INDIA’S ECONOMY IS PROJECTED FOR THE BIGGEST-EVER CONTRACTION - P J JAMES
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03 September 2020

“Following the longer period of lockdown”, according to the latest Report of IMF, “India’s economy is projected to contract by 4.5 percent” in 2020, the lowest ever for India in seven decades. And according to ADB’s latest forecast, this contraction is slated to continue in 2020-21 too, though IMF does not share such a view as of now. Moreover, if this contraction persists, then by 2021, India’s GDP may shrink to $ 1.9 trillion from $2.11 trillion (as estimated in 2019). Though Modi regime is now reopening the economy amidst further intensification of COVID-19 pandemic, many experts including Gita Gopinath, chief economist of IMF identifies the “Great Lockdown” as the immediate cause for the worst downturn in India’s history. Many US-based economic experts who earlier worked as Modi regime’s economic policy advisers have also come out identifying, among other things, the ill-conceived COVID-19-related policies including the prolonged lockdown as one of the reasons for the contraction of the economy. 

Following this, even Indian official sources such as Ministry of Statistics and Program Implementation (MOSPI), Centre for Monitoring Indian Economy (CMIE) and RBI (many official Indian agencies linked with the government were engaging in preparing doctored statistics as suited to the regime and those experts who questioned it had to resign too) have now started parroting on the negative economic trends already identified by neoliberal centres. For instance, the second quarter (of 2020) estimates released by the RBI just two days ago portray a dismal economic picture in every sphere in this regard including a 4-6 percent GDP contraction in the fiscal year 2020-21.  However, independent research bodies such as the Centre for Economic Studies and Planning (CESP), from the perspective of output and employment, predicts an impending 15-22 percent of the economy. According to noted economist Arun Kumar of CESP, India’s GDP in the fiscal year 2020-21 is set to contract by at least 30 percent from Rs. 204 lakh crore to Rs. 130 lakh crore. Many such evaluations are forthcoming from diverse centres.

Of course, COVID-19 and the coercive lockdown with just four hours prior information that brought the economy to a standstill are only the immediate cause that accentuated the crisis. That is, it is not COVID that created the crisis, rather the former only strengthened the latter that was already set in. On the other hand, until the onset of the pandemic, as opposed to their recent revelations and sudden somersaults, all the neoliberal institutions and far-right ideologues associated with them were working overtime to bring about a rosy picture of India even when its economy had been steadily and irreversibly plunging throughout the Modi regime. And throughout, these neoliberal pundits were camouflaging the real state of the economy under this government as well as the horrific living conditions of the broad masses of this country when Modi has been resorting to all means to accomplish the required investor-friendly measures and for laying red carpet for the unfettered inflows of money-spinning and speculative imperialist capital to India. Most corrupt corporate Consultancies like PwC and their Indian pen-pushers while spreading the illusion of a $5 trillion economy by 2024 and $10 trillion size by 2030, were abstaining from unravelling the underlying trends behind India’s 140th rank (2019 estimate) in the world in terms of per capita GDP.

As already underlined by various domestic and global studies, when Modi came to power in 2014, India’s GDP growth rate was hovering around 7 percent that prompted them to characterise India as “the best performing country” in the world. To an extent, as pointed out by many analysts, it was also “relatively immune” from the world economic crisis of 2008-09. Thus the irreversible declining trend in GDP growth rate actually began in 2014.  To transform the State as a corporate-facilitator and to rapidly improve India’s indices pertaining to “ease of doing business” and “global competitiveness” (even after so much sell-outs,  India’s rank is still at the pitiable 63rd and 68th position in global ranking regarding these indices) as laid down by Bretton Woods twin and in accordance with the far-right economic philosophy of RSS, the first step that Modi regime did was the abolition of the more than six-and-a-half decade-old Planning Commission, the last remnant of state-led development, and its replacement by a corporate-saffron think-tank called NITI Aayog and entrusting the task of policymaking with it without even consulting the parliament. This was followed by the Demonetisation in 2016 and GST in 2017 which in essence aimed at further concentration of income and wealth with the corporate-financial elite leading to a superimposed destruction of all the informal and traditional sectors of the economy upon which, as of 2019, more than 95 percent of the 52 crore Indian labour force (as of 2019) subsists. Along with this, mimicking China, the flagship “Make in India” initiative was announced in September 2014 with the declared aim of transforming India into world’s manufacturing hub, thereby claiming to raise the proportion of manufacturing from 17 percent to 25 percent of GDP by 2022. However, what happened is the opposite and today this proportion has fallen further to around 13 percent and in the meanwhile in spite of becoming one of the largest destinations of foreign capital investment, India’s position has again deteriorated into a dustbin of money-spinning speculative capital (since capital that flowed in taking advantage of liberal tax, labour and environmental regulations is least interested in employment-oriented productive activities) as well as a dumping ground for goods and services from imperialist sources ranging from US to China.

