Math behind the illusion
The economy is going downhill on a range of indicators. The NDA should focus on public investment, not serve interests of capital
Wither BJP’S electoral promise of providing ‘maximum governance; minimum government’? The Delhi chief minister’s office was raided by the CBI. Even if we were to accept the central government’s argument that this was done as part of the investigations against allegations of high-level corruption involving senior bureaucrats, how this could happen without the elected Delhi chief minister even being informed, leave alone consulted, is perplexing. A similar yardstick is, however, not employed as far as the BJP’S state governments of Madhya Pradesh and Rajasthan are concerned. We have seen this BJP government appointing known RSS pracharaks as governors. The state chief ministers are not consulted but merely ‘informed’ of this. Result: the Parliament session continues to be disrupted.
The central government goes on repeating ad nauseum that the opposition parties are not allowing the GST legislation to be passed, preventing healthy economic growth and prosperity of our people. There are serious objections that continue to remain unresolved regarding negation of all rights of state governments to raise resources and thereby reduce them to be mere recipients of the central government’s largesse. Leaving aside the BJP’S opposition to the introduction of the GST during the last decade, even if this BJP government was interested in evolving a consensus on this issue, then it would have discussed this with the Opposition parties. Till date however, not a single all-party meeting was convened by this government to discuss this. The GST is not an issue to be settled merely between the BJP and the Congress.
But, the Indian economy is fast moving into a state of classical deflation. Prime Minister Narendra Modi and the BJP government continue to remain in a state of denial over the truth of our economy’s decline.
On the basis of highly dubious data-series, our GDP growth rate has been inflated. The government maintains that the real GDP growth rate is currently 7.4% while the nominal growth rate is 5.2%. This apparent anomaly arises because the government has claimed that the Wholesale Price Index has fallen by 2.2%. As far as the people are concerned, what is important is the Retail Price Index which continues to soar. Therefore, as people’s livelihood conditions deteriorate, the government propagates a fabricated high GDP growth rate.
However, capitalist calculations are always based on profitability directly related to the nominal growth rate and not the real growth rate. The Reserve Bank of India statistics for July-september 2015 on the performance of 2,711 companies shows that sales have declined by minus 4.6%, value of production by minus 5.6% and the expenditures by a minus 18.7%. Further, the services sector (biggest GDP share) has shown a fall in net profit of a huge minus 33.9%. Clearly, investment and consumption have not picked up despite the RBI cutting the interest rates during 2015.
Gross domestic capital formation has shown a sharp decline. This means investment in the economy is declining. Further, the banking credit to industry declined by nearly 5%. Growth in manufacturing should reflect in the growth of bank credit. All this means that employment generation in the industrial sector is on the decline, when 12 million new job seekers are added every year. According to the labour ministry’s 26th quarterly employment survey, employment in the manufacturing and export-oriented sectors fell to a four quarter low during the three months ending June 30. Most employment intensive sectors have shown a decline — 43,000 jobs from the previous quarter. Compare this with the election promise of generating an additional 25 million jobs every year.
Our exports have fallen drastically by 17.6% between April and October 2015. This is the eleventh straight month of exports reduction. FDI avenues have been recklessly enlarged, without ensuring that they will bring in invest ments that will increase the productive capacities of the Indian economy, skills, technology and jobs. FDI is being permitted to maximise its profits, exploiting India’s min eral, natural resources and cheap labour, with no cor responding benefits to the Indian economy and people.
The increased debt burden is forcing our farmers to commit distress suicides. There is a sharp deterioration in living standards in rural India. The growth rate of rura wages fell from 17.5% in August 2014 to 3.8% in August 2015. The agricultural ministry says the sowing area in the current rabi season is down by 18% overall. For the wheat crop, it is down by 28%, 9% for pulses and 12% pulses for oil seeds. The agricultural growth rate of a measly 0.2% in 2014-15 could well fall to a negative.
If all legitimate taxes are collected, instead of being doled out as tax concessions to foreign and domestic capital a huge amount of revenue would be available for new and high doses of public investment. Such public investment is the only way, through which all developed economies in the world, from the US to the People’s Republic of China have built their infrastructure, both economic and social If this were to be done, then India’s woeful infrastructure situation would be considerably improved. Such public investment would generate large scale new employment This, in turn, would put the purchasing power in the hands of the people thus, expanding our domestic demand — the surest impetus for manufacturing and industrial growth
This BJP government, however, appear undaunted Pre-occupied with media headline management, it has employed a strategy of seeking to divert people’s atten tion away from growing economic burdens, by moving from one event to another while relentlessly pursuing the real RSS agenda of sharpening communal polarisation.