Economic Highlights
New Delhi, 28 August
2022
Corp Hit Peak Profits
SEIZE STATE, RAISE
PRICES: WB
By Shivaji Sarkar
The high inflationary
trend that has gripped India is stated to be a global phenomenon of corporate
adventure to maximise profits through controlling the political system even in
times of economic distress. The western inflation trends have severely impacted
the Indian economy, forcing the government to squeeze expenditure, the Reserve
Bank of India increasing interest rates, plummeting rupee and the society
compromising on lifestyle.
The US and UK studies
are concerned about the corporate ingress into the governance structure in
different countries. The US studies are specific that the corporate are raising
prices, having increase in profits and transferring costs to consumers.
Indian inflation has
risen to 6.82 per cent in July from 6.43 per cent in June and 3.92 per cent a
year back. As per the wholesale index it is at 13.93 per cent. Primary articles
cost 15.04 per cent more, food 9.41 per cent, manufactured products 8.16 per
cent and fuel and power 43.75 per cent. But International Monetary Fund puts
India’s growth at 7.4 per, faster than the rest of the world, though some
others show different lower figures.
In the US, inflation
remains at 8.7 per cent, a bit lower than the highest reached in 40 years at
9.1 per cent. Inflation in Britain is at the highest level since 1982. At the
August weekend, the UK hikes electricity and
gas bills by 80 per cent, in a dramatic worsening of the cost-of-living crisis.
Overall consumer inflation is at 10.1 per cent. It may head for a negative
growth next year, the Citibank predicts, and prices are likely to rise by 18
per cent.
In
contrast, the RBI Governor
Shaktikanta Das says that the apex bank is moving towards the four per cent
inflation target in a steady manner, without much growth sacrifice. After
hitting its peak in April 2022, Das expects retail inflation to ease to four
per cent by 2023-24. Assuming crude oil prices at $105 per barrel, the RBI
Governor stated that current account deficit (CAD) will be manageable and its
financing to be done in a reasonably comfortable manner in 2022-23. Real
gross domestic product (GDP) growth projection as per the August MPC is fixed
at 5.4 per cent though overall growth rate forecast remains unchanged at 7.2
per cent.
It looks brighter but
the way the corporate is raising prices and maintains a profit trend that may
hurt the people world over and the Indian government in particular rushing
through many infra projects. Rising prices have become a global trend for
various reasons including that is attributed to Russia-Ukraine war that has
changed lifestyle on both sides of Europe.
In 2021, US companies
logged their most profitable year since the 1950s, as many took advantage
of economies of scale and other more efficient production processes. Yet, firms
increasingly held on to the savings they gained from these reduced costs,
rather than passing them on to customers in the form of lower prices, according
to Alexander J Mackay. He says that between 2006 and 2019 the difference
between prices charged and the marginal cost incurred by a company climbed
about 25 per cent. The new US commerce department data
show corporate earnings jumped 35 per cent in 2021, while workers got an
11 per cent bump.
In 2017, Senator
Sheldon Whitehouse notes that America faces a crisis of corporate capture of
democratic government, where the economic power of corporations has been
translated into political power with disastrous effects for people’s lives. He
warns that “corporations of vast wealth and remorseless staying power have
moved into our politics to seize for themselves advantages that can be seized
only by control over government” through what he calls, the “immense pressure
deployed by the corporate sector in our government.”
Corporate interests
can vastly outspend labour or public interest groups on the US elections, he
says. In 2014, business interests spent $1.1 billion on
state candidates and committees compared to the $215 million that labour groups
spent. That same year, business political action committees (PACs), spent nearly
$380 million in federal elections, while labour union PACs gave close to $60
million. In 2016, it is estimated that $1 out of every $8 went to super PACs.
They, from corporate sources, raised $1.8 billion for the 2016 elections. He
found that $800 million of political spending were from obscure donors.
Mackay apprehends that
large political contributions will prevent Congress from tackling the important
issues facing Americans today, like the economic crisis, rising energy costs,
reforming health care, and global warming. In UK corporate lobbying is part of
the politics and this helps change decisions in their favour. The
corporate power has turned Britain into a less honest state, a Guardian report
says and are marked by government policy changes.
A World Bank
publication “Seize the State, Seize the Day”: State Capture, Corruption,
and Influence in Transition, says some firms in transition economies have been
able to shape the rules of the game to their own advantage, at considerable
social cost, creating what it calls a “capture economy” where public officials
and politicians privately sell “a range of rent generating advantages ‘a la
carte’ to individual firms.” “The State capture, influence and administrative
corruption are all shown to have distinct causes and consequences”, the study
says.
A 1981 report in
Economic and Political Weekly says that dependence of the private economy in
India has come to mean its dependence on the political parties. For the last
over two decades they are supposed to have played roles in decision
making. The top 20 companies continue to have 70 per cent profits, as per
Mercilius Investment Managers, and higher product prices in a supposedly
subdued market. Unilever, Suzuki Motor, and JSW Steel all are in the game of
raising prices. They also opt for reducing the pack sizes. The official
mechanism only occasionally delves into their affairs.
India has brought
transparency into donations through electoral bonds in 2016, former minister
Arun Jaitley mentioned in his 2017 Budget speech. Election Commission tells
Supreme Court in March 2019 in an affidavit that the electoral bonds wreck
transparency in political funding and with removal of cap on foreign funding,
they invite corporate powers to impact Indian politics.
Corporate are becoming
cleverer and know their ways. To counter big money, rebalancing of democracy
and empowering people to engage politically as a countervailing force across
the globe are necessary through rule changes. It sounds good, but not easy, so
prices and profits may not be put in check for the consumers. – INFA
(Copyright, India News
& Feature Alliance)
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