As we have noted in our analysis of the Interim Budget (“Budget as a Means of Purchasing Votes?”, Red Star, March 2019), that exercise of the Modi government was in total disregard of all established parliamentary traditions, precedents and scruples, including even abandonment of placing the mandatory pre-Budget Economic Survey which was indispensable for the country to know the “real state of the economy”. Modi government was afraid of presenting the Economic Survey as the data, inevitably be prepared by official agencies such as Central Statistical Organisation and National Sample Survey Organisation, would have highlighted several unpleasant but real facts concerning the economy. If brought to light through the Economic Survey, it would have been an official admission of the frightening disruption that has ravaged the entire economy. And on the eve of the 17th Lak Sabha election, leading members of these agencies who were reluctant to manipulate the data as demanded by the regime, quite unprecedentedly, had resigned from their posts. At the same time, utilising doctored statistics, manipulated data and bogus claims, Modi regime transformed the interim budget into an election speech with a whole set of freebies, giveaways, tax concessions, money transfer schemes and other populist programs, each being addressed to specific vote-banks. But after winning the election with a brute majority backed by corporate money power, EVM manipulation and by depoliticising the masses, in the full-fledged budget, quite characteristic of fascism, Modi.2 has brought forward its true colour.
Coming to Modi.2’s maiden budget, several experts including IMF pensioners deputed to India and US-based researchers formerly associated with Modi government, in spite of their adherence to neoliberal economic philosophy, have come out openly against the use of manipulated official data on which the budget also depends. Among them, the most relevant criticism has come from Arvind Subramanian, former Chief Economic Advisor (CEA) under Modi.1. Though Modi.2’s panel of economic advisers have rejected his evaluation, Subramanian’s observations have once again reignited serious concerns about the credibility of government’s economic growth data including the 2019 Estimates made by Sitharaman in her maiden budget. For instance, the 2019 budget claims that in 2018 India was the fastest growing economy in the world. According to Subramanian, this is an overestimation as the methodology used for calculating it was also flawed- an aspect upheld by several other economists too. Obviously, in the beginning of Modi’s first term, in 2015 itself, India had changed the way and the methodology of measuring GDP. The first major change was the use of market prices instead factory or production costs to calculate the GDP figures. This shift in the method of calculation from the traditional practice of using wholesale prices with producers to market prices paid by consumers definitely results an inflated figure of GDP. Secondly, the base year was shifted from 2004-05 to 2011-12 to assess GDP growth figures. Naturally, when the base year becomes 2011-12 everything included in the calculation will be at the 2011-12 prices which will be much higher than that of 2004-05 prices such that the nominally again the GDP figures will be inflated.
Therefore, Subramanian questioned Modi government’s claims on 7 percent per annum GDP growth under it and, according to him, the actual GDP growth under Modi.1 is only around 4.5 percent (possibly hovering between 3.5 percent and 5.5 percent) instead of 7 percent. Meanwhile, the new methodology had enabled Modi regime to suspiciously lower the GDP growth rate of under the former UPA regime, and artificially blowing up that during the NDA rule. Ironically, based on this new methodology, the fastest growth of 8 percent and 8.2 percent was respectively recorded during 2016 and 2017 though these were the years when both demonetisation and GST had devastated the economy. More revealingly, even today reliable data regarding the unorganised sectors are lacking, and it is this area that contributes 60 percent to the entire economic system. Since, Subramanian’s comment is based on these facts and on his own research, which has been published by the Centre for International Development at Harvard University, many economists and statisticians have come to believe that Modi government’s GDP figures are exaggerated or overstated by about 2.5 percent!
Hence when Modi government claimed India as the fastest growing economy in 2018, many leading economists have pointed out that this claim is baseless as it is on the basis of a flawed methodology. Subramanian has even gone to the extent of calling for an independent panel of experts comprising Indian and foreign nationals to examine India's GDP data. To quote him: "My new research suggests that post-global financial crisis, the heady narrative of a guns-blazing India - that statisticians led us to believe - may have to cede to a more realistic one of an economy growing solidly but not spectacularly." As such, several experts asked for restoring confidence in the official data by urgently revamping the statistical system to have an accurate picture of the economy and capture real-time data for policy analysis. Revealingly, finance minister Sitharaman has not yet been able to answer the question relating to the discrepancy in revenue collection between the Budget estimates and Economic Survey, the latter being generally recognised as reliable. Thus, while the Budget Estimates for 2018-19 expect a revenue of 17.3 lakh crore, Economic Survey puts the same as only 15.6 lakh crore—a gap of almost Rs. 2 lakh crore, a manifestation of utter confusion connected with data manipulation.
