India at its peak of inequality

 

While booster dose against Covid-19 vaccine is recommended to avert the risk of O-micron As of 1^st January, only 24.8 per cent of Indian people are vaccinated against Covid-19 with two doses and 54.9 per cent of Indian population vaccinated against Covid-19 with single dose.

 

In 2021 the low interest rates and expanded monetary policy did not stimulate the growth of real economy. Neo-liberalism has fuelled only speculative investments and boosted stock market rally. The stock market has attracted a large number of new investors. A huge number of retail investors have invested in the frenzied bullish market. Indian Companies raised ₹1.18 trillion from primary market in 2021.

 

The stock market rise, which began after March 2020, reached its peak in 2021. From January to November 2021, 2.744 crore new demat accounts were created in India. A demat account is an account for storing shares. 32.4 lakh and 36.3 lakh new demat accounts were created in October and November of this year respectively. In 2020, 1.050 crore demat accounts were created. Financialization increased the contribution of retail investors in the stock market

 

The total number of demat accounts in India has increased from 3.930 crore in 2019 to 4.980 crore by the end of 2020 and to 7.724 crore as on November 2021.

Prior to the COVID-19 pandemic, Indian stock market investments were growing at a rate of 10-15% per annum. After Covid-19 it’s growth rate is increased by 30-50%. About 76 per cent of the total investors in the ‘Grow’ investment platform are first-time investors, said its chairman Harsh Jain.

 

According to Morgan Stanley Capital International (MSCI), the stock market index of emerging markets, including India, had a loss of 5% in 2021, compared to it the Indian stock markets Sensex and Nifty indices were upped by more than 20%, while the global stock market index is increased by 19%.

 

Start-ups worth $ 1 billion, or more than $ 1 billion, are called unicorns. India’s number of unicorns is increased by 33 than it had in 2020. India with 54 unicorn ranks third leaving UK behind. The number of investors with a networth $ 1 billion (approximately Rs. 7,500 crore) has increased from 85 at the end of 2020 to 126. Their total assets, valued at $ 483 billion (approximately Rs. 35.3 trillion) at the end of 2020, have risen to about $ 728 billion (approximately Rs. 54.6 trillion). These are hailed as India's achievements.

 

US Federal Reserve Chairman Jerome Powell commenting on rising inflation over the past few months said it is only transitory and will soon subside. Although the Federal reserve has not yet raised its interest rate and promised to reduce its bond buying. The interest rate is more likely to be raised soon. As a result, foreign investors will increasingly pull out from their investments in the stock markets of developing countries. As a result, the demand for currencies in developing countries declines.This will adversely affect the financial stability of these countries. The dollar continues to appreciate as its demand is increased and the currencies of developing countries are depreciating. The Indian rupee has also depreciated. The steady depreciation of the rupee will further weaken foreign investments in the Indian stock market. The Pakistani rupee has depreciated drastically and has been forced to seek the help of the International Monetary Fund. There is a risk of widening trade deficit and current account deficit as import costs will rise due to currency depreciation. The foreign exchange reserves of the Central Bank of India have also declined. But despite all this, the Ministry of Finance has been saying that the Indian economy is heading on a great growth trajectory.

 

Since October 2021, foreign investors have sold $ 470 billion worth of funds in the Indian stock market. Foreign financial investors sold $ 227 billion worth of Indian stocks in October, $ 75.60 billion in November and $ 169 billion in December.

 

The Federal Reserve is targeted to keep inflation in USA within 2 percent. But in the United States inflation has risen to 6.8 percent. In India Food and vegetable prices have risen sharply in reality but inflation index released by the National Statistics Office does not reflect this actuality. Inflation seems to be underestimated in India.

 

Inflation is on the rise around the world. This situation of rising inflation has increased the likelihood of banks to raise interest rates that will limit the stock market frenzy in 2022.

 

Companies have said that the prices of all fast-moving consumer goods from biscuit will be rised again in January and that this increase is needed to offset higher input costs they said. Prices of raw materials such as steel, copper, aluminum and plastic have risen by 40 to 150 per cent in one year. This has severely affected micro, small and medium enterprises.

 

Our finance minister initially promised that a bill to ban the trading of cryptocurrencies in India would be tabled in the winter session of parliament, after which she said; global action would be the only way to effectively regulate cryptocurrencies. After that the Finance Ministry has stated in the Lok Sabha that it has no plan to promote cryptocurrency sector in India. Thus their position is inconsistent with no continuity in what they take then and now.

