Even after two Covid waves have devastated the Indian economy and people's livelihoods. The BJP government has been largely indifferent in taking preventive actions and in implementing economic recovery measures. So far only 4 per cent of Indian population has been vaccinated with at least one dose against Covid-19. Though central government opined that only after vaccinating the majority of population, economy can recover fast, its action has been dead slow. BJP government has promised to provide 75 percent of vaccines free of cost to the states, there is still a shortage of covid vaccines in most of the states.
It is the duty of a welfare state to lift
taxes on medicines and medical equipments during pandemic. The BJP government
has not done that despite it has been repeatedly demand opposition parties. The
govt has only reduced the previously imposed 12 per cent tax on antiviral drug,
remdesivir heparin, oxygen, oxygen concentrators, and disinfectants to 5 per
cent belatedly in June. But it is paying more attention to the 'poor', foreign
investors. The BJP government is evaluating ways to reduce taxes on foreign
investors in alternative investment funds!.
The domestic rating
agency, Ind-ra, has warned that the tax burden on homes, especially the
indirect tax, will delay the recovery of domestic consumption. It also noted
that the increase in taxes on fuels and the rising indirect taxes have had an
impact on the economy. The share of the total tax burden on homes has increased
from 60 per cent to 75 per cent in 2009-10. This is largely due to additional
excise duty on fuel and corporate tax cuts. The tax burden on homes has
directly and indirectly affected their budgets. It warns that job losses, pay
cuts, and additional medical costs for the preventive measures are a double whammy
on households, and a decline in actual wage growth could slow down the growth of
consumption and demand. Analyzing wage growth of 2,000 non-financial
institutions, it found that 60 percent of corporations have reduced their staff
costs in 2021.
The share of direct tax
revenue in terms of gross domestic product (GDP) declined by 4.79 per cent in
the FY 2020-21, while the share of indirect tax revenue increased by 5.48 per
cent.
July 1,
2021, marks the completion of 4 years GST implementation which robbed states of
their right to tax and their financial sovereignty and left them in debt crisis.
States are guaranteed 14 percent tax revenue for five years until 2022. But the
compensation was not paid properly as promised. The BJP government has asserted
that it will not extend the compensation beyond 2022, despite a lack of growth
in state tax revenue because of the Goods and Services Tax.
Narendra Modi praises about the Goods and
Services Tax (GST), saying it has been a milestone in India's economy. While it has significantly increased overall
revenue with transparency and compliance, the Goods and Services Tax has
reduced the number of taxes and the overall tax burden of the masses. What a
blatant lie it is! Numerous small firms have been closed because of GST. The
sovereignty of the states has been completely shattered. In 2020-21 alone The
BJP government has collected Rs 3 lakh 60 lakh crore in excise duty on petrol
and diesel. BJP govt reduced the share of tax revenue of the states by
increasing the share of surcharges, cesses. It hasn’t even removed the taxes on
Covid medicines. The BJP government has been distressing the commoners in two
ways, an exploitation within the goods and services tax and an exploitation
outside the goods and services tax by increasing excise duty on petro products.
In an utterly
anti-democratic way the Goods and Services Tax system was implemented. It is a
weapon of economic repression and centralization that made states powerless
puppets ripped them off their financial revenues. The GST has also completely
closed the possibility of the so-called federal co-operative principle of the
Indian Union.
The Grand Thornton
survey showed that as the Covid epidemic continues to hit the job market, wages
of 40 per cent employees have fallen. CMIE reported that
the formal sector alone has lost 18 million jobs in 2020-21. The income of 97 per cent of
households in India has plummeted since the onset of the Covid epidemic. The unemployment rate is increased to 12 per cent in May due
to the second Covid wave , with one crore people across the country losing
their jobs.
The second wave of Covid
epidemic has affected the economic activities of the country and the livelihood
of the people as general lockdown has been implemented across India at the
state level since the beginning of the current financial year. The prices of
goods have risen sharply. Inflation is not stimulated by demand. Inflation is
mainly due to supply constraints. WPI inflation rose to an all-time high of
12.94 percent. Higher cost of fuel is the main reason behind that.
