Open Forum
New Delhi, 1 April 2013
Ongoing Economic Distress
UNMISTAKABLE SINKING
FEELING
By Proloy Bagchi
Even as a layman
uninitiated in economics I get an unmistakable sinking feeling, the same which I
used to get during the days of our pseudo-socialism. Prices would rise
relentlessly while the incomes would by and large remain stagnant. Whether it
was the essentials, the utilities, services or whatever – the price of
everything would every year register a rise making survival difficult for us
ordinary folks. Despite the progressive enlargement of the Government it would
seem as if it was helpless; the absence of governance was all too palpable. The
financial squeeze was mostly on the vast numbers of poor and the slowly
developing middle classes, whereas the politicians, commanding the country’s
resources and with their nexus with business and industry, made merry.
A similar scenario has again
been unfolding for some time. Driven, inter alia, by the oil price hikes and
high fiscal deficit (5.1%), the inflation remains unchecked at a high of more
than 10%. The Government claims that the wholesale price index has since fallen
to around 6% which is meaningless as what affects the people is the consumer
price index and that refuses to climb down. Food items, in some cases, have
registered around a 15% rise.
Economics and politics
have a close inter-relationship and, hence, the current political instability
is going to inflict more hardships on the people. The miraculously galloping
GDP growth is currently not even on a trot. The growth rate during the last
calendar year hovered below 6% with the last quarter registering a mere 4.5% growth
– chillingly close to the abysmal “Hindu Rate of Growth” of around 3.5% that
persisted for decades during our pseudo-socialist phase. Although reports of
emergence of “green shoots” of revival (of the economy) have appeared in the
media one cannot put much stock on them as these are all officially engineered
to play down the gravity of the economic distress.
One fears the worst for
the next fiscal. The parties supporting the UPA from outside are likely to
arm-twist the Government to nurse their own constituencies. The Government will
have to play along sacrificing vast sums of money just to remain in power.
Fiscal prudence or bold economic initiatives cannot be expected from an
anaemic, virtually a minority, Government. Growth is likely to suffer and the
deficits may increase
As it is, investments in
the manufacturing sector have dried up. Leave alone foreign direct investments,
even the indigenous investments are missing. The climate in India was never
attractive for foreign investors On top of that the March 2012 budget with its
proposal of retrospective taxation and General Anti-Avoidance Rule (GAAR) made
the foreign investors apprehensive of the Government’s intentions. As
investments dried up, flight of capital also ensued. Dollars became scarce and
the Rupee declined against all currencies and about 18% against the Dollar. Imports
became expensive and the problem got compounded by slow-down in exports. The
current account deficit ballooned to around a massive $35 billion.
Unsurprisingly Indian
Inc, too, finds investments abroad to be attractive. It claims that apart from
the policy-paralysis that has set in, the dispensation is utterly opaque.
Besides, the cost of capital has climbed sky-high and the extant labour laws
are forbidding. Predictably, investments abroad by India Inc. during the 2012-13
have surpassed those made in India.
Industrial plants are being set up in Asia, Africa, Latin America and Europe where mergers and acquisitions, too, have become
common. Indian manufacturing base is progressively shifting abroad, especially
to China,
depriving the country of the benefits of creation of jobs and augmentation of
product base. Besides, China
is flooding our markets with cheap products which the country surely has the
capability to produce.
The already depressing
environment has become more depressing for want of jobs. The nine months of
2012 saw a measly 1% growth in the core industrial sector providing hardly any
scope for creation of jobs. Even during
the period of rapid growth only about a quarter of 12 million joining the
labour force every year had been accommodated. The manufacturing sector had
shed 5 million jobs between 2004-05 and 2009-10 but was unable to create jobs
for the rural migrants. In absence of significant job-creation one fears social
unrest in the future as the “demographic bulge” will pump in ever increasing
numbers into the labour markets.
The much-touted
“demographic dividend” might in fact result in an extended era of crises of
joblessness, crimes and social disorder – the “green shoots” of which are
already perceivable in the shape of robberies, thefts snatchings, rapes and
murders. The “overarching” goal of 2013-14 Budget “to create opportunities for
our youth to acquire education and skills that will get them decent jobs or
self-employment” will take some time to materialise.
Despite a spate of cases
of corruption involving billions of rupees, the Government has determinedly not
taken steps to institute a strong and independent Lokpal (ombudsman) - quite
understandably, as otherwise most of the ministers would find themselves in
jail. Rampant corruption in high places has encouraged even lower level petty
district officials in amassing millions by illegal means.
Describing the pervasive
corruption the Apex Court
very aptly observed recently that it “...accelerates undeserved ambition, kills
the conscience...paralyses the economic health ...corrodes the sense of
civility and mars the marrows of governance”. No wonder, even clerks and patwaries have been nabbed amassing
millions!
The number of crorepaties (millionaires) has multiplied
and is far more than the 48,000 determined by the Finance Minister. In fact,
there are arabpaties (billionaires)
numbering more than 48,000. Seeing so many crorepaties
everyone wants to become one by hook or by crook. And, on the other hand,
numbers of poor and hungry have also ballooned. As the cost of food items
escalates a few millions sink below the poverty line every month.
No efforts are noticeable
for price control. While the middlemen in the mandis (wholesale markets) laugh all the way to the banks, the
farmers keep committing suicide. Likewise, there is no effort to revive the
manufacturing industry and/or bring back the invested capital from abroad. The
famed Indian managerial and technical talent, surprisingly, delivers in the US, but not in
the country. No effort is being made to harness them for the country’s
wellbeing.
Worse, the Government has
made no efforts to have the illegal billions stashed abroad repatriated despite
the assurances of help and cooperation by various European governments,
including those of Switzerland
and Germany.
Perhaps, that would have been of help in neutralising the fiscal deficit. But
then, it is futile to expect such action from those who themselves are guilty
of salting away the country’s stolen wealth abroad. Politics and politicians
seem to be devouring this country
It is a great pity that
with renowned economists at the helm for almost a decade there is such all pervasive
gloom from which the aam aadmi can
scarcely find escape. ---INFA
(Copyright, India News and
Feature Alliance)
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