In India, 17.8 per cent of people have been vaccinated with two doses and 48.5 per cent of the people have been vaccinated with one dose.
Vaccinating majority of the people is only a precondition for preventing the
economy from sliding further but that itself can’t ensure economic recovery.
But Finance ministry and BJP leadership tend to view Covid vaccination itself as
an economic recovery.
The economic recovery will continue despite the third
wave of Covid says Finance Ministry. India's economic recovery has been
affected by the second wave of Covid-19, and the economic recovery will be
faster in the next three quarters even if the third wave hits the country. ‘Fast’
vaccination and the return of many economic indicators to pre-Covid level have
given such hope says the finance ministry. The economic indicators attributed refer
only statistical growth and not real growth. In the first quarter of 2020-21,
the GDP contracted by 24.4 per cent due to the Covid pandemic, general lockdown.
Growth in the first quarter of this fiscal year was estimated at 20.1 per cent.
This does not indicate real growth. The data only indicate economy has not even
reached the pre covid level.
“Confidence in the Indian stock market is
increasing as retailers and small investors are investing money in the stock
market. The half-year target on direct revenue has already been achieved. the
Indian economy was on the path to revival” says our finance minister.
Leave aside the
confidence in the stock market, is there
a confidence in the real economy what steps the BJP government has taken to
instil confidence in the real economy. Our Finance Minister is continuously
trying to fill the big hole in the economy with the stock market boom, which in
turn is fuelled by speculative
investments and not directly attributed to real economic activity.
The Finance Ministry claims that India is the only
country that has taken immediate mitigation measures to save lives and livelihoods
and has made supply side reforms that have provided flexibility in supply in
the early stages of the epidemic. Prime Minister N. Modi says our economy recovered more strongly than it got impacted
by the pandemic!.
The Finance Minister says the government had successfully
assisted the poor in rural India by transferring just Rs.500 into their account
during the first three months of the epidemic. BJP is able to save lives and livelihoods
with just 500 rupees! With no shame or embarrassment BJP govt is bragging about it, none can beat BJP
in this.
The unemployment rate has increased to 8.32 percent in
August, leaving 3.6 million people unemployed. The price of LPG cylinders is
hiked by 25 rupees in September. The price of iLPG has been raised by more than
300 rupees since May. With crude oil prices approaching $80 a barrel, there is
a risk for further hike in inflation. Unemployment, declining incomes and
rising prices have reduced people's purchasing power and there has been a
decline in consumption power but the BJP leadership, too blinded to accept the
reality is wafting in false pride.
Chief Economic Adviser (CEA) KV
Subramanian says supply-side reform is the only way to attract investment and
boost growth in India. He stressed that instead of spending taxpayers' money on
freebies and doleouts, state governments should focus on increasing capital
spending to attract supply-side reforms and private investment.
The central government by shirking its responsibilities has
put the entire fiscal burden on the heads of the state governments. What big freebies
this government has provided. Is that the 500 rupees given in the jandhan accounts? Mentioning them as free is an
insult to the citizens. Rising poverty, hunger and starvation indicate that
people are suffering from falling purchasing power to meet the minimum basic
needs .Why falling aggregate demand is not acknowledged by the one who has prioritized
supply side reforms. As rising unemployment and rising prices have reduced
people's incomes and reduced their consumption, the government should come
forward and increase investment to provide employment programs to address the
country's overall deficit. Public distribution system has to be expanded giving just rice and pulses alone is not enough,
other essential commodities such as vegetables, fruits, milk has to be provided
for subsidized price.
