An Enigmatic Place

Economy and Democracy

Tapas Piplai

The economy has been claimed to be growing at 7 % in Q 3 in 16-17, in comparison to that of last year (15-16). The Q3 is the time when demonetisation took place and the 85% of the currency in circulation (CIC) was sucked out. It was suddenly declared that existing rs 500 & rs 1000 notes had become illegal tender overnight! Cash in circulation (CIC) came down drastically creating acute hardship for the population in the country. It is called as another surgical strike by the government against black money. The consumption expenses, consequently, made a nose dive because of less CIC and ill-equipped digital transaction.

In India, the informal sector is a big sector which circulates and consumes cash most. It contributes around 40% of GDP and engages 75% of the work force. By withdrawing cash or currency, this sector along with poor people suffered the most as the entire economic activity came down drastically. The formal sector which operates on bank money showed another dismal performance. The growth in bank credit stood at 6%, which is a record low. It depicts a low growth in industrial activity. Same is the position for agricultural activities as well. But government continues its claim of success and thanked people for their cooperation. On the other hand the publicity in digital form has been stepped up by many folds by ruling agencies to eulogise the general public on actions taken by the government. The publicity labelled the demonetisation decision as pro-poor. It is claimed to have implemented a curb on the generation and unearth of black money, weeded out terrorist arm deals and arrested counterfeit notes in circulation. It is indeed a claim with doubtful success in any of the above three areas. The statistical agency of government claims that the velocity of money has been increased to 4 times (!) on a weak base of consumption in Q3. As per the previous data base during earlier period it had been hovering around 2 to 2.4 times maximum! A sudden jump of the figure to 4 times, that too during initial period of demonetisation is highly improbable!

It is found out that three times the GDP actual values have been changed to bring it to the level of 7% growth compared to previous period!  As per Prof Prabhat Patnaik ‘‘Government/CSO doctored the actual data to bring GDP growth from 5% to 7%! The GDP figures of third quarter of 2016-17 is estimated as rs 30.28 Lcrores. The growth percentage has been calculated third quarter of 15-16 and has been recalculated three times to fit in 7% growth. It is changed from rs 28.52 L crores to rs 28.51 L crores initially and finally to Rs 28.30 L crores''. Finally the magic figure of 7.1% is arrived.

Even for consumption expenditure Prof Nagraj raises the pertinent question – "how a cash-credit starved economy can clock an incredible consumption growth (PFCE) of 11.2%?" This figure is also a suspected claim.

The last quarter data is now out in public domain. As per the latest news Indian Economy grew at 6.1% in the last quarter of 16-17 (Jan to March) against 7 % in 3rd quarter,7.5% in Q2 & 7.9% in Q1 of 16-17. It clearly shows a decline in economic growth. The yearly growth as per govt. data was 8% in 15-16, made a dip to 7.1% in 16-17. It is surprising to note that the economy did not contract much during the 3rd quarter of last year, when the cash was sucked out of circulation! On the contrary, it is plummeted in 4th quarter and is publicised as a drag effect of previous quarter!

Manufacturing activity is registering a big decline, core sector growth slows down to 2.5% which is another point of concern. The visual facts around us also support the statement of ill growth when we look around for increase in manufacturing or trading activities. We hardly see any evidence of fresh manufacturing investment. The sale of durable and non-durable sectors as per experience are struggling to maintain their break even sale point. Lots of people are being retrenched in the manufacturing sectors because of demand contraction.

It is no doubt a grim situation. One may blame the government for these calamities but the root causes lie elsewhere.

Actually, the Indian economy has been undergoing a sea change ever since the liberalisation policy has been announced in 1991 following by Washington Consensus in 1988. It was further strengthened by globalisation policy announced around 2001. Lots of industrial sectors were deregulated for investment by the overseas capital. lt was a global change and by constant bleeding of foreign currency India had to accept it to repay the foreign debt. Yet the growth on a bigger time series data (25 years) by factors at constant price, do not depict any significant change in growth percentage with that of previous 25 years of 1991. Yet India had to open its boundaries for the global finance capital. During the global crisis (Lehman Crisis in US) period a new economic system emerged which is called Neo Liberalisation.

Fundamentally, the new finance regime under the new Liberalisation era believes – ‘money will make more money’ without much involvement of commodity or services wnich are the earlier traditional base for achieving higher growth. For example, one can see the continuous growth in share market index, though the industrial or agricultural growth has been languishing on a lower base.

