Book Review

Essays on Contemporary Indian Economy
By Neeraj Jain
Aakar Books, Delhi 110091
288 Pages, Price : Rs. 275.

Present Reality of the Indian Economy

Anirban Biswas

This collection of six essays (including the Introduction) deals with various aspects of the Indian economy as it presents itself now. The questions that continue to be discussed and debated for quite a number of years are whether globalization is beneficial to the economy, whether the policy of reduction of fiscal deficit is well-intentioned, whether privatization of various government enterprises, including the insurance sector, will ensure greater efficiency, whether growth of GDP should be paraded as the principal index of the development of the economy, whether the claim that India is going to be an economic superpower is sustainable at all, whether scams and corruption are growing under the present dispensation etc. The author has dealt with all these questions and successfully demolished the official propaganda, shared by unthinking and aspiring sections of the middle classes and aided by a large section of the media, with logic and facts.

The method of elaboration is simple and direct; the author seeks to test all the hypotheses poured out by the ruling party, the government, the IMF-World Bank combine and the corporate controlled media. Given the range of facts collected and presented by him, it may be said that he is fairly successful. He is merciless in his criticism, and has spared neither the UPA regime nor the present NDA regime.

On the 'economic superpower claim' the author has argued with reliable data that although the number of billionaires (in terms of dollars) has grown phenomenally (to 56 in 2014), the majority of the population is suffering from undernourishment, large numbers of students regularly drop out from schools and welfare expenditures by the government progressively get reduced, while tax concession and other subsidies to the super rich go on mounting. On the characterization of the growth of GDP as the proof of the robust health of the economy, the author has shown how the obsession with GDP growth, based on valuation of the quantum of marketed goods and services, creates environmental degradation and other problems. There is no reason to disagree with the author's observation that under the prevalent system of accounting, the GDP may be increased by felling trees, bringing underground water for common usage into the market network through bottling plants or driving farmers from their lands and depriving them of the opportunity to produce goods for self-consumption. The author's reference in this regard to Amartya Sen and Joseph Stiglitz is apt and useful.

The author has rightly pointed out that the era of neo-liberalism began as a response to a crisis, the crisis of debt-entrapment. But here he has not explained the reasons for the crisis, which he could and should have tried to do.

On the fiscal deficit, the author has exposed the fraudulent nature of official propaganda and the hollowness of the policy prescriptions of Kaushik Basu and others by producing conclusive evidence on tax concessions to the wealthy, plunder of natural resources by the corporates with the connivance of the government, plunder of bank funds, forcible seizure of farmers' lands and handing them over to corporates etc. He has noted how, in the name of reducing fiscal deficits, the ruling powers have been reducing real social sector expenditure while allowing the nation's monetary and non-monetary resources to be plundered by the corporate houses. He has also shown that the official claim about reduction of poverty is faulty and deceptive. Happily, the author has provided the reader with glimpses of the Latin American success in providing basic amenities to the people and broadening the scope of participatory democracy. He has also given enough evidence to show various scams of gigantic size have been plaguing the economy. The author has also pointed out how the BJP, now the principal ruling party, has made a somersault after coming to power.

One particularly interesting and striking piece is the chapter 'FDI in Retail: Development for Whom' . The author has succinctly outlined the process of cartelization of MNCs in retail trade in order to lower purchase prices and its adverse impact on retailers in Europe and America. He has also shown, by citing the examples of Honduras and Bangladesh, how the penetration of Walmart has impoverished workers. One pertinent remark by the author may be quoted here, "Workers in Honduras working for Walmart work for 88 hours a week in 14 hour shifts, making 43 cents an hour, which meets only 54 of the cost of survival. Clothing by Walmart is often made by young women in Bangladesh, who are forced to work from 7 am to 8 pm, seven days a week, paid 9 cents to 20 cents an hour, denied health care and maternity leave, allowed only monitored bathroom visits, and fired if they dare ask for their rights. Despite such terrible working conditions, the share of Bangladeshi workers' wages in the final retail price of a shirt in North American markets was only 1.7%; the profit of the Bangladeshi employer was another 1 percent; while 'gross commercial profit, rent and other income of distributors' accounted for "71.8%." The author has also shown that the notion that elimination of middlemen by supermarkets will lower consumer prices. One of the several examples he has offered may be given here. "In the US, supermarkets raised tomato prices by 46 percent between 1994 and 2004 while prices paid to producers fell by 25 percent." About India, the author has given the example of lowering of auction prices in tea and simultaneous rise in the profits by large tea companies at the expense of the consumer.