Dharmendra Pradhan, Minister
for Petroleum, has said that the increase in petrol and diesel prices in India
is due to the rise in crude oil prices in the international market. He has urged
OPEC to phase out its production cuts. Minister is covering up the fact that the
price of petrol and diesel has gone up to more than 100 rupees only because additional
taxes on petrol and diesel has been increased again by the BJP government. The
price of crude oil was $ 63.66 a barrel even before the onset of Covid
epidemic.
Chief Economic Adviser
Sanjeev Sanyal has stated that the Indian economy is likely to reach
double-digit growth in the current financial year due to the structural reforms
undertaken by the government and the opening up of many sectors to foreign
investment. "Most countries have focused on measures
to increase demand (but) we have also focused on the supply side ... New
sectors are opening almost every week. Many sectors can be opened, ”he said. But is the
economy in such a state to be proud about?. Other countries have taken steps to
increase demand. But the BJP government has washed off its hands in doing it. He
mentions like we have also focused up on supply. Then how can the increased inflation
be explained? Of course inflation cannot be attributed to an increase in
demand. Inflation has upped because of supply side constraints.
Globally, foreign direct
investment in 2020 was fallen by 35 percent from 2019. At the same time,
foreign direct investment in India had increased by 27 per cent in 2020 over
2019. But foreign investment is made largely in the financial, energy sectors. When
foreign investment is not made in productive sectors, to think economy will
grow automatically with foreign investment is just a wishful thinking.
Nitin
Gadkari has called up on for raising the share of MSMEs to 40 per cent of GDP.
But how can the small and medium enterprises that have been hit hard by the Covid
crisis increase their economic contribution without recovering from the
devastation? It is only less than 10 per cent of MSMES that has benefited from
the loan assistance schemes announced by the central government during the
first Covid wave.
The BJP government has
announced that it will raise Rs 1.75 lakh crore in the current financial year
by disinvesting two PSUs and insurance company. Currently, NITI Ayog has
proposed to privatize United India Insurance. A high-level committee headed by
the Cabinet Secretary to privatize two public sector banks has recently
convened a meeting to resolve its administrative issues.
The lending share of public sector banks in
overall credit has fallen to an all-time low. The share of lending by
state-owned banks has declined from 75.1 per cent of overall loans in 2010 to
56.5 per cent in March 2021. At the same time, the share of lending of private
banks in over all loans has increased from 17.4 per cent in 2010 to 35.5 per
cent in March 2021. Loans higher than Rs. 1000 crore has been lent to big
businessmen mostly through public sector banks, the bulk of which has been
written off as NPA. The increase in NPAS of public sector banks due to crony
mismanagement and privatization drive is the main reasons for the fall in the lending
share of public sector banks.
According
to RBI, household savings fell from 21 percent in the first quarter of 2020-21 to
10.4 percent in the second quarter and to 8.2 percent in the third quarter.
Housing (bank) deposits declined from 7.7 per cent in the second quarter to 3
per cent in the third quarter.
Former central bank governor D. Subbarao has
expressed concern over the intensification of inequalities in the economy
between the country's high-income segments and low-income families, and warns
that such trend will hit the growth prospects of the economy.
Confederation of Indian
Industry (CII) has demanded the central government to provide Rs 3 lakh crore
fiscal stimulus to boost consumption and demand of the economy. TV Narendran,
CEO of Tata Steel, President of the Confederation of Indian Industry, demanded to
disburse the funds directly to the affected and to allocate more funds to MNREGA
and to reduce GST for a short-term and to reduce excise duty on fuel . For more
than a year Opposition parties have been continuously protesting for
implementing such demands. The BJP government paid no heed. But this time it
was not the opposition or the left that made such demands. It is the
representatives of the capitalists who made such demands as even they
themselves have realized to what extent the consumption and demand of the
common people has fallen. But the BJP government has not been able to abandon
its stupidity, even though this time the demands have come from their allies
who are being hailed as wealth creators by the BJP government . Has the BJP
government listened this time? Not at all.
