Defeat This Neoliberal Adventurism
Prasenjit Bose, Ph D, is a Left activist.
The plethora of reforms announced recently by the UPA government shows its class bias and warped priorities in addressing the ailments plaguing the Indian economy.
What the barrage of criticisms of the central government from across the political spectrum – over the mega corruption scandals and relentless price rise – could not achieve in the past couple of years, was accomplished by a couple of adverse reports in the western media. Time magazine’s description of Prime Minister Manmohan Singh as the “underachiever” who was “unwilling to stick his neck out on reforms” made him sit up and show that he was after all not “asleep at the wheel”. The subsequent bravado displayed in raising diesel and LPG prices and allowing more FDI in sensitive sectors like retail trade, insurance and pension, however, has betrayed the Prime Minister’s open class bias and his warped priorities in addressing the ailments plaguing the Indian economy.
Coming in the backdrop of double digit inflation in consumer prices, the steep fuel price hike was a particularly cruel blow. This was topped by Prime Minister’s sermon that “money does not grow on trees”. His government has been repeatedly nailed by the CAG for losing lakhs of crore in revenues through under-priced allocation of natural resources – 2G spectrum (Rs. 1.76 lakh crore), coal blocks (Rs. 1.86 lakh crore), natural gas etc. Subsidies on fuel, food and fertiliser taken together amount to around Rs. 2 lakh crore, which is slightly over 2% of India’s GDP. Thus, the money lost in scams could have footed the subsidy bill many times over. Moreover, India continues to have the lowest tax-GDP ratios (16.4%) among the BRICS countries, as well as the lowest public social expenditure-GDP ratios. It is unbecoming of a Prime Minister to lecture the masses when his government’s own failings are so apparent.
Despite the fact that India has the fourth highest number of dollar billionaires in the world (48) with combined net worth of over Rs. 8 lakh crore, the annual wealth tax collection remains only around Rs. 1000 crore. The annual revenue foregone by the government because of the myriad direct and indirect tax concessions are over Rs. 5 lakh crore. Another Rs. 2.5 lakh crore have accumulated over the years as unrealised tax arrears. In the absence of the government’s failure to provide any credible estimate of black money stashed overseas, it can be safely assumed that the amount would be several lakh crore. The reserves and surplus held by the 220 central public sector enterprises have also crossed Rs. 6.5 lakh crore.
The government is certainly not resource-constrained; what it lacks is the political will to mobilise resources. This could be seen in the unceremonious burial of the GAAR proposals by the new Finance Minister soon after he assumed office. While foreign and domestic big businesses are being mollycoddled, the burden of bridging the fiscal deficit is being put on the aam admi by cutting subsidies on fuel and fertilisers.
The emphasis being laid on restoring the “confidence” of the big corporates by allowing high doses of FDI is thoroughly misplaced. FDI has not accounted for more than 2% of India’s GDP in the past few years, a substantive part of which anyways is round-tripped Indian money coming through the Mauritius route. What the government is trying to do today is to open up sensitive segments of the Indian market for foreign corporations, who are facing gloomy prospects in their home countries since the financial meltdown and the onset of the recession.
The foreign insurance companies and pension funds were directly responsible for the speculative excesses witnessed in the financial and real estate markets of the west in the past decade, which led to the financial crisis. It is the public sector dominance of India’s financial sector which has insulated us so far from such a predicament. In this context, the considerations for allowing the discredited MNCs to grab larger chunks of India’s savings in the insurance and pension sectors, does not appear to be rational.
The entry of giant supermarket chains will also be detrimental for the livelihoods of small unorganised retailers, whose numbers are around 4.5 crore in India. An average Indian small store occupies 200 to 300 square feet employing 2 to 3 persons. In contrast, an average Wal-Mart store while occupying over 1 lakh square feet employs only around 225 persons. The risk of large-scale job displacement is thus very real. Given the slowdown in the manufacturing sector and a perennially crisis-ridden agriculture sector, where would those displaced persons find employment?
The latest NSS survey (68th round) concluded in June 2012 shows that half of India’s rural households spend less than Rs. 35 per capita per day, while half of urban Indian households spend less than Rs. 60 per capita per day. The average per capita spending of the richest 10% of urban Indians used to be around 10 times that of the poorest 10% of the rural Indians in the early 1990s; this has gap has widened to 15 times in 2012. It is the low purchasing power of the average Indians and widening socio-economic inequalities which hinder India’s growth and development process. No amount of FDI or subsidy cuts can solve this basic problem.
The neoliberal adventurism underlying the recent “reform” initiatives by the Prime Minister has been celebrated by the big corporates and their cheerleaders in the media. The working people on the other hand are livid at the shamelessness of the scam-tainted government unleashing a gamut of anti-people policies. Even as this anger spills over to the streets, it remains to be seen whether the popular will gets reflected in the Indian parliament defeating these measures comprehensively.