 

The BJP govt is a government that works for publicity that is openly revealed in the Beti Bacho scheme. According to a parliamentary committee report, 80% of the project's money was spent on advertising.

 

It is highly reprehensible that under a new cargo policy which came into effect on December 15, the Indian Railways has decided to forego Rs.700 crore revenue a year, that it collected from companies running freight businesses on its network.

 

The long-awaited state-funded bad bank is reportedly set to launch its business from the second week of January.

 

The RBI has announced that banks will be allowed to increase their capital and shift their profits to their overseas subsidiaries without prior approval from RBI. This way of diluting regulations will facilitate greater outflows of funds from India to foreign countries.

 

Our Finance Minister said: We do not require brick and mortar bank branches to serve the customers. As people have smart phones in their hands which provide a technology platform that enable banking service without any hassle.

 

Her view is facilitating the complete privatization of banking services. In reply to her view, we raise the following question BJP government's prime motto is minimum government and maximum governance so an e-parliament can do that job; why then it needs a brick and mortar parliament which incur huge administrative costs?

 

Bank employees went on a nationwide strike on December 16 and 17 demanding the central government to abandon the privatization of public sector banks. Sanjay Das, general secretary of the All India Bank Officers' Federation (AIBOC), said the protests and rallies would continue. The government wants to hand over the banks to the big corporates. He also said Public sector banks account for 70 per cent of the country's total deposits. When these banks are privatized, deposits of the common people will be at risk.

 

The Banking Laws (Amendment) Bill, which seeks to reduce the minimum shareholding in public sector banks from 51 per cent to 26 per cent, is expected to be introduced in the forthcoming budget session.

 

Fifty-seven per cent of small and medium enterprises have responded that it was difficult to get a loan under the BJP government's debt guarantee scheme. A survey of 150 small and medium enterprises found that more than 70 percent had been severely affected by the second wave of COVID. 50 per cent responded they had not yet fully recovered from the impact of the first and second waves. Due to COVID 56 per cent were forced to adopt digital methods, while 35 per cent were seeking external financial assistance for their ventures, the study said.

 

According to a study of 756 companies, 61 per cent of those who borrow less than Rs 10 lakh and 52 per cent of those who borrow between Rs 10 lakh to Rs 1 crore and 49 per cent of those who borrow between Rs 1 crore to Rs 10 crore responded it was not easy and difficult to get a loan under the ECLGS- emergency loan guarantee scheme.

 

Credit card culture is on the rise in India as well. In October alone, 21.5 crore transactions worth Rs 1 lakh crore was carried out across India using credit cards. This is about 25 percent higher than the previous month and is almost 56 percent more than the last October. Credit card spending in September this year was found to be at Rs 80,477 crore.

 

Road Transport and Highways Minister Nitin Gadkari says; The country has set many world records in road construction despite COVID attack. India will also become a prosperous and successful country like US and Europe in the coming years as Indian road infrastructure is on par with the standards of the US and Europe. Is it possible to promote infrastructure and technology of India on a par with Europe and USA just by paving roads alone? In India, the ruling parties' consider only highways as the infrastructure which stagnate India’s economic development.

 

NITI Aayog CEO Amitabh Kant has stated that India is determined to carry out major reforms in all sectors as large-scale reforms are needed. He also said that the basic principle of this government is only the private sector creates wealth. The private sector ease of business should be facilitated and promoted and we will continue to push for all reforms in that direction.

 

Further he also opined that in a federal polity, and in vast country like India, one must push for change through the states. The Central Government provides a part of the funds allocated under the Central Sector Plans (CSS) on the basis of the good performance of the States. We must try to ensure increased funding for states that continue on the path of reform. He also said that of Ease of doing business rankings for states was a way of naming and shaming states to carry out reforms by putting competition in front of the public. Just as the International Monetary Fund (IMF) impose structural adjustment conditions for countries to provide debt to countries; Indian union which turned into a tail-end of neoliberalism is undemocratically oppressing states by forcing them to implement anti-people reform for providing funds.

In his pre-budget discussion, Prime Minister Narendra Modi called on corporates to invest in sectors including agriculture. They only raise prices and their new investments is no where seen.

