‘‘It is futile to try quenching thirst by filling up a pot with a hole.’’ Yes, it is a proverbial saying which now finds relevance in the desperate effort of the central BJP government and its Finance Minister (FM) to sound weird optimism about economic growth while all parameters are indicating downslide. Every week we are informed of the future economic growth of India by various quarters, the World Bank, International Monetary Fund, the credit rating agencies, various experts and of course the RBI and the finance ministry. But all figures are different and go on changing so frequently. Take the pronouncements of last one month. The ‘confident’ FM has expressed confidence that economic growth would be 7% this year.
But other institutions and agencies have been progressively downgrading India’s growth figure with every passage of time. For example, IMF which earlier forecast a 7.4% growth has, of late, revised it to 6.8%. The day the FM sounded customary hopefulness about recovery of economy without caring to give any believable justification, the retail price-line jumped up by 7.4% belying the target of the RBI to peg it between 2 to 6%. For last several months, the RBI, on the pretext of arresting price rise has been increasing the interest rate with the assumption, as we have shown on many earlier occasions, that rise in interest would motivate people to save more and spend less thereby reducing demand and bringing down price level.
According to the argument of the ruling dispensation, price hike, is demand-pulled, meaning demand is more compared to supply. In other words, if demand falls, it would entail dip in the prices. In Proletarian Era dated 15-05-22, while reacting to the RBI’s periodic monetary policy announcement which raised repo rate (the rate at which commercial banks borrow from RBI) by 0.4%, we had categorically stated that the textbook bourgeois economics is invalid in today’s context which is marked by continuous fall in buying power of the people and maximization of profit by the industrial houses and multi-nationals through maximum exploitation. We had also shown that India is in a state of stagflation, a combination of stagnation and inflation which is a feature of dying capitalism and cannot be explained based on the prescripts of classical bourgeois economics which say inflation takes place when people have more money to buy goods and so there is a spurt in demand entailing more production. On the contrary, recession or stagnation of produced goods takes place when there is low or no demand indicating dip in the buying power of people. But now in our countries as well as other imperialist-capitalist countries, inflation as well as recession are rising—a phenomenon which attest to the fact that prescripts of classical bourgeois economy are no more valid in acutely crisis-ridden dying capitalism.
Yet, the so-called experts in the stable of bourgeois economics are suggesting several more doses of interest rate hike to tackle the situation. Contrarily, another camp is apprehending that upswing in interest rate would discourage industrialists to avail bank loans for investment. This fallacious proposition also we dealt with in our previous article showing that even when interest rate was less, loans for productive investment was insignificant. Some industrialists themselves admit how can we invest and go for production if there is no market. So, both the arguments in favour of and against bank rate hike do not stand to reason.
Secondly, the government of India which is extremely liberal in granting concessions, waivers and lowered rate of taxes to the industrial tycoons and corporate behemoths thereby losing substantial amount of revenue is equally stringent in burdening the wretched countrymen with more and more tax burdens through indirect routes like GST etc. A substantial component of increased prices of essential goods constitutes indirect tax which the government nonchalantly extract from the pauperized people. In spite of squeezing the toiling masses to maximum extent, the government finds its budget deficit soaring. For 2022-23, the fiscal deficit of the government is estimated to be Rs 16.61 lakh crore or 6.4 percent of the GDP estimated six months back. It is, as per analysis of the Centre for Monitoring Indian Economy (CMIE), likely to overshoot by 0.40 lakh crores to touch Rs 17 lakh crores (17 trillion). Major part of this deficit is financed by borrowings from the market. The FM announced during last budget that borrowing target is kept at as high as Rs.14.31 lakh crores. Total outstanding debt of the government as on 30 June 2022 is reported to be around Rs 50 lakh crores. Interest payments had consumed over 45% of the Centre’s revenue receipts in the financial year 21-22. If borrowings increase, amount