Economic Downturn Seems Irreversible

S S Mahil

Nowadays, there is plenty of discussion on the crisis in the economy in the pages of newspapers and on media channels. The spokespersons of the Central government and the parties in National Democratic Alliance (NDA) as well as saffron scholars in television debates have been vigorously trying to prove that panic is not yet needed. India is still in a better position than the rest of world in terms of GDP. The whole world is moving towards economic depression and this has impact on India as well, they say. They concede that there is a downturn, but assert that the policies of the Modi government are not the cause. They maintain that in fact in India there is less impact than in other countries and this is due to Modi Government's policies.

The government experts claim mat employment has increased in some sectors. In fact, it increased in only IT sector. Secondly, this increase is because of outsourcing by US companies. Their second argument is that the inflow of foreign capital into India has increased but this is not because India's economy is very healthy but because foreign exchange is coming to India. It is actually because of the Trade war between the world's two large imperialist powers—America and China. Many multinational companies have stopped investing in these countries and some of them have parked their funds in India temporarily. This is not due to the positive policies of Government of India. It is true that the economic downturn is in many countries and some of them have parked their funds in India temporarily. This is not due to the positive policies of Government of India. It is true that the economic downturn is in many countries of the world but the economic downturn of developed countries is different from that of India. Even today China is the fastest growing economy in the world. One of India's largest auto companies, Tata Motors, is just one percent of General Motors. Despite the misleading arguments on television, the ghost of an economic downturn is rising. First the Deputy Chairman of Niti Ayog, Rajiv Kumar, sounded an alarm and this was confirmed by Shashikant Das, Governor of Reserve Bank of India, a history teacher who holds the keys to the Treasury of the Reserve Bank of India. When the figures for the first quarter of the fiscal year 2019- 2020 came in, it was found that the gross domestic production growth was at five percent. All the government experts had estimated that the GDP growth rate would be around seven percent but when growth dropped to five percent, the Government was stunned. As ASSOCHAM spokesperson Rajiv Goenka said, Industry is facing a serious situation and he demanded that it should be given a package of rupees one lakh crore by the government. All the Corporates shouted yes to this. And the government bent. Finance Minister Nirmala Sitaraman announced the next day a package for domestic and foreign Corporate at a press-conference. Modi government withdraw Rs one lakh seventy nine thousand crore from Reserve Bank including from its emergency savings. Such a situation had never arisen before. But saffron experts are adamant as are also Government spokespersons and they are still publicly trying to cover up this economic depression.

Five percent growth figure is due to change of basic figures, otherwise the rate would have been 3.2. Now look further, it is not even 3. There are two main sectors of Industry, the organised and the unorganised sector. The organised sector contributes fifty five percent and the unorganised sector contributes forty five percent of its share to the gross domestic production, but in the unorganised sector ninety four per cent work force is involved, while in organised sector it is just six percent. It is to be noted that this five percent growth rate figure does not include unorganised sector statistics because unorganised sector statistics come after one year. However, the reality is that Demonetisation and GST hit this sector the most. This sector has seen the most 'bloodshed' of jobs. In addition to that, the embezzlement of non-banking financial companies and IL&FS has also destroyed it. The most striking manifestation of this is the loss of employment of about our crore workers in the unorganised sector. The growth rate of the sector is certainly below zero percent. Even in the organised sector the growth rate is measured on the basis of data of those companies of which 38.7 percent do not even exist. These figures are not from a private entity but from the Central Statistics Organisation and the National Sample Survey of India, both government agencies. Frontline's independent investigations have also confirmed this scam. These companies have no offices, no meters, nor bills. In fact, gross domestic production rate is minus. Noted economist Arun Kumar also believes that the growth rote is in the negative.

There is a serious crisis in the financial sector including the banking sector. In these sectors many big scams have been revealed. Vijay Mallya, Nirav Modi, Mehul Choksey who have been exposed as guilty of big scams in the area, have escaped abroad. NPAs, the sinking loans, have broken the backbone of the banks. From 2014 to 2018, in four years banks have waived off five lakh, fifty five thousand and six hundred three crore rupees loan of big capitalists. Nevertheless the situation is that the banks are immersed in the debt which is 9.3% of the total capital of the banks. The result is that the banks are sinking. It is important to remember that the crisis of imperialism in 2008 started in the form of bank crisis. The banks were private in the West and when big banks collapsed there was stunned response. Because the banks in India are in the public sector, when some banks start to sink, they are merged with other banks therefore the seriousness of the banks' crisis is not discussed. However, the fact is that out of twenty seven banks in public sector only twelve banks are now left.