The Finance Minister has
announced 8 new schemes to revive the economy affected by the second Covid wave.
As usual She has just announced only credit guarantee schemes with no fiscal
stimulus. There is no handouts ,new job schemes or grants given to restore the purchasing
power and consumption of the people. Nothing is mentioned about extending
MNREGA to urban areas.
Inflation:
Wholesale price index
has increased to an ever time high of 12.94 per cent,
which was driven by higher prices of petrol, diesel and manufactured goods.
Fuel and energy prices have risen by 37.61 percent!.
Consumer price inflation rose to 6.3 percent in May, while
food inflation rose to 4.52 percent. Price of vegetables declined
by 1.92 per cent. The price of fruits has gone up by 11.98 per cent. Pulses became dearer by 9.39 per
cent. The price of eggs has increased by 15.16 per cent.
Oil and fat prices rose by 30.84 percent. Price of fish
and meat has increased by 9.03 per cent.
Industrial growth in April:
According to the Index of Industrial
Production released by the Ministry of Statistics, the IIP for April was found
to be 126.6. Among the major sectors, the output of the mining sector, the
manufacturing sector and the power sector were recorded at 108.0, 125.1 and
174.0 respectively. There is no base year data to assess the growth percentage
in this April as most companies were closed in last April because of the
nationwide general lockdown implemented to prevent the spread of the Covid. The
Production volumes of primary goods, capital goods, intermediate goods,
construction goods were recorded at 126.7, 82.4, 137.9 and 134.8 respectively. Production
volumes of non durable goods,durable goods were recorded at 112.4 and 142.3,
respectively.
Industrial growth in
May:
The combined production
index of eight key industries released by Department of Industry and internal trade promotion
is increased by 16.8 per cent in April. Coal production showed an increase of 6.9
per cent compared to last May. Crude oil production is declined by 6.3 percent and
refinery products showed an increase of 15.3 percent. Fertilizer production is
declined by 9.6 percent. Natural gas production is increased by 22.5 per cent,
steel production is increased by 59.3 per cent, cement production is upped by
7.9 per cent and electricity generation is increased by 7.3 per cent.
International
Labor Organization (ILO) has recently reported that the number of child
laborers worldwide was increased to 160 million in 2021 - an increase of 8.4
million in the last four years alone- with millions more at risk due to
the impacts of COVID-19.
But globally, the number of
high net worth individuals increased by 6.3 percent. Their wealth is increase by
7.6 percent in 2020 and reached $ 80 trillion. The number of high net worth
individuals in India has increased by 5.9 per cent in 2020
According to Credit Suisse's Global Wealth
Report 2021, the world's top 1 percent billionares (56 million) own 45 percent
of the world's total wealth. The remaining is left with 99 percent of the world
population and nearly 300 crore people in the world have no wealth at all.
In the United States efforts are taken to
increase capital gains taxes, to increase the amount that rich heirs pay when
they receive assets, and to increase corporate taxes. If U.S. companies
continue to operate as multinational corporations and transfer profits to tax
havens, the U.S. government will not be able to receive additional tax revenue by
increasing corporate tax. This can only be prevented by introducing globally a minimum
corporation tax. The finance ministers of the G-7 countries, including the
United States, the United Kingdom, Germany, France, Canada, Italy and Japan, in
a meeting agreed to implement the minimum corporate tax globally. Although Joe
Biden administration proposed a minimum corporate tax rate of 21 per cent, it
was not accepted by all and it was finally reduced to 15 per cent with every
one’s consent. When corporate tax in tax haven like Ireland is at 12.5 per
cent, 15 per cent is vey low. Property taxes have been increased in the United
Kingdom. In other countries, including Argentina and Bolivia, funds have been
raised from the rich last year. But the retrograde BJP government has tightened
the belts and purse strings of the masses by increasing indirect taxes and reducing
direct taxes. There is no possibility even to hint about a hike in corporate
tax here. It takes pride, no shame, in announcing nominal credit guarantee
schemes in the name of fiscal stimulus to revive the economy. The BJP government’s
actions are not in the way of preventing a third Covid wave but welcoming it.
