Economic reform or deform?

 

 

The threat of Covid third wave looms large as the number of Covid infections in India has spiked again. Only 10 per cent of the Indian people have been vaccinated with two doses. The death toll from the Covid pandemic in India could be 10 times higher than the official figure, according to the US Center for Global Development. BJP government, instead of spending millions of dollars in Pegasus spyware for surveillance, had it allocated to the health sector, the number of Covid deaths would not have been this much high.

 

 

Oxfam India CEO Amitabh Behar has emphasized that Persistent underfunding of public health system, especially primary health care and essential health infrastructure, remain to be addressed by the government even after the devastating second wave. According to government estimates, 60 million people in India are pushed into poverty because of health care costs every year. Anjela Taneja, Inequality, Health & Education lead Oxfam India stated that even One year after the outbreak of pandemic and facing two Covid-19 waves, the Indian government has failed to allocate 2.5 per cent of GDP for the health sector. Despite the continuing impact of the pandemic, only Rs 76,901 crore was allocated to the Ministry of Health and Family Welfare (MoHFW) in the 2021-22 financial statement, which is 9.8 per cent less than the revised estimate for the previous financial year.

 

The study by Tata-Cornell Institute for Agriculture and Nutrition found that the Covid-19 general lockdown has negatively impacted the nutrition of Indian women. The study conducted in four economically backward districts of Uttar Pradesh’s Maharajganj, Bihar’s Munger, Odisha’s  Kandhamal and Kalahandi  found that there is a decline women’s dietary diversity, household spending for food, especially in meat, eggs, vegetables and fruits in May 2020 compared to May 2019.

 

The epidemic has pushed millions of people into poverty and debt due to unemployment, declining income, health care costs, and inflation. The number of people who has taken into last resort of selling their gold jewels is also on the rise.

According to CMIE, during the Covid second wave due to the general lockdown 1.72 crore small traders and day laborers have lost their jobs in April and May. 32 lakh salaried employees and 57 lakh traders have also lost their jobs.

 

State Bank of India (SBI) Economic Research Department has expressed concern over the rising level of house loans. The amount of house loan has increased from 32.5 per cent of GDP in 2019-20 to 37.3 per cent in 2020-21. It has warned that bank deposits declined in 2020-21 and that the situation is likely to worsen in 2021-22 as household debt levels raise further due to rising health care costs. Bank’s fixed deposits declined to 9.8 per cent in July this year from 11 per cent last year.

 

Micro, small and medium enterprises are one of the main driving forces of the Indian economy. They account for 30 per cent of the country's GDP and 50 per cent of exports and given employment to more than 11 crore people.But the central government continues to neglect their contribution and not providing adequate economic support. A standing committee was set up in Parliament to study the impact of the Covid-19 epidemic on small and medium enterprises. The Parliamentary Standing Committee on Industry found that the fiscal stimulus provided by the government was inadequate. It further stated that the stimulus measures are long-term, in which mostly loan schemes are offered. Instead, it called for immediate mitigation measures to increase cash flow and improve demand, and asked the government to provide a large fiscal package aimed at boosting investment, exports and employment. The government's policies are aimed at the interests of the country's medium and large enterprises and the fiscal stimulus given by the government last year has not reached small enterprises it added.

 

The Khadi and Rural Industries Commission (KVIC) recently conducted a study to assess the impact of the pandemic on micro-enterprises set up under the Prime Minister's Employment Generation Program (PMEGP). It has found that 88 per cent of the beneficiaries of the Prime Minister’s job creation scheme have been negatively affected.

 

Credit growth of small and medium enterprises (SMEs) has declined for the second time in the financial year 2021-22, according to data released by the RBI for the month of May. The debt share of MSMEs has fallen from 12.11 per cent in December 2020 to 9.48 per cent in May 2021.

 

The public procurement policy was introduced in 2018, which mandates large corporations to procure 25 percent of their annual purchases from MSMES. The Public Procurement Policy Monitoring Panel reported that public procurement from small and medium enterprises in 2019, 2020 and 2021 was 26 per cent, 30 per cent and 28 per cent, respectively. But in truth big corporations implement this only as an eye-washing drama which robs MSMEs of their opportunities. The big corporations set up their own subsidiaries as MSMEs and procure from them. The Pro corporate BJP government wontedly remain unaware of this.

 

Chandrakanth Saloonke, Founder and Chairman of Indian Small and Medium Enterprises (IMEs), stated that 5-5.5 lakh MSMES from which procurement is taking place are wholly owned subsidiaries of big Indian corporates and the number of such MSMES seems to have increased since June.

