Economic Highlights
New Delhi, 30
September 2017
EAC Task Cut Out
FOCUS ON FARM SECTOR
& TAME BANKS
By Shivaji Sarkar
The poor and the
economy have taken centre stage in Indian politics. Prime Minister Modi feels
concerned about the deprived and announces the formation of his Economic
Advisory Council (EAC) for their welfare. His Finance Minister Jaitley looks
for a package to revive the economy that has “dipped a bit” without giving up
fiscal austerity.
And for a first in BJP
politics, a former Finance Minister and senior BJP leader Yashwant Sinha fires
salvos for a sagging economy.
This comes shortly
after the UN found the economy on a free fall, along-with world-wide need for
austerity and “hyper-globalisation”, a new coinage that marks the Trade and
Development Report (TDR) of UNCTAD. This means over financialisation
(bankisation) and the corresponding woes of the world economy. The TDR also
wants to give up austerity at Government levels --- just contrary to what India
has been doing.
Possibly all the above
four --- Modi, Jaitley, Sinha and TDR --- are correct. The country needs to
look for a new economic path. It needs a new package. There has to be full
scrutiny and solutions found for the grave problems. Sinha and TDR look for new
path so do Modi and Jaitley. There is consensus as the economic model
introduced by Manmohan Singh has failed. The quandary is about how to find a
new path.
Questionably, will the
new EAC led by Bibek Debroy be able to find that and give the right
suggestions? This question plagues everyone right from the Prime Minister downwards
to the last man.
Importantly, the EAC
has to find new moorings and dynamics for the Indian economy. Manmohan Singh
failed because as Congress Vice President Rahul Gandhi said, he failed to
create jobs. In fact, jobless growth, he says has worsened during the last
three years.
What would be EAC’s take?
How would it create the jobs? Given that the industrialized-manufacturing
economy has failed to do it. If it has to look for new avenues the dynamics of
economy has to change. India remains moored in the farm sector but that is the
most ignored.
Undoubtedly, the farmer
has to be the pivot of the economy. True, the importance of the farm sector has
been indirectly recognized by the Government as it shelved the decision to prepone
the financial year, which is linked to the agricultural production.
Besides, the Government
in mid-September realized that it does not get all data before the end of
kharif and rabi seasons which is the key. Over 54 per cent officially or about
75 crores are dependent on the farm sector for jobs though it contributes 14
per cent of the GDP, almost the same as the manufacturing sector, with crop
growth of a little over 2 per cent normally.
This hard fact is
ignored. For the last 70 years, these large numbers are targeted to be
separated from the farm sector. But this has not and cannot happen. The new
economy has to give these 75 crores to farm support so that it stays put and
increases the GDP contribution of the sector.
Till the advent of the
British and their resort to Permanent Settlement, India had a thriving farm
economy with poverty virtually a rarity. Today, India needs to rediscover it
and make a vibrant economy that would transform the dream of Mahatma Gandhi and
Deendayal Upadhyay for the rise of the last man --- antyodaya.
Modi’s EAC has the
onerous task to tailor out the new economy.
However, this cannot
be achieved if banks become monsters. The bankisation is the bane of world
economy the TDR states. Untamed finance is continuing to be the source of
instability and inequality, it adds.
Interestingly, the UN
body rejected claims that the financial system is safer, simpler and fairer and
condemned intensification of finance. India is facing it post note-ban.
Arguably, is Sinha
then right in criticizing note-ban which in his perception has led to the slowing
down of the economy to 5.7 per cent growth against the desired over 7 per cent?
To some extent he is correct.
The banks are rising the
world over with Government backing by creating a fear psychosis of black
economy, levying heavy charges and fraudulent deductions across the world.
India is no exception.
In fact, the world
over despite the 2007-8 crisis, the banking sector assets have more than
doubled in most countries and TDR notes, with peaks of over 300 per cent of GDP
in OECD economies. Banks in developed countries have become mammoths with over
$ 100 trillion accumulation. This exceeds global income.
India needs to be
wary. The EAC has to correct this and tame the power of banks along-with their
demands for unnecessary details like Aadhar,
mobile number, repeatedly know your customer (KYC) and unmitigated harassment.
In short, India, as many Eurpoeans, Americans and Japanese want have to be
freed from the leash of the banks and their instruments.
The Council has to
also address the interests on deposits, the lower interests are to depositors,
higher are their profits, which are often squandered away in credit to
unscrupulous businessmen and rarely repaid.
Notably, Indians banks
profligacy has led it to a trap over Rs 12 lakh crores NPA, all earned from
poor depositors. Now the Government is recapitalising the banks with the same
poor taxpayer’s money.
The EAC for the sake
of the poor also has to bring the banks out of the clutches of the Government.
The banks need to function like commercial entities and not Government
departments. They have to service and not fleece the people with the backing of
the Government. That would be a pro-poor approach to bring the banks back to
health.
Significantly, the UN
finds austerity of Governments a major issue for aggravating the economic
crisis and the growing number of poor across the world, even in the most
affluent US. It also warns against mixing automation and austerity. This has
led to job crisis across the world. In India, this is reflected in the sudden
sacking of thousands of workers from the IT and some other sectors.
Additionally, the EAC
has to ensure that robots do not replace well-paying jobs with the low-wage
ones. This raises profits of big companies, pauperizes the workers and hits
income distribution. The EAC has to chart out a policy on robotisation so that
India’s poor, Modi’s prime target, are not hurt.
Clearly, this is a
great opportunity to redesign the Indian economy. Its success with agri-focus
can change the dynamics of the country.---INFA
(Copyright,
India News & Feature Alliance)
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