When Sitharaman in her budget speech elaborated the government’s goal of transforming ‘fastest growing’ India into a $5 trillion economy in the next five years (i.e., almost doubling from the present $2.7 trillion) that requires an annual GDP growth rate of 8 percent, and outlined her budget estimates in conformity with this task, the fact remains that the whole exercise is based on unrealistic and unscientific data. Most important is the fact that even the current $2.7 trillion position, which at present is equal to the state domestic product of California-one among the 50 states in US, itself is an exaggerated figure. As already pointed out, the present high growth claim is not at all reflected in the economy or experienced by the people since, despite the government's claims of rapid growth, unemployment touched a 45-year high that too during the last two years of Modi.1. Further, in spite of several initiatives on the part of commerce and finance ministries to boost exports, on a year-on-year basis, Indian exports have dwindled in 2018 by 9.71 percent relative to the previous year due to both domestic factors and external factors such as ongoing global stagnation and strengthening of protectionist walls being built by a number of countries including the US. Coupled with this, the industrial sluggishness or deindustrialisation, unprecedented agrarian distress as manifested in the increasing mass suicides of peasants across the country and above all the total devastation inflicted on the informal/unorganised sectors (on account of demonetisation that created a sudden stoppage of cash flow to them on the one hand and GST that led to the withdrawal of all special tax provisions and corporate restrictions that sustained these sectors) that provide employment to more than 90 percent of the Indian people and contribute almost 50 percent to country’s export earnings) also reveal that the projected 8 percent growth rate as envisaged in the budget for doubling the GDP to achieve the $5 trillion mark is only wishful thinking.
In fact, the entire growth agenda elaborated in the budget are to unleash what is called the “animal spirits” of corporates to achieve the $5 trillion goal. To achieve this, while blatantly hoodwinking the people through certain populist schemes like Swatch Bharat Abhiyan, Bamboo and Khadi clusters, Rural Housing Schemes, Kissan Samman Nidhi, etc. to rural sector and peasants, (even as reducing MGNREGS allocation by Rs.1000 crore!) and appeasement of middle classes through certain income tax exemptions, this budget, true to the far-right economic orientation of saffron fascism, has opened up avenues for the biggest-ever corporate plunder and loot along with integration of India's infrastructure, finance, trade and service sectors with foreign corporate speculative capital. All the restrictions to the free entry of FDI into social overheads, insurance, banks, aviation, retail trade and even media are abolished. Even namesake controls on foreign portfolio capital which is coming solely for speculation are being taken away.
For instance, the hallmark of Modi.2 budget is its announcement of an infrastructure program envisaging investment worth Rs. 100 lakh in 5 years through the notorious PPP route that has become the most widely recognised form of private-corporate plunder under neoliberalism. The whole projects under this proposal leading to unrestricted loot of country’s land and scarce resources at the cost of environment, using budget allocations and above all appropriating public money deposited in banks will be led by the most corrupt corporate thugs, both foreign and domestic. Unhindered entry and exit of 100 percent FDI as announced in the budget is in accordance with this corporatisation. In the case of railways (along with the Planning Commission, in his first innings Modi had abolished the Railway Budget too), in accordance with the ultra-rightist orientation, entire railway development including rail infrastructure, goods traffic and passenger segments is also brought under under the notorious PPP model led by Indian and foreign corporates and an investment of Rs. 50 lakh crores is envisaged for this during the period between 2018 and 2030. To start with, projects in two corridors--Western corridor (Delhi-Mumbai) and Eastern corridor (Delhi-Howrah)—have already been initiated accordingly. In the same manner projects for building up 125,000 km roads with an allocation of around Rs. 75000 crore on the part of government under PPP will be undertaken in the next five years.