 

AS Union Finance Minister Nirmala Sitharaman has announced about including the retail and wholesale traders into the Small, Micro and Medium (MSME) segment, the definition of MSMES is currently extended to retailers and wholesalers as well. In the cover of inclusion, this paves the way for exclusion of real beneficiaries. Associations for small and medium enterprises have expressed concern about this move. This expansion will dilute the interests of the manufacturing enterprises. Priority sector loans to MSMES will also be extended to retailers and wholesalers. The inclusion of a sector of 2.5 crore retailers and wholesalers in to the MSME segment would further weaken the minimum support given to them.

 

In order to reduce the allocation of funds to the Government's Centrally Sponsored Programs (CSS) and Central Sector Plans, The Ministry of Finance has directed all Government Departments and Ministries to submit their proposals by 31st July 2021 for a review of the Centrally Sponsored Programs (CSS) and the Central Sector Plans for the next five years. The number of centrally funded projects, which currently stands at 131, is expected to fall by a third.

 

To further accelerate the privatization drive and to abolish all public sector enterprises, the BJP government has now brought the Department of Public Enterprises (DPE) which is the policy maker in the  Public Sector Units (PSUs) within the Ministry of Finance. The Department of Public Enterprises was previously part of the Ministry of Heavy Industries and Public Enterprises.

 

Finance minister had announced that leaving only one public sector enterprise in four strategic sectors all the other enterprises would be privatized. Disinvestment target for this financial year was announced to be1.75 lakh crore . So far, the BJP government has raised or Rs 7,646 crore, only 4.4% of the target.

 

At present, there are four public insurance companies in India: National Insurance Company, New India Insurance Company, Oriental Insurance Company and United India Insurance Company. The BJP govt has planned to amend the General Insurance Business (Nationalisation) Act (GIBNA) to pave the way for the privatization of public sector insurers. The amendment would remove the clause requiring the government to hold at least 51 per cent stake in public sector insurers in order to privatize their management control.

The BJP government has allowed 100 per cent foreign direct investment in public sector oil companies approved for disinvestment. A new clause has been added to the FDI policy for the oil and natural gas sector. The government decided to sell its entire stake, 52.98 per cent of Bharat Petroleum corporation limited. The Cabinet also approved raising the foreign direct investment (FDI) limit in pension fund management under the National Pension System (NPS) from 49% to 74%.

 

Loan amounts of more than Rs 100 crore have been disbursed to big corporates through public sector banks. Most of them defaulted and not been redeemed and were written off by public sector banks. Over the past four years, public sector banks have written off loans over Rs 1 lakh crore. In the last seven years loans of more than Rs 8 lakh crores have been written of which is more than double the amount of capital infused by the government from tax payers money. Between 2014-15, 2020-21, the government disbursed Rs 3.37 lakh crore to public sector banks for recapitalization. Public sector banks have been made saddled with raising NPAs and brought near bankruptcy to declare them inefficient so that they can be completely privatized. Public sector banks are deliberately being used as instruments of exploitation for the interests of crony capitalism.

 

The recovery rate under the Bankruptcy Act (IPC) has declined from 46 per cent untill March 2020 to 39.3 per cent in March 2021. Of the total outstanding amount of Rs 1.3 trillion, only about Rs 259.4 billion or 19.7 per cent has been recovered in 2020-21.The Finance Minister has tabled a bill in the Lok Sabha to amend IBC. In order to reduce rising NPA problem, bad bank in the name of  National Property Restructuring Co. Ltd. (NARCL) has set up in Mumbai with a capital of Rs 674.6 crore.

 

The BJP government, which is centralizing all powers and establised a fascist regime, has not left the co-operative sector. In the next step of centralization, BJP govt has created a new ministry named Ministry of Cooperation. Prior to this, the Co-operative sector was functioning under the Ministry of Agriculture. According to Indian constitution cooperative sector is in the state list, by tarnishing the principle of cooperative federalism, the cooperation ministry has been created to deprive the states of their sovereignty still left. More than 1 lakh 10 thousand co-operative societies across India have been functioning with deposits of 12 lakh crore rupees. Their security is also at stake now. GST, which is a hole in principle of co-operative federalism, has been hailed repeatedly by finance minister as one of the best federal institutions of independent India. The BJP government, which inverts and twists the meaning of everything, is now also trying to invert the meaning of co-operative system upside down.

 

The Trade and Industry Chamber (CTI) has appealed to the government to bring petrol and diesel under GST to reduce fuel prices. It has also asked the central government to withdraw last year's increased excise tax on fuel. It has also proposed a 28 per cent GST on petrol and diesel, which will reduce petrol prices by Rs 20 per liter and diesel by Rs 15 per liter.

