INDIA'S IMPENDING CRISIS - PJ James
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02 June 2019

As Modi led corporate-saffron regime had reached the fag end of its first term, spokespersons of the regime have started repeatedly emphasising on India’s fastest growth during the last five years. They argue, for instance, that India under Modi is not only the fastest growing one in the world with a growth rate of around 7 percent but also has become the sixth largest economy ahead of France and will soon become larger than even Great Britain. Modi continues in power, according to them, within a decade India will be the third largest economy below that of US and China respectively.

Of course, the basic orientation of Modi since the very beginning has been to pursue an ultra-rightist growth path led by private corporate capital in conformity with market fundamentalist Washington Consensus according to which benefits from wealth concentration and fast growth shall slowly trickle-down to the bottom. With this perspective, he dismantled the Planning Commission and dissociated from what is called state-led planning, the last relics of the Nehruvian model so as to transform the state as a mere facilitator of corporate capital. Modi took necessary steps towards complete demolition of the administrative price mechanism in fuel pricing and giving full freedom to corporate oil giants in price-determination, raising the FDI cap in defence and insurance sectors to 49 percent at one stretch and similar other pro-corporate and business-friendly steps, prompting the World Bank to praise the Modi regime in its 2018 Doing Business Report for adopting almost half of the total 37 requirements essential to achieve a high ranking in Bank’s Ease of Doing Business Index. The most crucial initiative among them has been the implementation of the GST, the biggest post-war neoliberal, pro-corporate tax reform at the behest of imperialist centres for placing the country on a high growth trajectory.

But the outcome is on the contrary. According to the latest data released by the Central Statistical Organisation, India’s economic growth rate has declined to 6.6 percent, even as leading members of the Central Statistical Office including its chairman had already resigned protesting against the governmental pressure on them to manipulate data in favour of the bogus claims of the regime. As such independent observers consider even the 6.6 percent GDP growth rate released by CSO an overestimate, and according to them, the real growth rate would definitely be slower than the official rate. In the same vein, organisations like the Centre for Monitoring Indian Economy (CMIE) do not consider this latest official growth figure as in accord with reality. And in a latest development, National Sample Survey Organisation (NSSO) has imparted a heavy blow to the Modi govt. by casting doubt over the reliability of the entire data base used by the government.

Historically, figures pertaining to the Indian unorganised/informal sectors where more than 90 percent of the labour force depends for sustenance are mere guestimates as reliable data on them are few and far between. However, the two unexpected attacks inflicted on the whole economy, namely, demonetisation and GST have devastated not only the informal sectors but the formal/organised sectors also. Therefore in the absence of a concrete analysis of the post-demonetisation and post-GST structure of the economy, even data relating to the formal sectors is also unreliable. 

Another aspect is the inclusion of large number of ‘untraceable’ or ‘shell’ companies’, whose number is almost one-third of the actually existing companies, in the official growth data. That is, large number of registered companies are not at all found at the address and are not engaged in the work they have claimed. Though, such bogus companies that are not contributing anything to national product, they are also included in data.  The main purpose of floating such companies which are only “shell” and not any way contributing to production is to divert profits and siphon out unaccounted money to tax havens within and outside the country. To include the shell companies output, which is nothing but a portion of the main companies output, in data is therefore double counting and the GDP estimation becomes highly inflated and larger.

The upshot of the argument is that in spite of a definite slowdown, spokespersons of Modi govt. are working overtime to chart out a rosy picture of the Indian economy still claiming that the GDP growth rate is still running at 6.5 percent. Ironically, the highest growth rate that the saffron regime claimed was in relation to demonetisation year when all the formal and informal sectors, especially the latter actually experienced a sharp decline. Therefore the credibility of Modi regime’s growth figures is questionable.  Meanwhile, the unpublished NSSO report, the details which are available in the public domain, has estimated the unemployment rate at 6.1 percent in the preceding fiscal year (quoting a leaked report from the NSSO, the Business Standard said, “The country’s unemployment rate stood at over a four-decade high of 6.1 per cent during 2017-18, compared to 2.2 per cent in 2011-12.”) and a steep decline in labour participation rate from 47 percent in 2017 to 43 percent in 2019! It can be guessed that these sharpest decline in employment in five decades has been mainly due to the double-shock inflicted on the economy by the superimposition of demonetisation and GST.

As a manifestation of this economic down-trend, production in both the consumer and capital goods sector are facing reverses, the latter registering a contraction of 8.7 percent in March 2019!A striking trend is the setbacks faced by the firms specialised in the middle-class oriented fast-moving consumer goods sector (FMCG) due to the sudden collapse in demand and low consumer sentiment. And in spite of GST, according to the revised revenue estimates for 2018-19, there is a shortfall of Rs 1.6 lakh crore, and the central government’s revenue growth rate is as low as 6.2 percent instead of its budgeted claim of 19.5 percent. Consequently, central government’s debt under five years of Modi has shot from around 50 percent of GDP to almost 80 percent.