 

Various Indian sectors have put forward their demands for the Budget. representatives of various social sectors and unions have demanded further increase in government expenditure in health sector for handling the COVID crisis. They also demanded for the introduction of urban employment scheme and to increase expenditure on rural employment guarantee scheme.

 

MSME sector demanded to increase the capital limit for small and medium enterprises (SMEs) and to reduce GSTs and also to exempt companies with a turnover of less than Rs 40 lakh from compulsory GST registration. Millions of vendors have been hit hard by additional GST compliance costs. Their activities have been severely paralyzed by the COVID PANDEMIC and they should be allowed to continue their businesses without GST registration; they said.

 

The Confederation of Indian Industry (CII), demanded that the government should make it easier for small and medium enterprises to get loans. They also asked to revise and implement Government's technology development funding plan and the debt - linked capital subsidy program, which was suspended in March 31, 2020. The government last year announced a ‘Fund of Funds’ scheme to contribute Rs 50,000 crore to SMEs, but it has not yet come into operation and they demanded it to be implemented.

 

Finance Minister Bhagwat Karad held a virtual meeting with representatives of the Department of Agriculture and agro processing industry to get pre-budget suggestions. Farmers' organizations and agri-experts have called for a minimum support price based on realistic production costs, and for an increase in diesel subsidies, and also to enable new technologies. In order to achieve the goal of doubling the income of farmers, Chief Adviser of Consoritum of Indian Farmers Associations (CIFA) P.S. Chengal Reddy has demanded to increase priority sector lending for agriculture to 25 per cent.

 

In a pre-budget consultative meeting of Union finance minister with state finance ministers, most states demanded to withdraw GST hike on textile Industry from 5 to 12 per cent and demanded that the central government should increase its spending share on central sector schemes. The central govt deferred its GST hike on the textile sector.

Tamil Nadu Finance Minister PTR Palanivel Thiagarajan stated as small and medium enterprises have been severely affected by the general lockdown imposed to control the epidemic; centre should provide a comprehensive stimulus package to revitalize them.

He urged the central government to allow states to borrow within the prescribed limits with no conditions. As the states have incurred huge expenditure to combat COVID-19 with its substantially declined revenues, he also urged the government to allow unconditional borrowing of 5 per cent of the gross domestic product (GDP) for the financial year 2022-23.

 

Finance Minister PTR Palanivel Thiagarajan has expressed that the central government's pre-conditions  for availing 1 per cent of the gross domestic product (GDP) of the states is adversely affecting the state's finances and its spending patterns.

He also stated that the proportion of cess and surcharges on the total tax revenue of the Indian Union has almost tripled from 6.26 per cent in 2010-11 to 19.9 per cent in 2020-21. In fact, states lost about 20 percent of their revenue. If these taxes were included in the divisible pool, the states would have got additional revenue of about Rs. 1.5 lakh crore. He urged the central government to merge CESS and surcharges into the basic rates of tax so that the States receive their legitimate share in devolution.

 

Goods and Services Tax Compensation for States will end by June 2022. As states' revenues have been severely affected by COVID pandemic, States have demanded for an amendment in the Goods and Services Tax Act to provide GST compensation for another five years until 2027.

 

 Finance Minister of Chhattisgarh has demanded minimum support price (MSP) for all crops and also demanded for an increase in wages under the MNREGA Scheme.

 

The Ministry of Finance has stifled the legitimate demands of the public sector by urging that no public sector should ask for additional expenditure under the guise of proposing a budget statement for the next financial year.

 

It is pertinent to note here that in BRICS report India’s Central Government has constructed a story of having provided 15.1 per cent fiscal stimulus during the COVID pandemic.

 

Former Chief Economic Adviser (CEA) Arvind Subramaniam has cautioned against celebrating economic recovery so early, as it is only the bouncing back from last year's slump.

 

He noted that the real or potential GDP growth rate for the period 2013-14 to 2018-19 was four per cent rather than seven per cent as shown by the Indian Official data of Economic Growth and in this context the real growth of the economy needs to be assessed.

 

He also said productivity-linked incentives (PLIs) often benefit technology and capital-intensive sectors. If we want inclusive growth in India, we need to promote growth in the unskilled labor-intensive sectors. But productivity-linked incentives won’t help in achieving it.

