By Shivaji Sarkar
The poor and the economy have taken centre stage in Indian politics. Prime Minister Modi feels concerned about the deprived and announces the formation of his Economic Advisory Council (EAC) for their welfare. His Finance Minister Jaitley looks for a package to revive the economy that has “dipped a bit” without giving up fiscal austerity.
And for a first in BJP politics, a former Finance Minister and senior BJP leader Yashwant Sinha fires salvos for a sagging economy.
This comes shortly after the UN found the economy on a free fall, along-with world-wide need for austerity and “hyper-globalisation”, a new coinage that marks the Trade and Development Report (TDR) of UNCTAD. This means over financialisation (bankisation) and the corresponding woes of the world economy. The TDR also wants to give up austerity at Government levels — just contrary to what India has been doing.
Possibly all the above four — Modi, Jaitley, Sinha and TDR — are correct. The country needs to look for a new economic path. It needs a new package. There has to be full scrutiny and solutions found for the grave problems. Sinha and TDR look for new path so do Modi and Jaitley. There is consensus as the economic model introduced by Manmohan Singh has failed. The quandary is about how to find a new path.
Questionably, will the new EAC led by Bibek Debroy be able to find that and give the right suggestions? This question plagues everyone right from the Prime Minister downwards to the last man.
Importantly, the EAC has to find new moorings and dynamics for the Indian economy. Manmohan Singh failed because as Congress Vice President Rahul Gandhi said, he failed to create jobs. In fact, jobless growth, he says has worsened during the last three years.
What would be EAC’s take? How would it create the jobs? Given that the industrialized-manufacturing economy has failed to do it. If it has to look for new avenues the dynamics of economy has to change. India remains moored in the farm sector but that is the most ignored.
Undoubtedly, the farmer has to be the pivot of the economy. True, the importance of the farm sector has been indirectly recognized by the Government as it shelved the decision to prepone the financial year, which is linked to the agricultural production.
Besides, the Government in mid-September realized that it does not get all data before the end of kharif and rabi seasons which is the key. Over 54 per cent officially or about 75 crores are dependent on the farm sector for jobs though it contributes 14 per cent of the GDP, almost the same as the manufacturing sector, with crop growth of a little over 2 per cent normally.
This hard fact is ignored. For the last 70 years, these large numbers are targeted to be separated from the farm sector. But this has not and cannot happen. The new economy has to give these 75 crores to farm support so that it stays put and increases the GDP contribution of the sector.
Till the advent of the British and their resort to Permanent Settlement, India had a thriving farm economy with poverty virtually a rarity. Today, India needs to rediscover it and make a vibrant economy that would transform the dream of Mahatma Gandhi and Deendayal Upadhyay for the rise of the last man — antyodaya.
Modi’s EAC has the onerous task to tailor out the new economy.
However, this cannot be achieved if banks become monsters. The bankisation is the bane of world economy the TDR states. Untamed finance is continuing to be the source of instability and inequality, it adds.
Interestingly, the UN body rejected claims that the financial system is safer, simpler and fairer and condemned intensification of finance. India is facing it post note-ban.
Arguably, is Sinha then right in criticizing note-ban which in his perception has led to the slowing down of the economy to 5.7 per cent growth against the desired over 7 per cent? To some extent he is correct.
The banks are rising the world over with Government backing by creating a fear psychosis of black economy, levying heavy charges and fraudulent deductions across the world. India is no exception.
In fact, the world over despite the 2007-8 crisis, the banking sector assets have more than doubled in most countries and TDR notes, with peaks of over 300 per cent of GDP in OECD economies. Banks in developed countries have become mammoths with over $ 100 trillion accumulation. This exceeds global income.
India needs to be wary. The EAC has to correct this and tame the power of banks along-with their demands for unnecessary details like Aadhar, mobile number, repeatedly know your customer (KYC) and unmitigated harassment. In short, India, as many Eurpoeans, Americans and Japanese want have to be freed from the leash of the banks and their instruments.
The Council has to also address the interests on deposits, the lower interests are to depositors, higher are their profits, which are often squandered away in credit to unscrupulous businessmen and rarely repaid.
Notably, Indians banks profligacy has led it to a trap over Rs 12 lakh crores NPA, all earned from poor depositors. Now the Government is recapitalising the banks with the same poor taxpayer’s money.
The EAC for the sake of the poor also has to bring the banks out of the clutches of the Government. The banks need to function like commercial entities and not Government departments. They have to service and not fleece the people with the backing of the Government. That would be a pro-poor approach to bring the banks back to health.
Significantly, the UN finds austerity of Governments a major issue for aggravating the economic crisis and the growing number of poor across the world, even in the most affluent US. It also warns against mixing automation and austerity. This has led to job crisis across the world. In India, this is reflected in the sudden sacking of thousands of workers from the IT and some other sectors.
Additionally, the EAC has to ensure that robots do not replace well-paying jobs with the low-wage ones. This raises profits of big companies, pauperizes the workers and hits income distribution. The EAC has to chart out a policy on robotisation so that India’s poor, Modi’s prime target, are not hurt.
Clearly, this is a great opportunity to redesign the Indian economy. Its success with agri-focus can change the dynamics of the country.—INFA