It is not intended here to go into the details of this economic collapse. Though Modi came to power in 2014 claiming to generate an additional 2 crore jobs every year, as of now, according to independent estimates, the country has lost around 14 crore jobs during the six year period 2014-20. And India today experiences the worst unemployment in recorded history. Almost 50 percent of the people are still clinging on to agriculture for their sustenance though the contribution of agriculture to GDP is only around 15 percent as of now. But Modi’s input-output pricing policies pertaining to agriculture and its forcible integration with world market and corporatisation policies are displacing large sections from agriculture altogether. Despite the economic slump, India being one of the highest number of superrich billionaires, income and wealth inequality (close to 60 percent of the country’s total wealth is in the hands of upper 10 percent of the population, and three-fourth of the additional wealth generated is gobbled up by the top one percent) are of unprecedented proportions. Still only 1.5 crore Indians are effective direct tax payers (including corporate and personal income taxes) and in spite of extreme concentration of wealth and inequality, Indian corporate tax rate at 15 percent is the lowest in the world. The direct tax-GDP ratio in India is stagnating at around 5.5 percent which also is world’s lowest. If the upper 10 percent of the wealthy sections are brought under the tax net, together with 30 percent corporate tax (during the 1970s, the highest rate was up to 90 percent), the direct tax-GDP ratio could have easily been raised to 20 percent.

To compensate for this biggest loss in tax revenue (GST collection is already on the downturn due to lack of purchasing power of the masses and declining consumption expenditure), Modi has been resorting to the biggest-ever loot of the broad masses by sky-rocketing prices of petroleum products (mainly through raising taxes and cesses on petrol, diesel, cooking gas, etc.), and by this alone during 2014-20 the regime has amassed an additional amount worth Rs. 17.5 lakh crore relative to the UPA regime. Ironically, the average world crude oil price (India imports around 80 percent of its crude oil requirements) during the entire Modi regime has been around one-third of what it was during the previous UPA rule, and following declining global demand in the context of COVID-19, global price is now hovering around  one-fourth of what it had been a decade ago.  Meanwhile, declining government revenue from direct and indirect taxes coupled with corruption and plunder of the exchequer in manifold ways are resulting in an unprecedented growth in India’s debt-GDP ratio to around 85 percent during the Modi period. To cap it all, an unprecedented loot of public wealth through disinvestment of PSUs and plunder of public sector banks through the creation of NPAs by corporates are flourishing without any let up.

In 2015, the World Bank based on its renewed yardsticks of poverty measurement including the new methodology of purchasing power parity redrew its world poverty line. Still India with 17.5 percent of world population had more than 20 percent of world’s poorest people. Out of this, more than 6 crore belongs to chronically malnourished children under the age of 5. According to UNICEF estimate, 8.8 lakh Indian children have been dying every year due to lack of food. As per the latest Edition of the State of Food Security and Nutrition in the World (SOFI) India has the distinction of the largest share of food insecure people. As estimated by UN Organisations, under Modi.1, the prevalence of food insecurity in India increased by 3.8 percentage points. As a result, by the year 2019, the number of food insecure people increased in India by an additional 6.2 crore than 2014. Though FAO in its Prevalence of Moderate and Severe Food Insecurity (PMSFI) estimate places India in a very critical situation, Modi government is not allowing publication of such reports in India for obvious reasons.

