January 18, 2015

PM Modi’s ‘Illusions’: Gas Balloons

THIS week has seen a very well choreographed and orchestrated campaign to woo international finance capital to India. Prime Minister Modi seeking to realise his “Make in India” campaign was physically omnipresent at the Vibrant Gujarat Summit 2015. PM Modi has made a clear shift from the slogan of “Made in India” that he thundered from the Red Fort in his first address to the nation on Independence Day to the slogan of “Make in India” that he advanced at a yet another choreographed event at the Madison Square Gardens in New York on his visit to the UN. These columns had earlier discussed the meaning of this shift. However, by now it is clear that both these slogans are bound to fail, again, as repeatedly argued in these columns, because of the continuous shrinking of the purchasing power in the hands of the vast majority of the Indian people and due to the continuing global economic crisis that has depressed both global economic growth and hence volumes of global trade. This means that whatever that is made in India, or, made to make in India, cannot be sold either in India or elsewhere in the world. The only way to kickstart the Indian economy towards a higher growth trajectory is by concentrating attention on expanding the domestic purchasing power of our people. This would expand the domestic demand providing the necessary impetus for manufacturing and industrial growth and, hence, for overall GDP growth accompanied by growing employment. We had also repeatedly argued that such a course can only be ensured if the government substantially increases the levels of public investment in building our much needed infrastructure rather than providing whopping tax concessions for India Inc., and providing concessions to foreign capital to invest in India. But being prisoners of international finance capital as well as having been heavily funded in the election campaign and the projection of PM Modi by India Inc., this government out of its own compulsions is aggressively pursuing neo-liberal economic reforms that permit higher and faster ways of maximising profits at the expense of further exploiting the Indian people and mercilessly looting Indian material and mineral resources. Under these circumstances, this Modi government, in order to continue to maintain its hype of improving the well being of the Indian people – ache din aanewale hain – continues to spread longer the red carpet for foreign investors and domestic big capital to invest more in India. As the product of such increased investment cannot find either a global or a domestic market, this strategy is bound to fail. Not to be left behind, the ruling Trinamool Congress (TMC) in West Bengal has held its own similar event, `Bengal Global’. The union finance minister was present there to offer all cooperation of the Modi government for these efforts in Bengal. Many eyebrows were raised. The public posturing is one of antagonism between the BJP and the TMC. Such promised cooperation, though couched under the cloak of self-righteousness, smacks of a new political deal that is underway. The Trinamool Congress, whose leaders are increasingly being summoned by the CBI for questioning in the humongous Saradha and other chit fund scams, with the needle of suspicion pointing towards the chief minister, desperately needs the protective umbrella of the central government. On the other hand, the BJP, that is increasingly finding it difficult to get its anti-people legislations, particularly regarding neo-liberal economic reforms, endorsed by the Rajya Sabha, requires the acquiescence of the TMC to make its life easier in the upper house. May be, that such a deal is in the offing was reflected in the rather enthusiastic support offered by the finance minister to the TMC at this `Bengal Global’. Be that as it may, let us return back to the economy. It is not too often that the governor of the Reserve Bank of India agrees with the Marxist analysis on the ailing economy as discussed in these columns repeatedly. Delivering the Bharat Ram memorial lecture last month, RBI governor cautioned the government on PM Modi’s `Make in India’ mantra suggesting that India would have to look for domestic demand for growth. Clearly, he was suggesting that `Make in India’ must be primarily aimed at the Indian domestic market as an export-led growth strategy would be ineffective; as the industrial world stagnated and many `emerging markets’ were re-thinking their export-led growth model. “There is a danger when we discuss `Make in India’ of assuming it means a focus on manufacturing, and attempt to follow the export-led growth path that China followed …. But the world as a whole is unlikely to be able to accommodate another export-led China.” Further he said, “If external demand growth is likely to be muted, we have to produce for the internal market …India will have to work on creating the strongest sustainable unified market”. What we have been arguing in these columns appears to have found yet another unlikely ally. The Associated Chambers of Commerce of India (Assocham) said that even if an investment revival were to happen, there would be a time lag of at least 18 months before it reflects in the manufacturing sector. “In any