 

Economist C Rangarajan, is skeptical about India's real GDP growth of 9.5 per cent for 2021-22 as projected by the International Monetary Fund (IMF) and the Reserve Bank of India (RBI). The economy grew by 8.4 percent in the second quarter of the current fiscal year, according to data released by the CSO. He said 20.1 per cent growth in the April-June 2021 quarter and growth in the second quarter had only offset the decline in GDP and did not indicate much positive growth. This full-year growth forecast is unlikely to be fulfilled unless growth is strong in the third and fourth quarters. On the contrary, he said he expects the country's real GDP growth to be between seven and eight percent for 2021-22.

 

Inflation:

Whole sale price inflation is increased to 14.23 per cent in November compared to 2.29 per cent in last November. Inflation has been driven by soaring prices of mineral oils, basic metals, foodstuffs and crude oil. Consumer price inflation is found to be increased by 4.91 per cent in November from 0.78 per cent in the previous month. Food prices are increased by 1.87 percent which is a 1.40 per cent increase compared to last month. Prices of vegetables are fallen by 13.62 per cent. Fruit prices are increased by 6.03 per cent. Pulses became dearer by 3.18 per cent. Egg prices are fallen by 1.31 percent. Oil and fat prices are increased by 29.67 percent. Prices of fish and meat are increased by 5.55 per cent.

 

Industrial growth in October:

According to the Index of Industrial Production released by the Ministry of Statistics, production is increased by 3.2 percent in October. Among the major sectors, production in the mining, manufacturing and power sectors showed a growth of 11.4 per cent, 2.0 per cent and 3.1 per cent, respectively. Production volumes of primary goods, intermediate goods and construction materials are increased by 9.0, 2.1 and 5.3 per cent respectively. Production of capital goods is declined by 1.1 percent. Production of non durable consumer goods is increased by 0.5 percent. Production of durable goods is declined by 6.1 percent.

 

Industrial growth in November:

The combined production index of eight key industries released by India's Department for promotion of Industry and internal Trade is increased by 3.1 per cent in November. Coal production is increased by 8.2 per cent compared to October last year. Crude oil production is declined by 2.2 percent and cement production is declined by 3.2 percent. Production of petroleum refinery products is increased by 4.3 percent. Fertilizer production is increased by 2.5 percent. Natural gas production is increased by 23.7 per cent, steel production is increased by 0.8 per cent and electricity generation is increased by 1.5 per cent.

 

Brazil, Australia and Guatemala raised a dispute against India in World Trade Organization complaining that from 2014-15 to 2018-19, India provided more than 10 per cent (of the total value of sugarcane produce) incentives to sugarcane producers. India lost in this sugar subsidy dispute. India responding to that said it has mostly supported only small and marginal farmer which is in compliance with the pledges of the trade body and India plans to appeal the case.

 

According to the 2022 Global Inequality Report, liberalization and economic reform have only benefited a small segment of the population. The income and wealth of the top 10 percent of the global population is increasing. India is on the list of 10 most unequal countries in the world. The top 10 percent people in India receive 57.1 percent of national income. At the same time, the bottom 50 percent of the population received only 13.1 percent of total income. The average income of the first 10 percent is 22 times higher than the average income of the bottom 50 percent. Income inequality in India is higher than in China and the United States. In China the top 10 percent earn 41.7 percent of total income. The income of the bottom 50 percent of China accounts for 14.4 percent of total revenue. The top 10 percent of the U.S. income is 45.5 percent of total national income. The last 50 percent's share of US’s total income is 13.3 percent.

 

According to the Global Inequality Report, India's income inequality has taken a ‘U’ shaped path when observed from its past. The share of income of the top 10 per cent in British colonial India was about 50 per cent. After independence, five-year plans inspired by socialism helped to reduce the income share of the top ten percent to 35-40 percent. The income share of the top 10 percent has now risen to 57.1% due to increased inequality started since the economic reforms of the 1990s. The top 10 percent benefited greatly from economic reforms, and the full burden of their income growth was borne by the brunt of poorest half of the population, the report said. It also suggested levying a 1.6 per cent tax on income, along with a global property tax, and investing the proceeds in education, health and climate change.

 

 

Economic inequality in the now BJP-ruled India is aggravated more than it was then a British colony. India's "democracy" is treading backwards in a trajectory which is more reactionary than the monarchy regime. It is not to be surprised BJP government might celebrate India’s entry into the listed of the top most unequal countries in the world as its own achievement.