Economic Highlights

New Delhi, 5 March 2015

Price Check, Higher growth

INDUSTRY MUST TAKE LEAD

By Shivaji Sarkar

Focus of the economy has to change. The Union budget 2015 is targeting a big push to infrastructure. It proposes to infuse Rs 70,000 crore. Rural development also gets attention. The approach to agriculture is conventional. It needs a bit more than a common market. But a significant aspect that has to be dwelt on is the prices – a check is a must.

The Narendra Modi government has the advantage of coming without a baggage. Certain inheritance from the previous government has to be junked. People want a stable family life with least aberration in prices. It causes volatility in their life. They expect the Government to ensure stable prices, check on high profits and a constant growth process.

Over the years the Indian family budget is bursting at the seams. It is just not commodity prices. The family expenses on school education of an average two children, transportation, medical expenses, clothes, milk and sundry items are going up. They are crying for a stable price regime. They wonder if the strong US economy, even when fledgling, can do with low prices, why not a developing but vibrant India.

The cut in repo rate to 7.75 per cent signals an interest rate cut despite RBI Governor Raghuram Rajan’s doubt on price stability. The industry welcomes it but individual savers rue it. Of late, a conflict of interest is growing. Individuals feel that interest rates do not match inflation. Every paisa they put in banks cause erosion in value. Over the years the difference between deposit and lending rates increased. While the Government encourages savings, it has to ensure that value of savings grow proportionately.

Industry cannot always expect people to subsidise their investments as also pay higher price to boost their profits. The common depositor wants to hedge for the future. They find saving a difficult task as prices continue to move up and so does family expenses. They rue when interest rates fall. It becomes a disincentive.

Should the industry pay more for borrowing? Possibly, yes. The industry has found everything belonging to the people an easy prey. A higher lending rate would incentivize them to take out their own reserves, which they rarely utilize. It would increase the cash flow and help the banking sector lend to the real needy.

The nation needs to remember that Rs 240 lakh crore is locked with industry’s unwillingness to repay bank debts. It forces the Government to re-invest in banks. Is not that a subsidy? Often, the industry comes out with the argument of low interest rates in countries like the US. It forgets that the US Government strictly monitors the prices too. It has the lowest inflation rate. It helps the US Government and industry also to keep their wage bills in check.

The Indian consumer is in a double whammy. They lose on all counts. Mere Government push to infrastructure would not help. Industry wants the Government – the people - to do all and they want to have the sop. They want the Government to build the roads but they want a high toll to maximize their cuts even after being paid the costs with profits in three years. The dichotomy is causing discontent, a seething anger as well as high disparity. It is slowing down India.

The industry must not think they can grow by cartelizing, rising prices (while costs remain low) and cajoling the governments. People do not feel the industry exists for them either as consumer or as working class. As consumers they are fleeced, most people feel. As workers they are paid improper, if not poor, wages; their jobs casualised, medical and social sector benefits curtailed. It is not limited to the daily wage earners. Even the richest IT and other companies have turned into not so good employers. During the past one year over 30,000 have lost jobs and a higher number had to suffer wage cut despite growing profits.

The workers are shown the door at employers’ whims and fancies. Often their dues remain unpaid – or simply gobbled up by the corporate. Still they want “labour reform!” It fuels further discontent. The industry must stop demanding “reforming” labour. If they want to be partner in progress, they would have to ensure the minimum, statutory or not, benefits and post-retirement sustenance. The industry is the biggest defaulter while it comes to payment of the provident fund or ESIC shares.

Denial and imposing higher costs have become the fad of the industry. Even corporate social responsibility (CSR) has become another way of providing employment to their kith and kin and gobble up profits.

The situation in rural areas despite proposed increases in Government investments, be it skill development, irrigation or other aspects has not improved. The rural people are getting squeezed leading to higher displacements of people, miseries and imposing cost on the cities.

Each of these moves increase prices, erode savings, bank deposits, weakens the economy, wastes government efforts, leaves people with less money, lowers demand and hits manufacturing. How long can a government boost the process? How long can the Government alone remain the model employer?

India needs to change the process. Industry needs support but it also needs to support efforts at strengthening the Indian people. Without stronger working class, if the industry expects growth, it would be daydreaming. It is causing nightmare for the entire economy.

The ease of doing business is a necessity. Many steps have been taken in this budget. But so is the industry’s responsibility to give it back. It has to come out with moves to increase jobs, stability for the workers, their families and stop exploitation at all levels.

Growth cannot come with a mere industry-centric approach. Industry has to ensure a low-price regime. The Government accordingly can be asked to check taxes. But if prices raise government expenditure, as government remains the largest consumer, tax revision too would be a continuous process. Industry can no more have the cake and eat it too.

It needs to come out with proposals and the road map to lower prices and higher growth. That would be a new beginning. The Government would have to encourage the dialogue so that the country moves on a fast pace, with lower prices, to a new-look India that could become the world leader. ---INFA

(Copyright, India News and Feature Alliance)