Usually, while the World Bank reports often whitewashes the Indian situation, the FAO Report seems to be more objective in approaching India’s stark realities. Thus, according to FAO’s PMSFI, while 27.8 percent of India’s population suffered from moderate or severe food insecurity in 2014, the proportion rose to 31.6 percent in 2019. Thus, number of food insecure people in India rose from 42.65 crore in 2014 to 48.86 crore in 2019. Accordingly, India accounted for 22 percent of the global burden of food insecurity, the highest for any country in 2019. Since Modi government has not released the usual NSSO Consumption Expenditure Survey data even for 2017-18 which was due, FAO had to use supply-wise data on per capita food availability to measure changes in average per capita calorie intake, which is an underestimate.  Prolonged lock down and lack of buying capacity of people has increased the core issue of hunger and food security, and many starvation deaths are frequently covered up under COVID-19. While there is no let-up in India’s multidimensional poverty, the 2019 Global Hunger Index (that measures the severity of hunger) has ranked India at 102nd out of 117 countries.  

  On the other hand, amidst the fudging of economic data, deployment of the entire administrative machinery for achieving its Hindutva majoritarian objectives and using the pandemic itself as an opportunity for corporate bootlicking and selling out the country’s wealth to the most corrupt foreign and Indian corporates, concerted efforts are also going on to cover up the stark realities people’s life.  For instance, India being ranked second in food and agricultural production, the total food grains stock (rice plus wheat) with FCI has now topped 100 million tons as of June 1, 2020. On account of grave storage challenges, millions of tons of this grain stock are prone to decay, and the government could have effectively and quickly liquidate the heavy burden of storage by immediately distributing this among the needy, vulnerable and destitute sections through a free-grain scheme.  But true to its fascist character, except certain window-dressing (as part of the much trumpeted Aatmanirbhar, 5 kg wheat/rice for 3 months among the poor 80 crore was announced), no concrete intervention is there to distribute the food grains among the tens of millions of poor including the migrant workers who were forced to bear the brunt of Modi’s coercive lockdown since March 25th 2020. Concerned people have already demanded an extended food distribution system along with an universalisation of the MGNREGA program expanding to urban and semi-urban areas where the informal/unorganised workforce is concentrated including a revision of pay from the existing Rs.202 to Rs.450 a day. They have also demanded a wage-led approach that will boost output, employment and demand instead of the current “supply-side” interventions (i.e., the pro-corporate stimulus packages) now pursued by the Modi regime.

However, the fascistic Modi regime is consistent in blatantly opposing such genuine pro-people demands. On the other, as again proved by the announcement of Rs. 21 lakh crore package (in real terms what is addressed to the vast majority of toiling and oppressed people in it is only around Rs.2 lakh core or just one percent of the country’s GDP) under what is called “Aatmanirbhar Bharat Abhiyan” the regime is still pursuing the beaten track of stimulating the corporates as the only alternative before it. While setting apart a paltry sum for the people whose entire livelihood has been destroyed, Aatmanirbhar turned out to be a cover for an unprecedented sell-out to those whom Modi regime characterises as “wealth creators”, a post-truth synonym for corporate looters who plunder and appropriate the country’s wealth. Thus Aatmanirbhar Bharat has turned out to be a more vulgar imitation of the earlier “Make in India”, under the cover of which the remaining key and strategic sectors including  mining, transport, defence, banks and insurance  space exploration, power distribution, health research, and entire frontier technologies are thrown open to foreign and Indian corporates.

As already discussed, this intensified shift to the far-right by the corporate-saffron regime laying red carpet for aggressive corporate plunder using COVID-19 as an opportunity is driving the country deep into the vicious circle of corporatisation-induced economic breakdown. Unless this trend is reversed through an appropriate political intervention, fascist forces will deploy all avenues at its disposal to put still heavier burdens on the backs of common people. A broad-based, nationwide people’s movement capable of mobilising the workers and all oppressed including dalits, adivasis, minorities and women based on a common minimum program against corporate saffron fascism is the need of the hour. 

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.