June 22, 2014

People’s Miseries to Mount Exponentially

EVEN before the new government announced the schedule for the budget session of the parliament and the date when it would present its first budget has come worrisome news on the economic front. This has two dimensions – one for India Inc. and the other for the vast majority of our people. As we noted in these columns earlier, post-elections is the payback time for those who heavily financed the BJP election campaign and forcefully projected Narendra Modi as the `messiah’ of India Inc. Though much of the payback has already happened through market capitalisation as a result of the surge in the sensex and the stock market on the morrow of results, it is clear to everyone that this is not simply sustainable. As we go to press, already the downward trend appears to have begun. The value of the rupee has begun to fall once again. India Inc., therefore, hopes that a new surge of economic reforms particularly financial liberalisation would begin soon. Such reforms are aimed at making capital available to the corporates in an easier manner and on lower interest rates. The news on the economic front, however, dampens such hopes. Inflation has suddenly shown an upward swing. The wholesale price index rose from 5.2 per cent in April to 6.01 per cent in May 2014. The consumer price index growth would naturally be a multiple of this price rise. Worse, this surge in inflation is based on the rise in food prices and essential commodities. Food inflation rose to 9.5 per cent in May against 8.64 per cent in April. Potato inflation was highest at 31.4 per cent followed by fruits at 19.4 per cent and eggs, meat and fish at 12.47 per cent. Manufactured product inflation went up by 3.55 per cent. This, naturally, negatively impacts the poor, marginal and the vast majority of the working people more. Under these conditions, financial reforms aimed at making capital available on easier and cheaper terms by reducing the interest rates is not possible. This is so because the neo-liberal ideology informs that by reducing interest rates, there will be a greater money supply in the economy which will put further pressure on the prices to rise. The neo-liberal reform pundits who have scant concern for the travails of the poor due to price rise are, however, concerned with inflation as it hampers the gen-next reforms essential for profit maximisation. Their concern at controlling inflation is exclusively this pre-occupation, not the further burdens imposed on the people. This new surge of inflation led by the rising prices of food and essential articles is likely to come under greater pressure. The central government has issued an advisory to the states on June 18 asking them to be prepared with strategies for mitigation of a possible drought during the kharif season. The meteorological department has already predicted a weak monsoon. A day after official data showed inflation running at a five-month high, the central government called an emergency meeting of concerned ministers and officials. Believe it or not, the main decision taken at the meeting was to ask the state governments to crack down on hoarders. Though this must be done, this, in itself, is not sufficient to contain this price rise. Additionally, two more crucial measures are necessary which the CPI(M) has been advocating for a long time now. First, there is an immediate need to ban all speculative trading (through the futures/forward commodity markets) in essential commodities. This, however, while reining in food prices will deny the multinational trading corporations and the trading community in India which is an important element of the BJP’s social base, the opportunity to make windfall profits. The BJP government’s refusal to undertake this step clearly shows where its interests lie – in imposing further burdens on the common people, thus, compounding their misery while permitting windfall profits. Secondly, the central government continues to hold on to a huge stock of foodgrains in its godowns. Releasing these at BPL prices to the state governments for sale through the public distribution system or government-controlled sale in the open market would automatically lower the prices of food articles. Again, this BJP central government refuses to do this. Instead, it is seeking to export this stock and augment government revenues at the expense of further burdening our people. As we noted in these columns last week, normally when a new government assumes office, the president's address contains the agenda that the new government will seek to undertake to implement in its first year. The president's speech contained neither a roadmap, forget a blueprint, nor did it detail any priorities. The government’s real agenda of `development’, a la its much tomtommed `Gujarat model’, has, however, now come from outside the parliament, when the prime minister spoke of “tough economic decisions” on June 13. He claimed to have “taken over the reins of the country in circumstances when there is nothing left behind by the previous government. They left everything empty”. Therefore, he justified the imposition of further burdens on the people through “stringent measures” for restoring financial discipline. Saying that “for ten years, the people of this country have not witnessed a working government in Delhi”, he tweeted, in his by now established channel of one way communication, that the “time has come to take tough decisions in the interests of the nation”. Is this anyway different from the previous government’s slogans, one that was not “working for the last ten years”? Former PM Manmohan Singh had asked the people to “tighten their belts”. The result was unbearable inflation, growing unemployment and heaping miseries on the vast majority of our working people. Having reaped the benefit of this people’s discontent during elections, the BJP is now asking the people to be prepared for a more lethal dose of the same medicine. Again, the PM did not outline what these “stringent measures” mean. But India Inc., through the media, have been articulating this agenda. Industry associations were quick to demand tax concessions in the name of overcoming the economic slowdown. Now recollect that already the `tax foregone’, as informed by the last UPA budget, was a whopping Rs 5.73 lakh crores. In addition, according to official records, default in direct tax collections amounted to Rs 5.1 lakh crores. Thus, over Rs 10 lakh crores of legitimate revenue to the government have already been denied. India Inc. cries out for further tax concessions! The last budgetary estimate of our fiscal deficit was Rs 5.20 lakh crores. The tax concessions given so far would wipe out this entire deficit and leave handsome surpluses in the hands of the government for much-needed infrastructure development. This, in turn, would have generated new employment boosting domestic demand serving as the sustainable impetus for manufacturing and industrial growth. This, however, is not to be. Given their active role in strongly financing this BJP election campaign, unprecedented in the history of Indian democracy, the assessments of India Inc. would be closer to what the government’s policies might be rather than people’s hopes and expectations. The 15 tough steps that the PM is likely to announce, according to India Inc., include the phasing out of subsidy on diesel; monthly increase of LPG and kerosene prices; scaling down of the food security and fertilizer subsidy; significant amendments to make land acquisition easier; shrinking the NREGA; labour reforms to enact `hire and fire’; increase railway fares and lower food subsidy by reducing the rate of raising minimum support prices. This last measure will further compound the present agrarian distress. The classic recipe for profit maximisation by imposing burdens on the people! In the meanwhile, the IMF on June 16 slashed its forecast for the growth of the US economy from its previous estimate of 2.8 per cent to 2 per cent in 2014. This is sending panic waves in India Inc. as our exports, already significantly weakened due to global economic crisis, will further weaken as a consequence. Hence, profit maximisation would have to rely entirely on intensifying domestic loot. Hence, there is an alarming new surge for the complete privatisation of the public sector. Cries are getting louder asking the PM/FM not to do this piecemeal but “Tackle them all in one go by enacting a new omnibus law giving the government the right to disinvest by executive action, overriding existing laws”. To overcome the lack of a majority in the Rajya Sabha, the PM is being advised “You can convene a joint session to pass it”. Need anything be more explicit! Dangerous portends reminding us of Mussolini’s infamous definition of fascism – “fusion of corporates with governance’. The real meaning of the BJP’s election slogans of `development’ and `ache din aanewale hain’ are, thus unfolding. The singular message is that people’s miseries are going to mount exponentially. Only when these measures are resisted through intensified public movements and struggles can the hopes of the majority of our people from such economic woes be realised. These struggles will have to be strengthened in future even for maintaining the existing levels of our people’s livelihood and, on that basis to improve it for the better. (June 18, 2014)