Open Forum
New Delhi, 6 October 2021
Uneven Reforms
COMMON MAN LEFT OUT?
By Dhurjati Mukherjee
The hype in the media, a rising bull runand
the industrial scenario may not reflect the true picture of the economy. While
the need for certain reforms in some sectors can’t be doubted, the big question
is how to check inequality, which has risen specially during and after the
Covid pandemic. Reforms undertaken are unfortunately formulated keeping in view
upper echelons of society and middle income sections, while low income groups barely
benefit.
On the one hand, number of billionaires in
the country rose from 102 to 140, on the other 75 million retreated into
poverty, accounting for 60% of the global increase in poverty, as per
PewResearch. The net result of easy money regime has been that the rich have
seen their wealth grow via higher asset prices even as the poor have seen a
decline in their real incomes due to inflation.
Also in recent months, high-end cars have
recorded the highest sales though millions are suffering due to poor health
facilities. Besides, even as the stock market is booming, the daily earnings of
230 million people, as per a study by Azim Premji University, slipped below the
national minimum wage threshold of Rs 320, other than spurt in unemployment
rate to 23.5% at the peak of lockdown.
Statistics in the five months from April-August
in the current fiscal reveal that when the economy was apparently roaring its
way to recovery, 64 million families had at least one family member toil all
day to earn a paltry Rs 200 or even less under MGNREGA programme. There is no
economic recovery or otherwise for these millions of families. If this trend
continues more people will be dependent on MGNREGA for their incomes this year
than in the three months prior to Covid-19 combined, the highest in the
programme’s history.
Though stock markets are booming to all-time
high, due to big corporates amassing wealth through various means, it’s distressing
that a record number of Indians are pleading penury. It’s thus futile to
attribute foreign flows or stock market indicators as good sign of the economy.
Latest CSO data shows manufacturing activity in June 2021 was at the same level
as four years ago in 2017, construction activity as in 2016 and trade and
transport services activity as in six years ago in 2015 (at constant prices).
Thus, real economic activities that provide jobs, income and livelihood are
missing and it’s no surprise that millions are pleading for work under MGNREGA.
The other word for reforms is privatisation
which, no doubt, increases efficiency but at the cost of labour reduction. There
are only few examples where private sector has brought in latest technology to
modernise the unit and achieve economies of scale and higher productivity. Given
high unemployment, there is need for introspection on how to utilise abundant
labour force in next two years.
The proposals the government is adopting is to
privatise some central public sector organisations. To start with, a sizeable
portion of equity is being sold to the private sector. However, the latter must
be involved in the modernisation process to ensure efficiency and rise in productivity
and government must seek commitment during disinvestment process. Likewise, privatisation
of banks too must be done on same lines.
Regarding LIC, West Bengal’s Finance Minister
Dr Amit Mitra, wrote to his counterpart at the CentreNirmala Sitharaman, urging
a rethink on the plan to privatise public sector insurance companies, including
the LIC. He underscored that the LIC’s volume of investments in
the Indian economy stood at a “staggering Rs 36.76 lakh crore (in FY 2020-21)
of which Rs 23.75 lakh crore is in government securities”. He warned: “Privatising
LIC would lead to opening a Pandora’s box, throwing into insecurity 30 crore
(300 million) policyholders”.
On the banking sector, the Insolvency&
Bankruptcy Code(IBC) has at long last genuinely empowered creditors and begun
to yield speedy resolution of large, complex cases of bankruptcy. Some poorly-run
public sector banks remain a weak line in the process, resulting in low
recoveries in many instances. Not more than one PSU bank should be privatised
and before going for further privatisation, its performance needs to be
monitored and decisions taken accordingly.
There is also need for simplification,
rationalisation and an end to exemption raj applied to corporate profit tax
system,which must be extended to personal income taxation. The focus should not
be to extract maximum revenue from those who pay and let evaders get away. A
broad base and moderate tax system should be the government’s aim and perhaps the
super- richshould have been asked to pay something extra for the pandemic or
development of health infrastructure through imposition of cess.
Former Finance Commission ChairmanN K
Singhrecently noted: “If you go on raising exemption limit, as a populist
measure, it results in people coming into the tax net but without any purpose.
If 5.5 crore returns are filed, 40.5% have no taxes and it’s 6.3% who bear the
burden of 79% of taxes”.
The most critical aspect of reforms is
creation of demand in the economy. A Parliamentary panel on industry suggested
the government put in place measures to generate demand and help improve the
‘grim situation’ of small enterprises due to the pandemic. It noted: “…the
measures adopted were more of loan offering and long-term measures, instead of
improving the cash flow to generate demand as immediate relief. In the process
of economic recovery post first wave of the pandemic, the second wave even more
vigorously ripped the economy, particularly the MSME sector. The committee, has
therefore, recommended the government should immediately come out with a larger
economic package aimed at bolstering demand, investment, exports and employment
generation to help the economy, including MSMEs, to recover from the pandemic
fall-out”.
Aspects of reform in sectors such as prisons,
judiciary are not taken cognizance of and only labour reforms are focused as
modern trend of Indian business is to bring down workers’ costs. The ‘inhuman’
conditions of prisons are not considered as broad parameters of reforms or
the need to expand judiciary so that
expeditious disposal of cases help the common man. Why is there no talk of
expanding secondary schools in rural areas, which can not only impart education
to backward communities but also generate employment? There should be at least
one quality school in every sub-division with specialised teachers, modern
facilities and library and labs.
All focus on GDP growth is rather erroneous.
Though the RBI expects the economy to grow at 9.5% in the current fiscal, even
achieving 9% may not look very attractive as it would just compensate the loss
suffered in 2020-21. Moreover, GDP growth can’t be considered a benchmark of
improving incomes and quality of life of the masses. Good governance with effective
decentralised operations can only ensure needs and aspirations of the common
man. The onus is on Modi government to usher in reforms that meet common man’s
aspirations, and before 2024 elections.---INFA
(Copyright, India
News & Feature Alliance)
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