An unkind cut for most people
The budget needs to boost the purchasing power of the poor rather than focus on attracting foreign and domestic capital
The focus of this Budget session of Parliament will, naturally, be on the economy, particularly how two contradictory electoral promises, which ironically fused together to fashion Narendra Modi’s victory, will be reconciled. One, realisation of the ‘dreams’ sold to the people, the other, meeting India Inc.’s expectations, who liberally financed his campaign, of speedier ‘reforms’ providing further concessions for profit maximisation at people’s expense. The hiatus between these two Indias is dramatically widening. Most likely there may be no attempt towards such a reconciliation. The RSS/BJP will continue to speak with multiple tongues — achhe din, Make in India, love jihad, and ghar wapsi — to advance their objective of transforming the secular democratic Indian Republic into a rabidly intolerant fascistic “Hindu Rashtra”.
The people’s ‘roused aspirations’ are, today, farther away from realisation. Despite the official propaganda of falling inflation, food prices continue to soar. Fuel prices have been raised yet again, petrol by 82 paise and diesel by 61 paise per litre. When international oil prices tumbled petrol prices were reduced by ` 2.42 and diesel by ` 2.25 a litre. But excise duties were hiked four times totalling ` 7.75 and ` 7.50 per litre, respectively, i.e., the government was profiting three times more than the relief given to people!
The agrarian crisis is deepening. The current Rabi season cultivated area has declined by 5.3%. The previous Kharif crop production declined from 129.3 to 120.3 million tonnes. Between November 2013 and November 2014, rural India’s average daily wage rate fell drastically. Labour Bureau reports that MGNREGS employment has dropped since the Modi government assumed office, from 8.37 million households to 6.07 million. Agricultural minimum support price for three continuous years is below the cost of production as estimated by the Agricultural Prices Commission. Non-profitability is leading to debt accumulation and the inability to return this is pushing more farmers to commit distress suicides.
The Modi government has recently changed the base year for calculating economic growth rate parameters to show our performance in a better light. On this basis, new claims are being made of India growing faster than China! Ironically, this resulted in showing the UPA government’s record in a better light, nailing Modi election propaganda. Indeed, “lies, damned lies and statistics”! Notwithstanding such “statistical packaging”, the factory output growth rate slowed in December 2014 to 1.7% from 3.9% in November 2013. Consequent rising unemployment combined with rising prices, particularly food prices, is resulting in lower purchasing power in the hands of the majority of our people, leading to an overall fall in our domestic demand.
This is confirmed by the official data recently released by the CSO for December 2014 over December 2013. Consumer durables and non-durables recorded negative growth of (-) 9% and (-) 5.7% respectively. The data group that includes radios, TVs etc., showed the highest negative growth of (-) 70.4%; telephone instruments, mobiles etc., (-) 80.1% and computers (-) 36.0%. The agrarian crisis saw tractors’ growth rate falling at (-) 42.6%; sugar machinery, the essential indicator of capacities for processing sugar-cane at (-) 48.6%. Similar contraction in the building sector saw negative growth of (-) 24.3% and PVC pipes & tubes at (-) 22.2%.
Expenditure cuts are already in place–10%across the board cut in non-plan and spending less than 30% of planned budget allocations in nine months of this fiscal in prime social sectors—adversely affecting peoples’ livelihood. Further expenditure cuts and more aggressive disinvestment plans are likely to meet the fiscal targets in the coming budget. All this comes on top of the already in place curtailments of the public distribution system, rural employment guarantee scheme etc.
In direct contrast to imposing such burdens on vast sections of our people come the slew of reforms expanding opportunities for profit maximisation for foreign and domestic corporates. The proposed further opening up of defence production, insurance, banking, mining and civilian nuclear energy, seen together with India succumbing to pressures on Intellectual Property Rights, access to our agricultural production and markets under WTO Doha round negotiations and purchase of ‘greener technologies’ under climate change treaties means a similar loot of our human and physical resources by foreign capital. This will be at the expense of domestic industrialisation. PM Modi’s ‘Make in India’ hype has already seen Nokia closing its production facilities in Tamil Nadu, throwing out of work thousands of our educated highly skilled youth. Despite the steep fall of the Indian rupee value (currently above 62 per US dollar) that should make our exports cheaper in foreign markets, Indian exports now registered a decline of 11.2%.
This Modi government’s economic policy trajectory is shown to be the more aggressive variant of UPA-II, Manmohan Singh’s reforms. They follow the same logic that the our economic development and prosperity can only improve by attracting a larger quantum of investments through big concessions to foreign and domestic Indian capital. However, mere increases do not automatically lead to higher employment and growth. This can only happen if the purchasing power of our people grows to be able to purchase any increased production. With global commerce shrinking due continued economic slowdown, our exports will remain low. Under this Modi government, this purchasing capacity of our people is, instead, contracting.
Will this budget be able to reverse this? The Modi government will surely not. But, yes, it can be done. Instead of expanding concessions amounting to lakhs of crores of rupees for attracting investments, which, in any case, cannot result in growth and improve people’s welfare, if these amounts are utilised for substantially increasing public investment to build our much-needed economic and social infrastructure, this can be done. Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP
The views expressed by the author are personal