There are certain tendencies during the Neo Liberalisation policies. It assigns the maximum emphasis on investors’ interest under a veil of political system which is the new democratic curtain. Due to massive publicity and digital campaign and the distribution of freebies amongst the poor through some intermediaries, bring the so-called independent democracy to the feet of investors. In the name of country specific democracy it creates the hype of Nationalism to shift the attention of common masses to other surgical measures like-protection of territories, protection of religion etc. It simultaneously initiates engagement programme of the people on these superficial issues.

Investors cannot do all these without making people corrupt. The corruption becomes an ally to this new economic era. The state properties become the epi-centre of corruption, depriving common people from their age-old rights to live etc.

Recent hype of protectionism of capital is another contradiction between democracy and finance capital in the first world countries.

Financing of any type of loan to enlarge consumption market. It is another distinguished aspect of today’s finance market.

The finance capital destroys the earlier class spirits and creates a fractured polity comprising of separate Dalits, community, religion based divisions, geographic sub division, caste based social norms, etc. It utilises every bit of difference between people to its advantage. It diffuses successfully the spirit of unity to fight against poverty and other ills to humanity.

States, by and large, abdicate all the responsibilities towards common people’s welfare, leaving it to the draconian market forces. The market forces are articulated by these investors only to earn more profits. For example one sees today common people’s utter dissatisfaction to the bills in the private hospitals, whether it is for nominal or serious treatments. Because of brain drain to higher paid jobs, the government hospitals are struggling for medicines, doctors, skilled technicians and hygienic ambience. Government remains a silent spectator in the hands of investors.

Similarly the age old rights of humanity on natural capitals such as coal, oil, water, air and other minerals are denied today and distributed to the politicians as the rewards towards corruption: In every sector the urge for profit making is so dominant that basic human values of hospitality, kindness, affection etc are at the back bench.

The globalisation is just a rhetoric to facilitate the state systems towards debottlenecking the free flow of capital and make them earn a phenomenal profit.

To keep the Political structures intact Neo Liberalism brings in corruption in the society at every stage. It is a gift to the politicians and policy makers for extending favours to the global capital. Lumpenisation of society becomes a natural ally to these corruptions as a logical consequence.

The nature of today’s new finance capital is truly international. It moves from countries to countries for better income which is return on their investment and with the local government guarantees on their principal investment. They are slowly leaving manufacturing, marketing and retailing to the earlier regime of MNCs or National companies. The flight of capital from one country to other has become very frequent and hassle free. These changes cast a massive change in the economy favouring only the investors.

The cities on the other hand are drowned in corruption, unemployment, poverty etc. The villages are dying and resulted a massive exodus of young people from villages or industrially backward states to nearby rich states to search for jobs and greener pastures. The state is gradually withdrawing the capitals and leaving the state functions in the hands of private hands. For all social welfare activities, it is now the private capital which is dominating. Large scale acquiring of tribal and forest lands at a nominal price is another gift of these finance capitals to the industrialists to create a sustainable asset base, it is eventually another corruption to acquire the public land for private industries. Finally, the Industries are growing with jobless opportunities. The creation of employment remains a farfetched dream for the common people. The recently launched “make in India” programme is nothing but a failure. The digital media were made at the beck-and call of investors. All leads to an anarchy in the social system with burgeoning unrest and lumpenisation. The incidences of crime are bound to go up and has been on the rise.

In order to shield the system of exploitation from any public agitation, the new finance capital needs a person or a group to be projected as hero or a public mouth piece to diffuse any tension in the political system in the existing democracy. He cannot be like earlier Hitler or Napolean who created enough disturbances with others as well as within the country with their dictatorship approach. Today’s finance capital cannot afford to indulge in these practices for their own benefit and protection of capital. Corruption is no more taken as an important aspect for assuming the leadership. The one window decision is the mainstay for service delivery. The long hierarchical decision making tree is treated as obscured path despite its unquestionable honesty and success. It naturally entails empowerment of one or two leaders in the political system with enough publicity, right or wrong. On the other hand the leader should be a perfect orator, preferably honest in personal life and capable to appease the imperialist powers and the people in India by his oratory skill. Needless to mention about the contents as it has been the same more or less since 1991.

Therefore, the much-debated result of economic reform and growth continue to remain a hypothetical proposition. India is the 10th largest economy of the world, but the Human Development Index is at the tail end of 183 countries. The pertinent question is therefore raised that for whom the economy has been growing? How does the growth affect the common people? There is no denying the fact that Neo Liberalised Finance is spreading its claws over Indian economy, notwithstanding the wishes of our political masters. As a natural consequence, it is changing the democratic fabric of the country.

Vol. 49, No.52, Jul 2 - 8, 2017