Economist Himanshu says, “real wages from agricultural
industries in rural areas have fallen by 4.6 percent in the past year and 0.8
percent in the last two years, and the decline is even greater for
non-agricultural industries. "Wages are down 6.7 percent from last June and
1.8 percent from June 2019,". According to PLFS 2019-20 data, even workers
with better wages and protection in rural areas have lost 1.8 per cent of real
wages. But wages has increased by 0.4 per cent in urban areas compared to
2017-18. Labor data for 2020-21 is not yet available, with wages falling even
before the pandemic, workers' grievances have been exacerbated by the impact of
the epidemic,. “Economic growth of 20 percent is not a sign
that indicate whether the living standards of the majority of workers have
improved. GDP data is inadequate because livelihood and income losses in the
informal sector are not reflected in GDP estimates” says Himanshu
Gross Fixed Capital formation (GFCF) for
the first quarter of 2019-2020 (before the outbreak) was Rs. 12.3 lakh crore.
It has fallen to 10.2 lakh crores- a decline of 2.1 lakh crore in investments
even after adding the fiscal packages and corporate tax cuts says West Bengal
Finance Minister Amit Mitra.
In the first quarter of 2021-22, private
consumption, which accounts for 56 percent of GDP, fell 12 percent compared to
the pre-pandemic level of 2019-2020. RBI and CMIE data showed a sharp fall in
consumer sentiment in the month of August.
According to the controller general of
accounts(CGA) analysis for the first four months of the current year.
1. There has been high revenue growth in
the first four months, despite pandemic controls. In the first four months, the
central government received 37.4 per cent budgeted revenue and 34.2 per cent
tax revenue. This represents a 194 percent increase over the same period last
year and a 74 per cent increase over the first four months of 2019-20.
2. The government
has been cautious in spending and borrowing. In the first four months, it spent
29 percent less than budgeted estimates. but it has spent
up to 34-35 per cent in previous years. The central
government borrows only 21 percent of the budget
estimates.. The government debt ratio was 77.8 per cent in
2019-20 and 103 per cent in 2020-21.
3. The fiscal deficit was at an all-time
low of 21.3 percent in the first four months. The fiscal deficit in 2020-21 was
103 per cent of budgeted estimates and 77.8 per cent in 2019-20.
this analysis
shows if the government had used this higher revenue, borrowed more, spent more
and increased investment in social sector, the consumption power of the
population and the aggregate demand deficit would have improved which in turn could have aided the
economic recovery.
The 45th meeting of the GST Council in September decided not to bring
petrol and diesel into the GST and not to extend the GST Compensation Fund to
state governments after 2022 which is very disappointing. But the Cess on
automobiles, cigarettes and pan masala is going to be extended till the end of
2026!.
There has been a sharp decline in
the tax revenue of the states due to the Goods and Services Tax system. But the
BJP government, which has ripped the financial sovereignty of the states, has
left the states in limbo, not even ready to extend the GST compensation at
least for another two years.
Former Reserve Bank Governor
Raghuram Rajan has stressed the need for decentralization as India is too large
to manage from the center. Giving more power to the state will only strengthen
democracy. He also stressed the need for public sector enterprises, including
banks. Functioning democracy with checks and balance will prevent the benefits to
go only to few cronies. Rajan also criticized the government for not paying enough
attention to health and education and for the fall in spending.
Finance Minister
Bhagwat K Karad has said that the government plans to increase the revenue of
PSUs through disinvestment and disinvestment and will help PSUs increase
revenue and create jobs. Public sector companies employ 14 lakh people in the
country he added.
What he stated is an
utter illogical non sense. Selling the shares of PSU to private at rock bottom
price can never be attributed as a revenue generating exercise. Petroleum and
Natural Gas Ministry Secretary Tarun Kapoor has made similar statements.
Tarun Kapoor also said that public sector companies have
played an important role in the development of the country and they will
continue to do so!.
Corporate loan
demand from public sector banks has declined. In the context of the uncertainty
caused by Covid-19, companies have focused on staying debt-free rather than
engaging in expanding activities. State Bank of India's (SBI) domestic
corporate debt declined by 2.2 per cent to Rs 7.9 lakh crore in the June 2021
quarter from Rs 8.1 lakh crore in the previous year. Corporate lending at Bank
of India has declined by three per cent in the last quarter. Corporate loans of
Punjab National Bank has declined by 0.6 per cent.
