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Rich Vs Poor: RETHINK PLAN APPROACH, by Shivaji Sarkar, 14 Oct, 2011 Print E-mail

Economic Highlights

New Delhi, 14 October 2011

 

Rich Vs Poor

RETHINK PLAN APPROACH

By Shivaji Sarkar

 

The Approach Paper to the 12th Five Year Plan has not taken care of the latest debate on the number of affluent and the growing number of poor. The most recent TNS's Global Affluent Investor study puts India among the top five nations where the affluent have more than $100,000 .i.e. Rs 50 lakh to invest on an average, alongside the UAE, Singapore, Hong Kong, and Sweden. The number of such affluent is stated to be a little over 27 lakh, or about one per cent of the population.

 

Planning Commission Deputy Chairman Montek Singh Ahluwalia almost simultaneously gave a statement that was based on S Tendulkar committee report of 2009 on poverty, that there would be 65 per cent-- over 78 crore people who would be poor. In 2009, the figure was stated to be at 36 per cent, though that too was disputed. Ahluwalia accepts that the rest of the 35 per cent, are also not living in a very happy state.

 

Should there be a glee over the TNS survey? Perhaps not, even while accepting that there are about 27 lakh people, who constitute more than many European countries, including Germany, are not at the same level of comfort. Over 15 per cent compounded inflation rate has eroded much of their wealth. They have far less purchasing power capacity than the affluent in Europe or the US as the currency value in these countries is higher with a capacity to buy more.

 

Thus, the Indian rich are poorer than the rich anywhere in the West. They are also far less numerous than the number of rich in the recession-hit US, which has over 31 million rich. Apparently, the Approach Paper neither takes this into account nor how the number of poor is increasing or how those on the edge are slipping to the poverty level.

 

Indeed, the growth approach is misleading. It was based on the concept of trickle-down effect, which in effect means that as there are more affluent people, their extra income would be passed on to the other deprived groups. This sadly has not happened. The reasons are many:  As there is an economic uncertainty, those who are slightly well-off have tightened their purses to meet eventualities. Taxes are high on those marginalised rich, if they could be called so. Thus there is heavy erosion on their income. The rest of their comfort has been robbed by high inflation of 15 plus percentage and high interest rates.

 

In the US or Europe, the rate of inflation despite an increase remains at a low level of 3 to 4 per cent. Their currency has higher purchasing power and all this makes their rich richer than the so-called affluent in India. They pay a very low interest rate against almost a penal interest rate in India.

 

Therefore, planning for the next Plan has to take this into account. This apart, debate and discussions should now refocus on how to rid the country of poverty and pep up agriculture. It also needs to refocus on the galloping disparity. Surely, there is no pride for a country of 121 crore people that has only 27 lakh near affluent people after over six decades of Independence.

 

We all know that the socialistic concept had abhorrence for the rich. It is no crime to be rich but it is not a healthy social trend to have so few people who qualify to be called so. It is a pointer to the failure of the planning process and its concept. The US with 31 million – viz India’s less than 3 million – has a better chance of getting back to recovery. And by this comparison, India’s economy should be called an ailing one.  

 

The Public-Private Partnerships are designed to privatise profits and socialise losses. Policies are being designed to allow individuals to loot the Government, as an extra benefit. Government finances get driven into deficits. This has pushed the State into financially fragile zones. This fragility can be used to create panic for loosening rational checks and extract further advantages for corporate or big business out of the State funds.

 

Candidly, it calls for greater regulation to check the plunder of natural resources and public funds and banks. The recent State Bank of India crisis is one such pointer. But the planning process has not taken care of many of the genuine problems of the corporate.

 

Undoubtedly, the nation has to discuss the new approach to the policy of development. The best one would be to immediately stop the 12th Plan and enter into a one-year planning process for 2012. The interregnum could be used to decide the new focus – how to reach the benefits of the planning process to a larger segment of the population so that it could come out to join – not alleviate from poverty – the affluent.

 

A fewer number of outside the poverty net has caused severe problem for raising revenue. The number of taxpayers, and that includes many just above the official poverty level, are still about 3 per cent – about 4 crore – of the people. This is causing greater anxieties as tax realisations till September – indirect tax increase at 1.2 per cent – Rs 28,510 core and  direct corporate and income tax at 7.2 per cent – a mere Rs 1.95 lakh crore, customs duty decline at 11 per cent – Rs 101.2 crore  - are slowing down. This shows the impact of food inflation – a steady 9 to 10 per cent or more, high interest regime and high taxes.

 

The planning process has to take a look at all this. It has also to refocus on rural and agriculture economy wherein 72 crore people still live on it. This has been gravely ignored repeatedly in many Plan periods. Of late, even the Khadi sector has entered a crisis, forcing greater dependence on the corporate.

 

The planning process has to change the stress to agriculture –not a corporatorised one - so that there are more affluent people who could contribute to the Government’s kitty, which could then fund development.

 

The debate is not rich versus poor. It is about broadening the process of development and including the largest segment of the population. If the country wants to be a super power, it has to rise on the strength of its people and not the few corporate. ----INFA

 

(Copyright, India News and Feature Alliance)

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