case, where is the question of investment revival in the private sector when the existing capacity remains unutilised to the extent of 30-40 percent in several industries?” it asked. Hence, it said, “Under these circumstances, the only way left for investment to return is through state funding of the infrastructure — both economic and social”. Responding to the union finance minister’s already put in operation across the board 10 percent cut in non-plan expenditures and his active consideration of slashing across the board 20 percent of plan allocations to save about Rs 47,000 crores to meet the fiscal deficit target in the face of an expected tax revenue shortfall of Rs 1.05 lakh crore and a big shortfall in meeting the disinvestment target of Rs 58,425 crore, the Assocham “strongly urged” finance minister not to slash plan spending to meet the fiscal deficit target. It also told the FM that it is the government and State-owned companies, rather than the private sector, which should lead the investment revival in the country. “Heavens would not fall if the fiscal target of 4.1 percent in the current financial year (FY15) is not met and the deficit moves up somewhat. But it will be quite detrimental to the efforts for economic revival if different ministries are asked to squeeze their planned budget and it saves the day for the fiscal consolidation,” the industry body stated (as reported in Business Standard, January 12, 2015). This government’s chief economic advisor, Arvind Subramanian, in the mid-year economic analysis underlined the need for increased public investment to revive the economy since the private sector was woefully short of funds, the banking sector was already overstretched and the governance structure for the much-hyped public-private-partnership projects (once again exposing the vacuity of the PPP model) exposed them to several kinds of financial risks and weaknesses. This comes in the background of the fact that the total cash reserves with the public sector companies at the end of March 2013 (the latest date for which these figures are available) were estimated at Rs 2.66 lakh crore. At the same time, India Inc., on the whole would like to `hunt with the hound’ while `running with the hare’. They do not want the fiscal deficit also to go uncontrollable. Fiscal consolidation and keeping fiscal deficit below 3 percent is a necessity to make India’s `ratings’ by international agencies favourable. Thus, the Business Standard editorially (January 12, 2015) speaking of the inability of private investment to grow given that the macro economic recovery is yet to manifest says that, “The gap can only be filled with public investment”. This, “will have a wider growth impact as well, by stimulating demand”. At the same time, it cautioned by saying, “While some have expressed the view that the deficit target under the resurrected fiscal responsibility and budget management process need to be subordinated to the more pressing investment compulsions, this would be the wrong way to go. The last thing the government needs in the first year is to lose its fiscal credibility”. Hence, it concludes seeking that the government “step up public investment with quick returns to improve the climate for private investment”. This comes in the background of what we have stated in these columns two weeks ago statistically showing the shrinking domestic demand and hence dwindling opportunities for private investment to grow. The capitalist State must orient its policies to suit the interests of private capital at the expense of the people – capitalism’s perennial dictum, always sought to be disguised – seems to be the naked motto of this Modi government. Speaking at the Vibrant Gujarat Summit, he said: “We want to make them (foreign investments) not only easier than earlier, not only easier than the rest, but we want to make them the easiest,” he said trying to woo investors at the global platform. The PM said, “India has three things to its credit – democracy, demography and demand”. Alas, these three attributes - democracy, demography and demand – as noted in these columns in the recent weeks continue to remain for the country and the people as `non-performing assets’. As long as this continues, the illusions created by the Modi campaign will continue to remain intangible and elusive. The gas balloons of high hopes have been released. But they are not rising high to float on the clouds realizing the promised ache din aanewale hain. As these balloons continue to stand still in the smog of this cold winter, the heavy air of uncertainty and insecurity of the future lurks our people. Stagnant balloons are bound to burst sooner than later. This will further worsen the livelihood health of our people. Under these circumstances, the only way that the vast majority of our people can improve their livelihood is by forcing the Modi government through powerful popular mobilisations to reverse these neo-liberal economic policies while defeating the aggressive Hindutva campaigns aimed at disrupting the growing unity of our people against these policies by diverting their attention and hurling them into a morass of strife and communal conflict. Strengthening of such popular mobilisation is, hence, the need of the hour. (January 14, 2015)