Modi.2’s first budget is going to create history by granting tax-exemptions worth Rs. 8.99 lakh crore to monopolies under various heads out of which corporate income tax exemptions alone amounts to Rs, 4.69 lakh crore. The consequent revenue gap is to be filled up by hikes of Rs.2 cess/litre on patrol and diesel with their concomitant cascading effect on the prices of all necessaries and all services as announced in the budget. The gains from corporate tax-cuts in the budget are applicable to almost 99 percent of the business class, even as India’s income tax base still remains too narrow with just 4.6 crore tax-payers filing returns. At a time when even leading financial tycoons like George Soros have written to US presidential candidates seeking increased taxes on the superrich and billionaires (for the sustenance of capitalism), Modi government has reduced corporate tax from 30 percent to 25 percent (in view of various tax-exemptions, experts have already pointed out that the nominal tax of 30 percent corporate tax means an effective tax of only 16 percent) for companies with a turnover of up to Rs. 400 crore. While corporate tax rate in India, a country having the highest inequality in wealth and income, with around 80 percent of the additional income generated being gobbled up by the upper-most one percent of the population, is the lowest, even imperialist countries like France and Germany still have 56 percent tax on the superrich. Further, India under the Modi regime has again become the country having the lowest tax-GDP ratio of 11.7 percent.
Along with this unleashing of corporate capital to every sphere of economy, the budget also envisages several neoliberal steps for discipline and keep workers at its disposal. In this regard, the move to transform all the existing 44 labour laws into 4 Codes has already been taken during Modi.1 itself. Among them, the first one, i.e., the bill on the Code on Occupational Safety, Health and Working Conditions (OSH Code) that legally empower employers to extend working time to 14 hours against the existing 8-hrs work, abolishing guarantee for 'equal pay for equal work' and incorporating provisions for transforming the state as a 'facilitator' of corporates against the interest of workers is already presented before the parliament. This Code that seeks to merge 13 labour laws into a single code applicable to all establishments employing 10 or more people and, therefore, encompasses 40 crore of Indian workers, together with the other 3 Codes, is a flagrant violation of ILO regulations and a clear-cut corporate-saffron fascist move towards unfettered corporatization. At a time when the domestic market is shrinking, the idea of corporate-saffron think-tanks is to emulate China’s model of capturing global market with export of low-priced goods and thereby, to strengthen the present trend towards India’s transformation as a cheap-labour based export-oriented economy. In conformity with this Code, without even convening or even consulting the Statutory Minimum Wage Advisory Committee, to appease the corporate plunderers, the Modi government has fixed Rs. 178 as the daily wage for workers. Modi’s anti working class position is once again evident as according to a Report, out of the Rs. 47127 crore Construction Cess collected as of March 2019, only around 19000 was spent, and the worst case in this regard is that of Modi’s own Gujarat which spent only 0.09 percent of the cess collected.
The budget has other notable anti-people measures too. The disinvestment target pegged at Rs. 1.05 lakh crore is the biggest-ever intended to instalment-wise sell-out of all the remaining PSUs such as BSNL, ONGC, GAIL, etc., to the corrupt capitalist cronies at throwaway prices. And as a manifestation of the interpenetration between the saffron fascist regime and corporate monopolies which is a feature of fascism, Amit Shah, the Home Minister himself has taken over the charge of the Cabinet Committee for disinvesting Air India. Another closely related aspect of this fascistisation is the defence allocation (including defence pension) to the tune of Rs. 4.31 lakh crore out of which an amount of Rs. 1.08 lakh crore is to be directly handed over to corporate-global arms manufacturers and weapon dealers based in imperialist countries especially, the US.
Thus while the budget tries to achieve its high growth target by freeing up the “animal spirit” of the corporate financiers, what we witness is an abysmal slowing down in all sectors. Even the stock market indices which were galloping upwards when Modi.2 ascended to the throne are going down so that during the 50 days of the government, around 12 lakh crore have been lost in the leading stock exchanges in India. The reason is all round shrinking of the world market mainly due to extreme protectionist policies pursued by countries together with the loss of purchasing power of the toiling masses in the domestic sphere arising from unprecedented joblessness. Of late, information is coming out regarding the unprecedented move on the part of the government to forcibly appropriate the reserves of RBI and even that of SEBI to tide over its acute financial crunch. In fact, the immediate reason for the sudden plunge of the stock indices is attributed to this. Meanwhile, relieved of all controls, in the mad pursuit of making maximum profit at the shortest time possible, capital investment is fast entering in to the sphere of money-spinning speculative sphere altogether abandoning employment-oriented productive sectors where profit rate is relatively low. As a consequence, agricultural retrogression, deindustrialisation and unemployment have become the norm even as wealth accumulation in the hands of a tiny superrich and financial elite is breaking records leading to unprecedented inequality and pauperisation of the broad masses. To be precise, Modi.2’s budget is reinforcing all these negative trends.