RBI's report showed that the capital
investment of private companies, which declined last year due to the Covid-19, general lockdown may also decline in the
current financial year. According to data based on loan schemes already
approved by banks / financial institutions in the last few years, it has
declined from Rs 94,227 crore in 2020-21 to Rs 68,469 crore in 2021-22. Taken
together, these funds are valued at Rs 1,13,171 crore in 2020-21 and Rs 1,07535
crore in 2021-22.
According to the Securities and Exchange Board of India (SEBI), Indian
companies have raised a total of Rs 81.8 lakh crore from the bond market. About
Rs 1 lakh crore has been raised from the stock market by August. The trend of
borrowing from non-bank sources increased last year and it is likely to
continue this year as well (livemint).
In
fiscal 2021, deposits by private sector companies increased by 26.5 percent.
The share of private sector companies in total bank deposits has increased from
11.3 per cent in 2020 to 12.7 per cent in 2021. In fact, the bank's annual
deposit growth slowed to 8.62 per cent in August from about 10 per cent earlier
this year.
Private banks do
not strictly follow the priority sector lending norms for banks. RBI has
stipulated that banks should lend 40 per cent of their aggregate net banking
credit to priority sectors, of which 7.5 per cent has to be given to MSMEs. But
in reality most banks do not lend more than 25 per cent to MSMEs.
India needs 4 banks like State Bank of
India to cope with the changing economic environment says Finance Minister. In some rural areas banking
service is inadequate. steps has to be taken to set up bank branches in these
areas and there should be no area left without bank branches she added. Is that
true only big banks can set up branches in villages?. The reality is the
opposite. Big banks prefer urban areas than opening up branches in small
villages. What our FM is meant to convey?
Is she want the remaining PSU shares to be disinvested to private sector
or calling for amalgating banks so that they can close away existing rural branches?.
What she intend to imply?. Because the terms big, best, and efficient are mostly
used with reference to private sector.
The average farming family in India
earns Rs. 10,218, according to data from the National Sample Survey Office. The
monthly income for 2012-2013 was
Rs.6,426. This represents a nominal revenue growth of about 60 per cent in six
years. However, after adjusting for inflation using the rural consumer price
index, farmers' incomes have actually grown by only 21 percent during this
period. But India’s real GDP (real size of the economy) increased by 52 per
cent over the same period.
According to the 2019 survey of the National Sample Survey Office, the
average debt burden of a farming family was Rs.74,121. Now, with the impact of
the Covid pandemic, the amount of credit is likely to increase further.
Loans for agriculture sector from banks, co-operatives and non-government
financial institutions accounted for 69.2 per cent, private loans amounts to 20
per cent.
Inflation:
Wholesale price
index is increased by 11.39 per cent in August, while fuel and energy prices is increased by 26.09 per
cent. Consumer price inflation is increased by to 5.30 per cent in August,
while food inflation is increased by 3.11 per cent. Prices of vegetables has
fallen by 11.68 per cent. Prices of Fruits are increased by 6.69 per cent.
Pulses became dearer by 8.81 per cent. Prices of Eggs are increased by 16.33 percent.
Oil and fat prices have increased by 33.00 percent. Prices of fish and meat have
increased by 9.19 per cent.
Industrial growth in July:
According to the Index of Industrial
Production released by the Ministry of Statistics, production is increased by
11.5 percent in July. Among the major sectors, production in the mining,
manufacturing and power sectors grew by 19.5 per cent, 10.5 per cent and 11.1
per cent, respectively. Production volumes of Primary commodities, capital
goods, intermediate goods, construction goods are increased by 12.4 per cent,
29.5 per cent, 14.1 per cent and 11.6 per cent, respectively. Production of non-durable
consumer goods showed a decline of 1.8 percent. Production of durable goods is
fallen by 20.2 percent.
Industrial growth
in August:
The combined
manufacturing index of eight key industries released by Department of Industry and Internal Trade
Development increased by 11.6 per cent in August. Coal production is increased
by 20.6 per cent compared to August last
year. Crude oil production has declined by 2.3 percent and production of petroleum
refinery products showed an increase of 9.1 percent. Fertilizer production has
fallen by 3.1 percent. Natural gas production has increased by 20.6 per cent,
steel production is increased by 5.1 per
cent, cement production is increased by 36.3 per cent and electricity generation
is increased by 15.3 per cent.
