharp decline in the growth rate of manufacturing and consequently the index of industrial production.

No amount of effort to make capital available for investment will generate growth unless the government shifts its focus to expand our domestic demand by enlarging the purchasing power of our people. This can only be done if the government undertakes largescale public investments to build our much needed infrastructure, while providing greater employment and thus expanding our domestic demand. Rather than doing this, in its eagerness to further the trajectory of neo-liberal economic reforms that will enlarge avenues for greater profit maximisation for international capital as well as India Inc., UPA-II is embarking on this course of `Gennext’ reforms.

The experience of the stimulus packages provided in the wake of the 2008 international financial meltdown and the consequent severe global crisis, has shown the abject failure of such a trajectory as evidenced in the recent economic slowdown. During the course of these three fiscal years, the tax forgone by the government as admitted in the budget papers in the name of stimulus packages was to the tune of a staggering Rs 14,28,028 crores. Of this, Rs 3,63,875 crores have been the concessions given directly to the corporates and high end income tax payers. Net result of these concessions is the fast enveloping economic crisis that stares us today.

This however, has vastly benefited the `shining India’. During these three years, the number of US dollar billionaires in India have grown from 26 to 52 to 69 today. These 69 individuals together own assets equivalent to a third of our country’s GDP. At the other end of the spectrum over 800 crores of our people barely manage to survive on Rs 20 a day.

The concerns over the growing fiscal deficit are also entirely misleading. In the wake of such huge concessions given to the rich, the estimated fiscal deficit for this year of Rs 4,65,000 crores looks a mere pittance. If all the legitimate taxes were collected, then there would have been no fiscal deficit at all. Further, there would have been sufficient amount of resources available in the hands of the government to undertake a massive programme of public investments which would have led to a healthier trajectory of economic growth while improving the livelihood standards of the vast mass of our people.

While we continue to force the UPA government to undertake effective legislation and establish the Lokpal in order to curb the humungous corruption and reroute these resources for improving the welfare of the people, the pressure to force the government to change its current trajectory of economic reforms must not be lost sight of. In this context, it is necessary to mount further pressure through popular mobilisation upon the government to adopt economic policies in the interests of the vast mass of our people. This would require also the need to completely expose before the people the fact that on matters of economic policy there is little difference between the Congress and the BJP. Both work more for the interests of foreign capital and India Inc. than for improving the livelihood status of the vast mass of our people, while the BJP, additionally, continues to champion its destructive communal agenda.

(December 21, 2011)