The author's discussion of the insurance sector is illuminating enough. He has effectively demonstrated with a large amount of facts and figures that the government's advocacy of privatization of the insurance and banking sector has no economic rationale and it is only evil-intentioned. Two pertinent comments by the author may be reproduced here:

"The government is claiming that the private sector insurance companies would be even more successful than public sector companies in mobilizing people's savings for investment in infrastructure. Even assuming that the private sector insurance companies are successful in mobilizing a larger portion of domestic savings as compared to the public sector companies (which of course they can never do, for reasons discussed below), why will they invest according to national priorities of development? They will be more interested in investing in sectors where they get maximum returns. Allowing foreign insurance companies to take control of our domestic savings by privatizing public sector insurance companies is even more stupid."

"The deposits mobilized by the public sector banks had crossed Rs 58 lakh crore as on March 2014. Once the public sector banks are denationalized, there is no guarantee that their private owners will not result in private trading, resulting in a possible financial collapse sometime in the future. Or they may indulge in financial mismanagement or outright cheating and declare bankruptcy..... because of government controls, no public sector bank in India has ever closed down, this guarantee will end, once these banks are privatized. Imagine what will happen if say the Bank of Maharastra declares bankruptcy and downs its shutters all of a sudden one day." These comments are not made in the form of assertion-they are substantiated by facts and figures. In fact, as the author has shown, while the failures of the private insurance companies of Britain and the USA, have reached scandalous proportions, the ITC of India has performed admiringly well in the matter of settlement of claims; yet the government wants to privatize the insurance sector. In this chapter, the author has also demolished the myth that India's foreign exchange reserves are comfortable by showing that foreign exchange reserves of the Indian financial authorities are less than the short-term liabilities of the economy.

One particularly noteworthy piece is that on Coca-Pepsi. The author has outlined the history of these two companies, their history of manipulation, trickery, thuggery and genocide in the way to the capture of the soft drink markets in the USA and elsewhere. He has carefully analyzed, with necessary empirical underpinnings, the various harmful effects of such drinks on the body and mind of the people. While depicting the Indian case, the author has pointed out how the water resources of the country in some areas are gradually being depleted in order to help these companies in making super profits. He has also shown how they, with the help of huge advertisements, aggressive marketing techniques and bribery, have come to wield immense power over consumers as well as politicians in power and have thus violated agreements with impunity. Interestingly enough, the author has cited the example of 1977 when George Femandes, the then industry minister in the Janata Party Government, threw out Coca-Cola from India. Again, this company reentered India in 1993 and in 2002, the condition imposed on it regarding equity was diluted when Farnandes was an important cabinet minister. The discussion on the Union Budget of 2015-16 is rich and useful, and the author has convincingly demonstrated that the NDA government is not only continuing, but accelerating the implementation of the anti-people neo-liberal policies of the earlier regime. It may be pointed out here that the budget of 2016-17 treads the same path.

A few questions, however, may not be out of place here. The author has correctly pointed out that the neo-liberal policies explicitly introduced by Mamnohan Singh in 1991 constituted a crisis-driven response. The crisis was largely that of external debt and it had begun earlier, in the eighties of the last century, finally leading the country into a debt trap. But why did this crisis crop up? Was it due to some inherent weaknesses of the earlier model? If so, what were these weaknesses? A related question is whether the mixed economy model introduced by Nehru did any real harm to the big corporate establishments? One standing suggestion is that the state built up those basic and heavy industries for which the private big industrial houses could not mobilize enough capital. This question is not irrelevant because it is difficult to find any significant difference between the Bombay Plan of the 1940s, the plan authored by eight leading industrialists of India and the Nehru-Mahalanobis model. Can it then be suggested that the big business by taking advantage of the earlier official strategy of development, fattened themselves and in course of time became, at least partly, capable of buying up the public sector units? It is now well-known that not only the IMF- World Bank combine, but the domestic corporate capital also, wanted the neo-liberal reforms, although the latter's acceptance was slightly qualified.

On the whole, it can be suggested without any hesitation that this collection is an extremely useful one in terms of facts and logic. In this sense, it is a handy guideline to the struggle for beating back the massive and misleading disinformation campaign carried on by the apologists of neo-liberalism, many of whom now belong to the Hindutva brigade. The global meltdown that began in 2008 and lingers till today has caught these apologists unawares, but they have vested interest in not giving up their ground, and hence the need for fighting them and their Indian followers remains, so remains the need to study such books. It would be gratifying if the book is translated into several, if not all, major Indian languages and circulated widely. The language is lucid and the method of exposition does not demand any prior grounding in academic economics. This has added to the merits of the book. The publisher must be thanked for bringing out such a rich collection in print.

Vol. 49, No.19, Nov 13 - 19, 2016