Even as a layman uninitiated in
the intricacies of macro-economics I get an unmistakable sinking feeling, the
same which I used to get during the days of our pseudo-socialism. Prices would
rise relentlessly while the incomes would by and large remain stagnant. Whether
it was the essentials, the utilities, services or whatever – the price of
everything would every year register a rise making survival difficult for us
ordinary folks. Despite the progressive enlargement of the government it would
seem as if it was helpless; the absence of governance was all too palpable. The
financial squeeze was mostly on the vast numbers of poor and the slowly
developing middle classes, whereas the politicians, commanding the country’s
resources and with their nexus with business and industry, made merry.
A similar scenario has again been
unfolding for some time. Driven, inter alia, by the oil price hikes and high
fiscal deficit of 5.1% due to the profligacy of the government in the social
sector, the inflation remains unchecked at a high of more than 12%. The
government claims that the wholesale price index has since fallen to around 6%
which is meaningless as what affects the people is the consumer price index and
that refuses to climb down. Food items, in some cases, have registered around a
15% rise.
Economics and politics have a
close inter-relationship and, hence, the current political instability is going
to inflict more hardships on the people. The miraculously galloping GDP growth
is currently not even on a trot. The growth rate during the last calendar year
hovered below 6% with the last quarter registering a mere 4.5% growth –
chillingly close to the abysmal “Hindu Rate of Growth” of around 3.5% that
persisted for decades during our pseudo-socialist phase. Although reports of
emergence of “green shoots” of revival (of the economy) have appeared in the
media one cannot put much stock on them as these are all officially engineered
to play down the gravity of the economic distress.
One fears the worst for the next
fiscal. The parties supporting the ruling coalition - the United Progressive Alliance
– from outside are likely to arm-twist the government to nurse their own
constituencies. The government will have no qualms in playing along sacrificing
vast sums of money just to keep itself in power. Fiscal prudence or bold
economic initiatives cannot be expected from an anaemic, virtually a minority,
government. Growth is likely to suffer and the deficits may increase and so
will the difficulties of the common man.
As it is, investments in the
manufacturing sector have dried up. Leave alone foreign direct investments,
even the indigenous investments are not forthcoming. The climate in India was
never attractive for foreign investors. On top of that the March 2012 budget
with its proposal of retrospective taxation and General Anti-Avoidance Rule
(GAAR) made the foreign investors apprehensive of the government’s intentions. Investments
from abroad dried up accompanied by flight of capital. Dollars became scarce
and the Rupee declined against all currencies and about 18% against the Dollar.
Imports became expensive and the problem got compounded by slow-down in
exports. The current account deficit ballooned to around a massive $35 billion.
Unsurprisingly India Inc. finds
investments abroad to be attractive. It claims that apart from the
policy-paralysis that has set in, the dispensation is utterly opaque. Besides,
the cost of capital has climbed sky-high and the extant labour laws are
forbidding. Predictably, investments abroad by India Inc. during the 2012-13
have surpassed those made in India. Industrial plants are being set up in Asia,
Africa, Latin America and Europe where mergers and acquisitions, too, have
become common. Indian manufacturing base is progressively shifting abroad,
especially to China, depriving the country of the benefits of creation of jobs
and augmentation of product base. It seems it is cheaper for them to import the
finished products from there and sell them in the country. Besides, China is
flooding our markets with cheap products of virtually all kinds most of which
the country surely has the capability to produce.
The already depressing environment
has become more depressing for want of jobs. The nine months of 2012 saw a
measly 1% growth in the core industrial sector providing hardly any scope for
creation of jobs. Even during the period
of rapid growth only about a quarter of 12 million joining the labour force
every year had been accommodated. The manufacturing sector had shed 5 million
jobs between 2004-05 and 2009-10 but was unable to create jobs for the
rural migrants. In absence of significant job-creation one fears social unrest
in the future as the “demographic bulge” will pump in ever increasing numbers
into the labour markets. The much-touted “demographic dividend” might in fact
result in an extended era of crises of joblessness, crimes and social disorder
– the “green shoots” of which are already perceivable in the shape of
robberies, thefts, snatchings, rapes and murders. The “overarching” goal of
2013-14 budget “to create opportunities for our youth to acquire education and
skills that will get them decent jobs or self-employment” will take some time
to materialise.
Despite a spate of cases of
corruption involving billions of rupees, the government has determinedly not
taken steps to institute a strong and independent Lokpal (ombudsman) - quite
understandably, as otherwise most of the ministers would find themselves behind
the bars. Rampant corruption in high places has encouraged even lower level
petty district officials in amassing millions by illegal means. Describing the
pervasive corruption the Apex Court very aptly observed recently that it
“...accelerates undeserved ambition, kills the conscience...paralyses the
economic health ...corrodes the sense of civility and mars the marrows of
governance”. No wonder, even clerks and patwaries
(lowest level revenue officials) have
been nabbed for amassing millions.
The number of crorepaties (millionaires) has
multiplied and is far more than the 48000 determined by the Finance Minister for
levy of a nominal additional tax. In fact, there are arabpaties (billionaires) numbering more than 48000 whose assets
are both concealed and undeclared or are located somewhere in banks abroad.
Seeing so many crorepaties everyone
wants to become one by hook or by crook. And, on the other hand, numbers of
poor and hungry have also ballooned. As the cost of food items escalates a few
millions sink below the poverty line every month. Mindboggling sums are being
poured into the social sector to mitigate poverty and elevating the level of
healthcare but most of it is siphoned off by unscrupulous petty politicians and
bureaucrats. Though the fiscal deficit is thus enlarged people do not get
respite from poverty and disease.
No efforts are noticeable for
price control. While the middlemen in the cartelised mandies (wholesale markets) laugh all the way to the banks the
consumers are squeezed dry and the farmers keep committing suicide. Likewise,
there is no tangible effort to revive the manufacturing industry and/or bring
back the invested capital from abroad. The famed Indian managerial and
technical talent, surprisingly, delivers in the US, but not in the country. No
effort is being made to harness them for the country’s wellbeing. Worse, the
government has made no efforts to have the illegal billions stashed abroad
repatriated despite the assurances of help and cooperation by various European
governments, including those of Switzerland and Germany. Perhaps, that would
have been of help in neutralising the fiscal deficit. But then, it is futile to
expect such action from those who themselves are guilty of salting away the
country’s stolen wealth abroad. Politics and politicians seem to be devouring
this country.
It is such a pity that with
renowned economists at the helm for almost a decade there is such all pervasive
gloom from which the aam aadmi (common
man) can scarcely find escape.
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