of interest payment would also go up reducing revenue amount for expenditure further. Moreover, the government had budgeted for non-tax revenue receipts of Rs.2.70 lakh crores in 2022-23. But the actual receipts are expected to fall short of the budget estimates due to lower-than-budgeted transfer of surplus by the RBI. Further, while the revenue of the government is falling far short of requirement and the bourgeois economists often hold subsidy payment to food, fertilizer, etc., as the cause, the fact is otherwise. The government is loath to taxing the huge profit being amassed by the top monopolists and thus foregoing a source of substantial revenue inflow. Now, as reported by CMIE, the government is contemplating on providing state-run Oil Marketing Companies (OMCs) with an additional Rs 200 billion as compensation for their rising under-recoveries on sale of subsidised cooking gas. Under-recovery, as we have repeatedly been saying, is no figure of loss but denotes the difference between the price that could be fetched through import and the domestic retail tariff of petrol, diesel, LPG and kerosene. So, it is akin to subsidizing the notional loss that they claim to incur because of selling fuel in the country as against opportunities to sell abroad at higher price. It is evident that the BJP government is solely concerned about profit maximization opportunities of the corporates and not alleviating the economic destitution of the toiling masses at large. With phenomenal rise in unemployment and unabated plummeting in people’s buying power, market crisis of capitalism has reached a peak entailing steady fall in the life standard of common people. But the ruling BJP and its ministers are remarkably stoic about the soaring plight of the toiling Indians. Whenever asked to comment on the downturn of economy, the FM or her colleagues brook no delay in pointing to external negative factors like global economic turmoil, Russia-Ukraine war, slide of rupee, rising cost of oil import and so forth and plead their helplessness in lifting the country’s economy in such a global milieu. Even in her current speech at the Development Committee meeting of the IMF and the Word Bank, the FM said despite the tense geopolitical environment and looming uncertainty, the outlook for the Indian economy’s growth remains optimistic on the back of strong macroeconomic fundamentals and structural reforms undertaken by the government. Macroeconomics, as is known to all, examines economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment. We have just stated above the worrying figures of each phenomenon. Yet, the BJP FM claimed that ‘‘in a world of uncertainties, India is one of the very few standout performers.’’ However, like all other bourgeois leaders and economists who are struggling with fidgetiness to explain the collapsing capitalist economy all around, the BJP FM has also avoided to clarify what prompts her to express optimism about rebounding of economy? Most ridiculous of all has been the recent utterance of the BJP FM. She has stated that the steps taken by her government to lift country’s economy from sagging are
i) Fast production and adroit administration of corona vaccination.
ii) Reaching out benefits to people through digital infrastructure.
iii) Ensuring supply of food and fuel after Russia-Ukraine war.
iv) Reducing duty on oil.
During her deliberations at the meetings with World Bank and IMF, she also said that while giving due importance to the rise in price, the primacy would be to keep economic growth unhindered. Finally, she reiterated that their ‘‘deliberations can usher a silver lining for the global economy amidst mounting inflationary pressures, currency depreciations, rising debts, and shrinking fiscal space,’’ without, however, stating anything concrete about navigating the headwinds caused by the ongoing multiple crises. Instead, she has proved her acumen (!) in highlighting robustness of Indian economy by claiming that ‘‘Indian Rupee has not weakened but in reality, it is the US Dollar that has strengthened.’’ Incredible indeed! Who knows tomorrow some protagonists of Hindutva might claim that Newton’s apple did not fall on the ground but the ground rose up to reach the apple in the tree. Compared to dollar, the currency of any developed country registered so much of fall. Earlier also, we have seen during budget presentations that she chose to spend maximum time on mundane and irrelevant subjects to parry the basic questions and problems. We have all the reason to be elated (!) at such expertise of the BJP FM to beat about the bush and skirting basic questions by referring to non-issues with alacrity from a BJP minister when the ruling party leaders and ministers are known to be adept at propagating things far removed from reality.