Economic Highlights

New Delhi, 28 March 2014

Cong Promises Galloping Inflation

MORE RHETORIC, MAXIMUM SUFFERING

By Shivaji Sarkar

The Congress manifesto may hit the common man hard. It is not only soft on inflation but has proposed measures that would make everything from electricity to education dearer.  Its promise of flexible labour laws and unleashing corporates in rural areas to create a virtual zamindari --- SEZ in a new garb --- is likely to cause untold miseries. It seems the poor have taken a back seat in the Congress agenda.

Importantly, controlling corruption is not a priority. While releasing the manifesto asserted out-going Prime Minister Manmohan Singh, “Corruption in a developing economy cannot be wished away”.

Not surprisingly, the business community is not enthused. A FICCI on business confidence released a day after the manifesto indicated that businessmen are disturbed with the current economic trend --- dwindling profits, fall in jobs and demand, difficulty in credit availability, high interest rates and high cost of doing business.

In a guarded reaction to the manifesto, FICCI stated, “Wide variety of rights must be based on sound economic health of the country”. Significantly, no corporate is supporting caste-based reservation in private jobs including CII President Kris Gopalakrishnan, Maruti Suzuki Chairman RC Bhargava and Videocon Chief Venugopal Dhoot.

Indeed, if the Congress comes back to power, people should expect galloping inflation as nothing would be available without “user charges” for “assured quality” be it electricity, natural gas, LPG education, train services or any other service. So train fares would compete with air fares which would become a reality for even those who cannot afford unreserved seats.

Moreover, it offers “complementarity” between business beneficiaries of welfare schemes by arguing that programmes like housing and health security would spur demand. In a radical shift, the manifesto promises “only the absolutely necessary subsidies to the absolutely deserving.”

This only means the Party wants to ensure that people are deprived of the bare necessities for the sake of “quality”, a right that every consumer or user has. Undoubtedly, the benefit would go to large companies, who now would have an alibi to harass consumers by offering poor services for fixed or lower tariff. The national highways are stark realities of this.

This is not all. Each so-called “better” service would have higher premium. The suffering poor citizens would have only one goal ---- to fill up pockets of perpetrators of officially-sanctioned loot --- a sure path to mis-governance. This possibly justifies the recent doubling of RIL’s gas price from the Krishna Godavari basin from $ 4.2 to $ 8.3 per mbtu.

The manifesto proposes upgrading the Sarva Shikhsha Abhiyan to Shreshta Shiksha Abhiyan. The underlying assumption appears to be that having expanded the coverage of public services in the past 10 years, the Congress now wants to focus on their quality, for which it is not averse to charging users.

Consequently, the aam aadmi would have to toil harder to get “proper” and certainly not “better” education in a country where jobs have become scarce and wages minimal, except for pampered Government employees. The age-old concept of vidyadan --- bestowing education to all --- is being sacrificed at the altar of higher profits. Remember, affordable education has made India one of the global repositories of human resources across the world.

No wonder the number of students in debt has doubled in the last five years of UPA II according to data compiled by the Indian Banks' Association. The outstanding amount is Rs 8,297 crores and the number of defaulters is rising because degree-holders are not getting jobs.

Additionally, the manifesto virtually calls for withdrawal of the Central Government from all activities that would benefit the people. The responsibilities are proposed to be transferred to the State Governments. Thus, the importance of the big-budget “national flagship programmes” of UPA I and II has been reduced.

The Congress says it wants to pass on a greater share of the cost of implementing these programmes to the State Governments as they have the fiscal space to bear the expenditure. This, the manifesto says, will let the Union Government allocate more resources for its exclusive responsibilities such as defence and railways. Undeniably, this is a virtual admission of the poor economic health and revenue constraints the Government is suffering from.

Questionably, is the manifesto a mere rhetoric?

The working class is likely to be worst hit as the manifesto wants to give freedom to employers to fix wages and policy of hire and fire. The 15-point agenda for socio-economic and political transformation include initiatives like promoting flexible labour laws.

This is in sharp contrast to the promise of creating “10 crore jobs by unleashing $ 1 trillion corporate investment in the rural area”. It appears as if the rural people have no entrepreneurship and they could be subjected to become slaves of big corporate houses, who, as per the Congress vision, would own the vast hinterland --- a massive zamindari!

The Party also promises right to health, pension, housing and social security and wants the fiscal deficit contained. But, it is silent on funding the right-based programmes. Further, health care is likely to be tagged at higher charges, housing would have a higher cost and social security would come for a price.

For business and industry, the Congress agenda promises to address the ‘holy cows’ of “flexibilities” in the labour market and minimum tariff “protection” to domestic manufacturers against imports. It assures of special tax incentives to firms manufacturing IT hardware to take on the imported “popular branded hardware” such as Apple and Samsung. To exporters, it promises waivers or rebates on all Central and State taxes on exported products.

However, it is silent on outsourcing of manufacturing to China and South Korea. The manifesto dwells on trite cliché of a manufacturing policy announced two years ago to revive the industry. It has silent on reviving small entrepreneurships whereby the pledge of “Ease of Doing Business” is apparently restricted to large businesses and foreign firms, for whom a number of facilities are proposed.

Notably, the Party’s tall claim of 14 crore people crossing the poverty line has been questioned by Moody, Goldman Sach and other international rating agencies. The agencies argue that the cut-off line was put almost at half, in other words, Rs 750 per month income while this should be double as per inflation figures. That means 14 crore more have gone below the poverty line.

Pertinently, it is silent on giving tax reliefs to the highly taxed citizens.

Therefore, in keeping with Congress Vice-President Rahul Gandhi’s vision, Indians would have to be prepared for more rhetoric and maximum suffering! ----- INFA

(Copyright, India News and Feature Alliance)