 

Chief Economic Adviser Krishnamurthy Subramaniam stated that the government will definitely rationalize the GST system. He also said it was not possible for the government to reduce fuel taxes despite the sharp rise in petrol and diesel prices. He said the reduction in fuel taxes was unlikely to have a significant impact as fuel has low weight in the index of retail inflation. In the Consumer Price Index (CPI), petrol and diesel account for less than three per cent by weight and food account for 50 per cent. Food inflation is more of a concern, not a rise in fuel prices he argued. He has to be taught that the rise in fuel prices may not directly but indirectly increase the prices of all other goods and services.

Former Chief Statistician of India Pronab Sen has showed concern about how statistics has been politicized by the BJP government and only by reducing the BJP government's control over statistics accurate data can be released on time he emphasized.

 

Inflation:

Wholesale price inflation has increased to 12.07 per cent in June, driven by higher prices of petrol, diesel and manufactured goods. Fuel and energy prices rose by 32.83 percent. Consumer price inflation is increased to 6.3 percent in June, while food inflation showed an increase of 5.01 percent. Prices of vegetables are declined by 0.70 per cent. Prices of fruits are increased by 11.82 per cent. Pulses became dearer by 10.01 per cent. Price of eggs rose by 19.35 per cent. Oil and fat prices rose by 34.78 percent. Prices of fish and meat showed an increase of 4.83 per cent.

 

Industrial growth in May:

According to the Index of Industrial Production released by the Ministry of Statistics, Production in May found to be increased by 29.3 percent. This increase is due to low base as most of the production activities are halted in last May because of the general lockdown.  Among the Core sectors, production in the mining, manufacturing and power sectors grew by 23.3 per cent, 34.5 per cent and 7.5 per cent, respectively. Production volumes of Primary commodities, capital goods, intermediate goods, construction materials is increased by 15.8 per cent, 85.3 per cent, 55.2 per cent and 46.8 per cent, respectively. Production volumes of non durable consumer goods, durable consumer goods showed an increase of 0.8 and 98.2 percent, respectively.

 

Industrial growth in June:

The combined manufacturing index of eight key industries released by Department of Industry and internal Trade Development is increased by 8.9 per cent in June. Coal production is increased by 7.4 per cent compared to June last year. Crude oil production declined by 1.8 percent and petroleum refining products rose by 2.4 percent. Fertilizer production showed an increase of 2 percent. Natural gas production is increased by 20.6 per cent. steel production is increased by 25 per cent. Cement production is increased by 4.3 per cent and electricity generation is increased by 7.2 per cent.

 

July 23, 2021 marked the 30th anniversary of Manmohan Singh led economic reform in India which is based on liberalization, privatization and globalization. Has India achieved any social progress by means of economic reforms is a lingering question. Manmohan Singh may be proud about it. But He himself acknowledges that India is lagging behind in social sectors such as health and education. Anil Ambani, the richest in Asia and India, agrees that the benefits of economic reform have not reached the poor.

Globalization has tripled India's GDP, but workers have been excluded in this growth says Nobel Prize-won economist Eric Muskin. He also emphasized that economic inequality cannot be solved by market forces.

 

India remained a planned economy until planning Commission has been dissolved by the BJP government. Planning is essential for allocating funds for the development of social sectors. But why one need planning for cutting the spending for social sectors!, Niti Aayog can do that well. This was the logic behind that very move. Neoliberal agent Niti Aayog is very keen about ​​abolishing the public sector. It has been continously recommending for the complete privatization of all sectors including education and health.  With the new economic policy, all sectors were opened up to the private sector and foreign direct investment. Foreign investment is often made for speculation and in service sector, which in itself acted as a stumbling block to the development of India's manufacturing sector.

 

India has chosen the path of increasing only the GDP through economic reform. No nominal concern was shown for how much of that GDP went to workers and peasants. More than three lakh farmers have committed suicide because of this economic reform. The minimum support price and price administration of the state has protected farmers and consumers. That minimum protection was abolished in the name of economic reform. The agricultural sector still remains a neglected sector. The plight of farmers who have been fighting day and night for 11 months in the cold and rain to repeal the Farm reform laws is indescribable. This economic reform has created such a tyranny which is not even ready to listen to the demands of the farmers.

 

The tendency to cut government spending on social sectors and promote privatization in every sector has led crores into lasting poverty and left the economy in stagnation. The country is far behind in socio economic progress and stumbling in reactionary mire. Economic reforms have not reduced caste inequalities but only further strengthening the caste structures and made India a bastion of reactionary forces. Economic reform has prohibited free primary education for all and stunted social development in every sector. Economic reform has not reduced poverty, it has only increased income, wealth inequality socio economic inequalities unprecedently. This economic change, which made the Indian Government fall short of  providing even the basic education and health care to its citizens, is not really economic reform but economic deform.