The World Bank has stopped publishing report
on ease of doing business, which assesses the extent to which countries favor
companies. Many companies and investors around the world have given more
importance to this report. Using the World Bank's "Ease of Doing Business"
report, they decided where to invest money, where to open manufacturing plants
or where to sell goods. . Although it evaluates how government agencies treat
domestic companies, this ranking is often seen by the media and investors as
the basis for how favorable national governments are to foreign investment.
In 2018Paul Romer, the then World Bank's
chief economist, resigned, criticizing the report lacked transparency. In the
South American country Chile, When socialist Michelle Bachelet became president
the, Chile was downgraded in the report. Chile was rated high when Conservative
Sebastian Pinera, ascended to presidency and chile again downgraded when Michelle
Bachelet came to power again, Chile’s rankings fluctuated up and down although
no policy changes were made during these times says Center for global development.
Justin Sandefur, Center
for global development, says the World
Bank's ranking has always been anti - government intervention in the economy, and
it does not accurately assess government spending, labor and consumer
protection and has a pro-private stand towards regulation and taxation.
The World Bank's report on ease of doing
business was subject to pressure for lack of transparency. The World Bank panel
has decided to suspend the publication after internal audit found
irregularities in 2018 and 2020 editions. According to the investigation, China
has been given a high rating due to pressure. This move has to be welcomed. Why
because this report has been used as an instrument which ripped away the fiscal
sovereignty of the states and this report forced governments to undertake
liberal reforms to achieve higher ratings, thus neglecting public and social
sectors, and reduced government spending. Pro-people economic activities have
been against the likes of the report motive.
According to a survey conducted by the National Sample Survey Office of
India, 10 per cent of the rich own 50 per cent of India's assets. 55.7 percent
of property is owned by 10 percent of the rich in urban areas and 50.8 percent
by 10 percent of the wealthy in rural areas. The poorest of the poor have less
than 5 per cent of total wealth. The richest 10 per cent of the country's have
assets worth Rs 132.5 lakh crore out of a total of Rs 238.1 lakh crore in rural
areas. These data only suggest the need to bring back wealth tax.
India should
learn a lesson from Switzerland. A referendum was held in Switzerland
recognizing that taxing capital was the only prudent way to increase growth and
reduce inequality.This popular initiative, also called ‘The 99-percent
initiative’ was launched by the Socialist Youth group, which seeks to force
wealthy people to pay 150 percent more tax on their capital income and
redistribute this money to the rest of the population. Such a scheme would
bring in an additional five to ten billion francs to Swiss government coffers. Business
and economic circles, along with most parties, urge voters to reject the
initiative, as does the government. This referendum was held on September 26,
64.10 percent of Swiss voters voted against the imposition of an additional tax
on capital. However, it is a good initiative to be followed by other countries.
Referendum is one of the brilliant tools to ensure true direct democracy in a
country and we have to pave way for its widespread use in our country.
The BJP government
has ignored all just full means of raising government revenue. The BJP does not
want to bring in wealth taxes. It has significantly reduced taxes on capital
and corporate taxes. Its only way to generate revenue is resorted to sell
public properties and increase indirect taxes on the people. The BJP government
is planning to raise Rs 6 lakh crore over the next four years by leasing public
assets to the private sector which is called the 'National Monetization Plan'. state-owned
properties such as roads, railways, airports, ports, mines, power generation,
power supply, natural gas pipelines, playgrounds and real estate will be leased
to the private sector. Thus the public who have so far been the beneficiaries
of the services rendered from these assets will be excluded from them thereafter.
If these assets are leased/privatized, the cost of services will be drastically
increased which will exclude the masses. It has become the norm of the BJP government to further inflict
suffering on the already afflicted and bragging it as an economic recovery.