Exports also are stagnant. The exports under Manmohan Singh's government in its last year, i.e., 2013-14, were worth 315 billion dollars. In the first Modi regime it could never reach this level. Thus, economic depression is an undeniable fact. The five percent figure is in fact of the factory output. This crisis is affecting the Corporates and but to this Finance department swung into action and the Finance Minister held a press conference concessions and benefits to domestic and foreign Corporates. It was first announced that the ten percent surcharge imposed in this year's Budget on the companies with more than Rs 400 crore turnover was being withdrawn. Sitaraman announced Rs 70 thousand crore would be given to the banks so that the banks could make cash available to the industry. Giving concession in tax collection, she said that if the tax case was not solved within a month then the notice would be considered cancelled and proceedings would be initiated only after giving new notice. To giving concession to foreign portfolio investment, rules in single brand retail have been relaxed. Coal sector and captive production have been opened for 100 percent FDI investment. Digital media has been opened for foreign investment. Limit on foreign investment in aviation, media and insurance sectors is set to increase more than 26 percent. The question now is whether these steps of the government will be able to overcome the economic recession.

All economic experts agree that the cause of this downturn is the sharp decline in demand. As is the situation in the international market, the imperialist powers are fighting for the maximum share of the market as the world's two largest economic powers America and China are in a trade war. In this case the consumption of Indian goods in the international market is highly unlikely to increase. So, the Indian economy has to rely on its own domestic market to survive the downturn. Hence it is necessary to increase the purchasing power of the people of the country. But the steps announced by the Finance Minister will not be of help in this direction. When one talks about the domestic market, about two third of the population lives in villages and the country's fifty-one percent population is engaged in the agrarian sector. Agriculture sector's growth rate dropped from five to two percent but when government tries to tackle the economic downturn, all its focus is on Corporate. In the Central Government plan, agricultural sector has no place. The Government does not seem to be alarmed by the economic down turn in the agricultural sector, though the situation is that lakhs of peasants and agricultural labourers have committed and are committing suicide. The Government had announced that it would double the income of peasants by 2022 but how would it achieve that? In truth the government has played a joke on the peasant families by giving them six thousand rupees a year each! According to a study by the United Nations Organisation for Economic and Social development, forty five lakh crore rupees of Indian peasants have been looted between 2002 to 2019. On the other hand, from 2008 to till now, the Governments have been providing support packages to the Corporates. The Corporate is being given one lack twenty thousand crore rupees every year in various forms of aid. So far the Corporate has been given eighteen lakh crore in this way. The Government has not given anything to those whose forty five lakh crore rupees have been looted, but for those who have looted eighteen lakh crore from Government Treasury, the doors of the Treasury have been opened. Then whose Government is this? Of course, the Government serves domestic and foreign Corporates. Rural labourers are dealing with unemployment. MGN-REGA guarantees minimum hundred days' work in a year, but rural labourers, on an average, got only 38 days' work under MGNREGA. Work offered is less than half of the assured and wages are much less than the wages in the area, that's why MGNREGA is a last resort. How can domestic demand be increased without touching the rural area which is where two third of the population is located? Taxes on prime interest and car loans and house loans by the banks will be cheaper. But a person does not build a house every day and a house will be built once in a life time. Similarly, a car is not purchased daily. It is not the first priority of the lower middle class. Because of this, the steps taken by the Government can hardly make any impact on the economic downturn. These excuses can be a means to fill corporate treasury. In this case there are huge question marks on the wisdom of withdrawing money from the Reserve Bank's reserves. They are not even withdrawn in the 1990s when gold was mortgaged. On the question of withdrawal of money for the government, two RBI Governors and one Deputy Governor were shown the door. Government formed a committee headed by Bimal Jalan to cover this. There is an atmosphere of uncertainty on the world level. This could be a major crisis of foreign liabilities were to be paid on the world level. This could be a major crisis if foreign liabilities were to be paid immediately as foreign investors are withdrawing money from financial market. These liabilities will surely increase because the liabilities are over five hundred billion dollars while the reserves are about four hundred billion dollars. The value of the rupee is falling continuously with which liabilities themselves are increasing. It is very likely that after Demonetisation and GST, the plunder of the Reserve Bank's reserves could prove to be the third major stupidity of the Modi government.

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Frontier
Vol. 52, No. 23, Dec 8 - 14, 2019