Another grave problem has been that of NPAs (non-performing assets) now amounting to Rs. 15 lakh crore in the public sector banks attributed to big corporate companies, as a result of which agriculture, small and medium industries, traditional and informal sectors have become the victims of the severe credit crunch in banks.  Reckless loan payment to speculation by non-banking finance companies (NBFCs) such as IL&FS has also reduced the source of funds for labour-intensive, informal and small sectors. Lack of credit, indebtedness and absence of price-support programs are pushing thousands peasants to suicides every year. But since 2015, the National Crime Records Bureau as directed by the Modi govt. has stopped releasing data on peasant suicides though routine media reports of famers committing suicides in states like Maharashtra, Madhya Pradesh, Punjab, and Karnataka among others are continuing as usual. However, as per data available in the Ministry of Home Affairs, annual report titled ‘Accidental Deaths and Suicides in India’, on an average every day 34 farmers are committing suicides in India. 

This collapse in the domestic economy has it’s manifestation in the foreign trade sector too. It is an acknowledged fact that around half of India’s exports originate mainly from the labour-intensive traditional, small-scale and medium industries. However, both demonetisation and GST by denying cash and imposing higher tax-burden respectively have made most of them economically unviable.  Coupled with this adverse domestic factor including the overreliance on contract labour (along with lack of healthcare, education and skill-training) that declined labour productivity, competition from labour intensive exports of other cheap labour economies, especially South-Asian countries has resulted in a steep reduction in exports leading to a trade deficit of $ 176 billion(approximately more than Rs. 12 lakh crore). Regarding capital-intensive exports, India is facing the biggest threat from protectionist policies in the US and elsewhere. All these have their domestic linkage effects adversely affecting production and employment. Over the next 30 years, around 75 lakh young job seekers are expected to join the working age population each year.  Around 16 percent of the educated youth is estimated as unemployed in India.  On the other hand, Modi’s ultra-rightist policies have destroyed more than 100 lakh jobs in the preceding year alone. One can imagine the extent of social and political tensions in store for the future.

However, the immediate threat that Indian people are going to confront is the prospect of rise in oil prices. In view of the election, oil companies under instructions from the Modi regime has been keeping domestic petroleum prices flat, though crude oil prices rose from around $52.40 a barrel in January to $70.70 a barrel on 3 May. In the context of the unilateral US embargo on oil export of Venezuela and Iran, India is losing cheap sources of oil and is bound to import high-cost shale oil from USA and Canada. In view of the US threat-escalation, there is every chance of the world crude oil prices shooting up. As a pointer to the emerging trend, immediately after the polls, based on green signal from Modi regime, oil companies have already raised petrol and diesel prices.

Obviously, while the employment-oriented really producing economy is declining under the Modi-regime, the parliamentary opposition ranging from the Congress and regional parties to CPI (M) having no alternative to the neoliberal-pro-corporate policies, the exit-poll projections of a landslide victory of the BJP led NDA have given a further boost to the speculative the sphere of the economy as manifested in the Sensex gaining around 1400 points in one single day in the BSE. As a result, the shares of leading stock speculators including Ambani, HDFC, ICICI, etc. have gained around Rs. 5 crore. As these lines are being written, the election results are pouring in indicating a continuation of the Modi regime with an absolute majority in Lok Sabha. Then the outcome is an extra-ordinary galloping of financial speculation led by the most corrupt corporate class  under whom the so called development itself oriented to the vast majority of toiling people is transformed in to a by-product of money-spinning businesses throughout.

Modi’s second coming implies a further opening up of the floodgates of ultra-rightist, neoliberal corporatisation subjecting the working classes and all oppressed to the domination of the most degenerated financial class in every sphere.  Its outcome shall be unprecedented wealth concentration in the hands of the most corrupt tiny financial elite and intensified pauperisation and loss of purchasing power for the vast majority.

The ruling regime will try to manage the consequent political and social tensions by incessant attacks on democratic rights of workers and all oppressed including dalits, adivasis, women and minorities. It is up to the democratic and progressive forces in this country to rise up with an appropriate political intervention at this critical juncture. n

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Kabeer Katlat

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The Communist movement in India has a history of almost a century after the salvos of October Revolution in Russia brought Marxism-Leninism to the people of India who were engaged in the national liberation struggle against the British colonialists. It is a complex and chequered history.